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Technology and Customer Demand Driving Shift in Software Pricing and Licensing

August 02, 2016

Flexera Software has unveiled a new report examining the growing need for software producers to change how their offerings are licensed and sold to better meet the needs of enterprise customers. The company’s Software Licensing 2016: Seismic Shifts – Shaky Foundations report examines the transformation of the enterprise software marketplace in reaction to changing customer demands and enormous shifts in technology and application production.

The result of this transformation is a marked change in the way software is being priced and licensed to keep up with the pace of technology and customer needs. According to Flexera, software and application producers that fail to acknowledge this shift run the risk of being stamped out by competitors.

“Enterprises are rapidly redefining how they want to license and pay for business software,” said R “Ray" Wang, principal analyst and founder at Constellation Research. “Moreover, technology is shifting so rapidly it is rendering old pricing and licensing models obsolete. Smart software producers are being proactive, viewing this dramatic shift as an opportunity to offer more flexible monetization models, capture market share and new revenue streams. Producers that fail to act risk being left behind.” 

The Flexera report shows that perpetual software licenses aren’t as lucrative as they once were, with only 43 percent of those queried stating these licenses contribute to half or more of overall revenues. A whopping 70 percent of software producers plan to change their pricing and licensing models within the next two years to reflect changes in technology and customer expectations.

Less than half of applications are delivered as traditional installed software for 35 percent of those questioned, while 42 percent admit their customers have encountered challenges when it comes to deciding which software products they may legally use. And while an overwhelming 73 percent of software producers believe their pricing and licensing policies are effective, 55 percent of these don’t have any technology in place to track their customers’ usage of products. A further 51 percent don’t track customer usage at all and 45 percent don’t audit their customers’ usage.

All of this leads to an overwhelming push to transform pricing and licensing policies within the next two years to compensate for confusion and changing technologies. Flexera found that mobile platforms were the biggest driver for change, with 55 percent of producers planning changes to accommodate them, followed by the cloud, which is driving 49 percent of those queried to adjust their licensing policies. Virtualization is pushing 47 percent of software producers to make changes, followed by software-as-a-service (SaaS (News - Alert)), which is impacting 46 percent of those questioned.

More findings are available in Flexera’s report, which is available as a free download.

Edited by Alicia Young
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