Licensing Trends: Software Vendors vs. Enterprises

Licensing TrendsWhile vendors are trying to move customers to term licensing (subscriptions), enterprise customers continue to sing the praises of concurrency due to its cost savings and easier management. According to research by Macrovision, subscriptions or term licensing will be offered by a majority of software vendors for the first time in 2006. By 2007, the forecast is that fully two-thirds of software vendors will offer term licensing even though 57% of enterprises prefer perpetual licensing. Moreover, by better than 2-to-1, enterprises see concurrent licensing as preferred over seat-based licensing. Concurrency is the only licensing model to see an increase in customer preference during the past year, so we are already looking forward to the hallway conversations next year. In the longer term, utility pricing looks to address the needs of both software vendors and enterprises, but utility pricing is clearly not ready for prime time yet.

(Dis)satisfaction with Pricing & Licensing Strategies

Here is a shocker: nobody much likes their licensing models. According to Macrovision's research, less than one in three enterprises are satisfied with software vendors' pricing & licensing strategies. Dissatisfaction is not limited to the customers, as only 57% of software vendors are satisfied. While to some extent this probably demonstrates healthy market forces at work--meaning compromise has left neither side is completely satisfied--it also demonstrates the opportunity for new types of innovative licensing such as term- and utility-based models if software vendors can position them appropriately.

(Dis)satisfaction with Pricing & Licensing Strategies

Here is a shocker: nobody much likes their licensing models. According to Macrovision's research, less than one in three enterprises are satisfied with software vendors' pricing & licensing strategies. Dissatisfaction is not limited to the customers, as only 57% of software vendors are satisfied. While to some extent this probably demonstrates healthy market forces at work--meaning compromise has left neither side is completely satisfied--it also demonstrates the opportunity for new types of innovative licensing such as term- and utility-based models if software vendors can position them appropriately.

Questioning the Unquestionable

From time to time in business, an idea emerges that sounds obviously good -- so good, in fact, that it becomes accepted wisdom almost immediately. Product managers quickly incorporate it into their assumptions, marketeers let it shape the way they approach the project, and executives quickly incorporate it into their presentation slides so that it ceases to be mere idea and becomes... (drum roll) fact. The idea makes the leap from theory to principle without ever being subjected to rigorous testing. Often, the idea eventually gets proven out. But what if the so-called fact turns out to be false? Or what if an idea that once was true becomes false? What happens then? Has it happened to you?

Channel Optimization: Are you paying your channel too much?

Given the constant squeeze on end-user prices, increased channel competition, and investor demands for steady--if not increasing--earnings, it is hard to believe that many high-tech companies have an untapped source of additional profits on current business. In a recent worldwide channel economics study, Rubicon studied industry giants like Microsoft, Symantec, Apple and Macromedia, as well as their top channel partners, and found that each vendor, in their own way, was leaving money--profits--on the table. Neither the channel nor the vendor was using their channel investments optimally to bring products to market. The Rubicon study found that the investments many companies make in the channel do not prevent loss of mindshare or improve returns. Most importantly, the study revealed that channel economics are changing in ways that challenge conventional wisdom.

SaaS: Deja vú, or something new?

A few years ago, Application service providers (ASPs) were all the rage. Then the Internet bubble burst and the term fell from favor. Now more companies are offering their applications via Software as a Service (SaaS). Some articles you read do not even attempt to distinguish between the two, and refer to ASP/ SaaS companies. So what is the difference, and why is distinguishing between them important.

Rubicon in the News

Nilofer Merchant will be speaking at SoftSummit on October 11 as part of a panel on Innovation. Learn more. Nilofer Merchant's article on Value Innovation is a featured in the

Richness of Relationships

If you believe, as Rubicon does, that excellent sales and marketing revolves around meeting customers' needs, then this article will develop how that belief can guide the work of you and your team. "Knowing your customer" is not, of course, a new idea in marketing. Today's market landscape is characterized by pressure for high-volume, reduced transaction costs and e-commerce, ever-increasing specialization in products and needs, and shortened product life cycles. In this context, we are pressured to rely on impressions or memories or articles in the Sunday paper -- anything that saves time -- to provide a portrait of the customer. Following our beliefs, however, reminds us that it is more necessary to invest the time and energy in meeting, learning and understanding our customers. We want to get so close that the team can explain who the customer is, as a name, a place, and a voice -- and know what the customer needs, and think about connecting points to help finish the route-to-market puzzle.

Value Innovation

Does your company need to win new markets in order to keep up with, or more importantly, exceed investor expectations? Will you be able to get there by evolving your products or solutions, or will it require disruptive innovation? Does the challenge of your "day job" managing the existing business and investor expectations keep you from your "other job" of developing the strategy and plans that will allow you to leapfrog the competition? If you answered "yes" to any of these questions, you are not alone and have the company of many other executives, which very likely includes your competitors.