Application Producers Are “Climate Change Deniers” According to New Flexera Software Report

Software Monetisation study reveals software vendors are ignoring business climate signals, despite negative impacts on their bottom line

Maidenhead, U.K., December 1, 2015 – Application producers are ignoring clear market signals that the business climate is changing, and are failing to automate business-critical Software Monetisation processes in order to prevent revenue leakage and maximise profits. 58 percent or respondents develop and maintain their own entitlement management systems (sometimes in conjunction with another solution). Similarly, 61 percent of producers have not adopted best-in-class licensing technology for all of their needs. Rather, they develop and maintain their own licensing systems in house.

These are the findings of a new survey report by Flexera Software, which clearly reveals that producers are aware of rapid change impacting their ability to make money from their software products, but they’re not adopting automated licensing and entitlement management systems that would protect them from those changes and enable them to be more agile, and grow revenues and profits.

In the software industry, specialised commercial Software Monetisation solutions help producers automate, manage and track customers’ use rights and the software license lifecycle—the front and back-offices. These systems automate software license management and back-office operations (entitlement management) and are specifically designed to help producers adapt to technology changes and build flexibility into their business models. However, only 23 percent, use a purpose-built third party commercial entitlement management system, 22 percent do nothing, and 19 percent use a proprietary, custom extension of their ERP/CRM system. For licence management automation, 17 percent do nothing, and only slightly more than a third – 35 percent – use a purpose-built commercial licensing technology.

Signs of Changes in the Business Climate Abound
Nevertheless, according to the report, producers are aware that rapid technology changes are impacting the business climate, creating opportunity and risk:

Internet of Things (IoT) Opportunity For Producers That Can Adapt: 32 percent of producers said that today the IoT is having a high impact on customer satisfaction. Within 12-24 months, 16 percent say that the IoT will have a high impact on supporting new business models – meaning producers must adapt their businesses to capture the revenues and profits promised from the IoT – a proposition also supported by a recent Gartner report.
Cloud, Virtualisation & Mobile Impact Security Concerns: 38 percent of respondents said the cloud has a high impact on security concerns. 29 percent say that virtualisation has a high impact on security concerns. And 33 percent say mobile computing has a high impact on security concerns.
Customers Want to Buy Software Differently: Within two years, the number of producers who claim all their revenues are derived from a perpetual software license model will be nearly cut in half from 26% to 14%, and the number of producers who say half or more of their software revenues come from SaaS-based software subscriptions will rise significantly from 14 to 21%
Business Climate Changes Are Impacting the Bottom Line
Even while producers clearly understand the extent and breadth of the changes in the technology climate impacting their businesses – the survey suggests they haven’t yet widely built sufficient agility and flexibility into their businesses to adapt:

Producers Experiencing Massive Revenue Leakage: One measure of whether producers are effectively battling the impacts of business climate change is whether or not they are actually able to identify and recoup all the revenues due to them in accordance with their software license agreements. According to the report, software license non-compliance is rampant. 63 percent of producers say that customers are out of compliance – they’re using software beyond what they’re entitled to use.
Producers Unable to Optimise the Customer Experience: 58 percent of producers report difficulty enabling customers to manage their own software entitlements. 38 percent find it difficult to quickly package and bundle features to create different product versions in order to accommodate changing market needs or unique customer demands. And 33 percent find it difficult to support “try-and-by,” trial and/or evaluation licensing.
“Application producers lag far behind non-software industry counterparts that have long since automated critical operations with ERP, CRM and other mission critical systems. Many producers wrongly assume that because their ranks include software engineers and programmers, they can easily develop their own licensing and entitlement management systems in house,” said Mathieu Baissac, Vice President of Product Management at Flexera Software. “But Software Monetisation is a highly specialised field that is constantly changing, which makes it virtually impossible for non-licensing and monetisation experts to adapt and scale as the business climate changes. The result, as the report findings illustrate, is that most producers are leaving money on the table because they aren’t sufficiently agile and the customer experience is being negatively impacted.”