Thales Report: Lack of flexibility in software licensing leads to revenue losses

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Software Licensing

91% of independent software and device vendors (ISVs and IDVs) are experiencing revenue losses due to the limited flexibility of licensing models and the management of permissions.

More than 90% of independent software vendors and smart device vendors (ISVs and IDVs) are missing out on revenue by not offering the flexible licensing models that customers demand, according to a new study by Thales. More than half of these providers (54%) say that this is due to the fact that their customers demand more flexible licensing models.

This investigation takes place at a time when the landscape of software deployment and authorization management is changing. The Thales State of Software Monetization Report 2022, for which more than 400 ISVs and IDVs were surveyed worldwide, found that almost three-quarters (74%) of software vendors expect an increase in the provision of software as a Service (SaaS) via the cloud, while two-thirds (66%) expect an increase in the provision of software in a hybrid form, which is used both on-premises and in the cloud.

Providers cited significant benefits from approaches such as SaaS, with improved user experience (40%) being considered the most important factor, ahead of better customer value (34%) and increased revenue opportunities (30%). However, the push towards a digital approach is accompanied by considerable challenges for providers when it comes to licensing and authorizing their software. A whopping 40% of respondents say that they have problems licensing their solutions for multiple devices, and just as many report that they are struggling with different deployment environments. More than a third (37%) find it difficult to support the growing number of users working remotely.

Compliance and unauthorized use cause costs for providers

In addition to these challenges, unauthorized use and compromised software could lead to lost revenue for vendors. ISVs and IDVs estimated that more than a quarter of their software was unlicensed last year.
Almost all of the providers surveyed (90%) state that their revenues are directly affected by violations of license agreements, and are concerned that their software could be stolen, manipulated or copied.

“It is clear that providers need to offer flexible licensing and management of permissions to meet the different needs of customers,” says Jake Fox, Vice President, Software Monetization, Product Engineering & Services at Thales . “To meet the growing demand for more choice in provisioning, product composition, and permissions management, vendors need to invest in new technologies and ensure that their businesses are prepared to offer software in a variety of ways. Those who go ahead with flexible entitlements will gain market share, while those who do nothing run the risk of being left behind in an increasingly competitive landscape.“

Data usage as the key to increasing sales

To implement an effective software monetization and licensing strategy, software vendors need to better understand how their software is used by end users. This will lead to smarter innovations and product improvements. Fortunately, more than half (54%) of providers plan to make greater use of data for business intelligence. The data points that providers rely on are highly focused on the use of features and include the features that users are looking for most often (43%), the least popular features (41%) and the most and least used features (41%).

Fox continues: “Data should be an integral part of any successful business, but it must be used correctly. Data can form the basis for future product development and ensure that the company invests in the areas that are used by customers. In addition, they can also underpin software growth strategies by enabling companies to adapt authorizations, contracts and packages to customer needs in real time, thus achieving maximum return on investment.“

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