Software Licensing Featured Articles

Why Software Licensing Matters, Now More Than Ever

Let’s face it, the mobile revolution and cloud computing have forever changed the way we purchase, consume and use software applications. Gone are the days when you used to have to go to the store and buy a disc (or set of discs) in order to download an application for your computer – today you can purchase just about any application you want and download it directly via the Internet or wireless network. No discs to purchase – and in many cases there’s no “client software” to download onto your computer at all.

So how has this change in the software delivery paradigm impacted software licensing? How has it altered the software development model? Furthermore how has it altered the publishing, rights and distribution models?

One thing that has complicated software licensing, at least to a degree, is the fact that there are several different types of licensing models: Some software comes with the license when purchased “off the shelf” or an OEM license when bundled with hardware. Software can also be in the form of freeware or shareware. Software licenses generally fit into the following categories: proprietary licenses and free and open source licenses. The features that distinguish these “types” are significant in terms of the effect they have on the end-user's rights.

In the realm of proprietary licensing the big concern is, and always has been, piracy. With software applications being so easy to copy, developers have to take proper steps to ensure they protect their products from illegal copying as well as illegal downloading.

Fortunately there are vendors who offer software licensing solutions that give developers and distributors protection from these constant threats. Once such vendor is Flexera Software, which provides what it calls “Application Usage Management” solutions. The company “helps application producers and their customers strategically manage application usage to achieve continuous compliance, optimized usage and maximized value,” including providing solutions that help protect against copyright infringement.

To learn more about how new delivery mechanisms and other factors are impacting software licensing, as well as the company’s role in assisting and protecting developers and enterprises, TMCnet recently interviewed Randy Littleson, senior vice president of marketing, Flexera Software. What follows are excerpts from our interview:

TMCnet: Please provide a brief overview of Flexera Software: How did the company get its start and how has it evolved over the years? What are the key milestones to date? How did the company weather the recent recession – how was 2010 and what are your expectations for 2011?

Randy Littleson: Flexera Software is the leading provider of strategic solutions for Application Usage Management. Flexera Software’s comprehensive suite of Application Usage Management solutions strategically manage application usage, uniquely meeting the needs of application producers and their enterprise customers by delivering continuous compliance, optimized usage and maximized value. Our innovative solutions have enabled us to serve over 80,000 customers.

Flexera Software traces its roots to 1987 and the introduction of InstallShield, which went on to become the global leader in software installation tools for Windows developers. Since that time, Flexera Software has continued to deliver innovative solutions to software producers, high-tech manufacturers, enterprises and governments while complementing these innovations with the acquisition of market-leading solutions that broaden the value we’re able to deliver our customers.

Like many companies, we saw a slowdown in our business near the end of 2008 and through 2009. However, our business came back strong in 2010 and we see that continuing in 2011. We believe this is a result of not just the improving economy, but the strength of our market position and brands and the realization that the application producer and consumer communities have moved beyond just tactical tools for application administration to now seek strategic solutions for Application Usage Management.

Flexera Software uniquely holds a market leadership position in each of its core markets: For application producers – software licensing, entitlement management, electronic software delivery, software updates/analytics and installation solutions. Some of these are sold either as a product or an on-demand service, depending on the customers’ requirements. For enterprise customers we offer Application Readiness and Enterprise License Optimization solutions. This broad portfolio has been developed both organically and through strategic acquisitions over the years that have bolstered our solution set and channels.

TMCnet: Why is software licensing important? Why do developers (and which ones in particular) need it as a service? What are the factors driving the growth of software licensing solutions such as those offered by Flexera?

RL: Software licensing is critical in a number of ways for application producers:

--Helps their customers to stay in compliance. By enforcing licensing, IT users don’t accidently install software without considering licensing

--Provides flexibility in monetizing products based on configurations (e.g., editions), and geographies without having to provide different binaries etc.

--Enables new licensing models such as Software as a Service (SaaS (News - Alert)), concurrent users, count of use, etc. driven by customers and new technologies

--Improves revenue recognition – especially for high-tech manufacturers – by separating software IP and delivery from hardware

There are also a number of factors that are adding to the growth of licensing, including:

--Entering of new markets where IP protection laws are less enforced

--Hardware Manufacturers moving into software licensing

--New technologies such as application virtualization making it easier to get out of compliance

--New licensing models such as usage-based licensing and SaaS

The application producer community traditionally focused more on developing and expanding their software product portfolio, now recognizes the increasing importance of managing application usage to protect their IP and maximize its value. Likewise, we’re seeing tremendous growth in the area of high-tech manufacturing – from telecomm equipment to industrial and building automation to medical equipment – as all of these “smart devices” are increasingly differentiated and monetized based on their software.

So, software licensing is at the foundation of monetization and protecting your intellectual property, but is growing increasingly complex given the rapidly evolving market. This is resulting in more and more application producers and high-tech manufacturers partnering with Flexera Software to implement a strategic solution to manage application usage.

TMCnet: How has the advent of cloud-based apps and online app stores driven the need for turnkey software licensing solutions for developers?

RL: Although it’s not having a significant impact on Flexera Software right now, we anticipate that within the next few years this will drive new market expectations around pay-as-you-use or rent of software. Application producers’ customers are telling them that they want more flexibility and want to pay based on actual usage. One large database developer shared that customers were increasingly desirous of bringing their product up in the cloud, based on need and pay for it only when they used it – so there will be peaks and valleys of usage. And, they don’t want to pay the same amount in the valley as they do in the peak. Amazon has announced that you can now “rent” Oracle (News - Alert) database usage by the hour. These trends are changing the landscape significantly in terms of how application producers monetize their products – increasing the need for a strategic solution to manage this.

At the same time, their development and IT resources are constrained. In talking to many development executives, what they tell us is that what is both strategic and critical to them is ensuring they build the top three features required to beat the competition. They view usage management capabilities to monetize and protect their intellectual property as critical and growing in strategic importance to the business. They also say that they have fewer resources today than in the past so they must put them on things that are both strategic and critical and buy solutions for other capabilities. As a result, they have turned to Flexera Software to provide them solutions to manage application usage.

TMCnet: Does a software licensing solutions provider like Flexera need to work with a team of legal experts and patent attorneys, on a continuous basis, in order to keep the solutions up to date with regard to changes in the law? How is this process carried out (do you have to retain a team of lawyers?) and what are the specifics?

RL: We do not, but most application producers do. Our solutions enable companies to implement licensing models that meet their business objectives. We do not dictate which model you implement, or the terms of how you monetize your offering(s). We have a team of industry and technology experts that understand the prevalent licensing models in the market and then we implement the technology that enables application producers to implement those models based on our technology. That’s a huge value we deliver our customers. In the dynamic, fast paced environment we live in, we take that burden off our customers to stay current with the technology shifts and licensing model shifts – we provide the enabling technology that allows them to keep pace with the evolution of the market and their customers’ needs so they can stay focused on their critical and strategic priorities of beating the competition with unique features only they can build.

TMCnet: What are the differences (if any) in terms of protecting developers for OEM software vs. freeware or open source licenses? What about software that comes bundled with hardware – how does that change the approach?

RL: We are seeing that Open Source (News - Alert) software has some of the same requirements as traditional software. Although IP doesn’t need to be protected as much, some Open Source software vendors want to be compensated for their efforts. We expect that usage-based licensing will be critical to some open source vendors just as tracking entitlements is critical to them now. OEM’s have to track licensing as well – so that they get paid for their IP and having embedded enforcement is key to making that happen.

So, at one level it’s all the same – you have a fundamental need to protect intellectual property and to monetize your offering. Where it varies is by the business and licensing model that you wish to employ to accomplish those goals. There are varying models in the market – from subscription to node locked to concurrent use and more – and we provide the enabling technology to let you implement the model that fits your business needs and to evolve it easily over time as your market requirements change.

High-tech manufacturers creating hardware products are increasingly seeing the same needs as software vendors because increasingly their products are based on and monetized via software. Their business models may vary – for instance, many monetize their products based on capacity to a greater extent – but the fundamental business challenge is there.

While most people think about the technology that goes into a product to enable software licensing, there is also an essential back-office component. This entitlement management system helps you easily create new product configurations governed by the licensing technology, keeps track of which customers are entitled to which software, ensures that upgrades are governed by current maintenance and so forth. Such systems typically integrate with ERP and/or CRM systems and provide essential intelligence on who has what. Without such systems, we’ve seen application producers literally have no idea which customers are entitled to which products. When companies think about “licensing”, they really need to have a holistic and strategic solution for managing the full lifecycle of licensing – from initial purchase to upgrade to retirement. Many high-tech manufacturers, newer to the software business, overlook this essential requirement.

TMCnet: What strategies are being used today to thwart software pirating – and what is Flexera’s strategy for combating this problem?

RL: Software pirating has several levels – hackers who purposefully seek out to remove/break licensing protection in order to make it easy to install/distribute “pirated software” (for profit or for fun) and users who unknowingly install software beyond what they have purchased. We believe that the second level is far more common and has far more financial impact than “hacking” of software.

Although Flexera Software provides a number of solutions to prevent hacking – such as trusted storage, “call home,” checksums etc., our focus is on helping Publishers and End Users stay compliant.

Our customers utilize our technology on a global basis to protect their intellectual property and ensure they are properly monetizing the use of their products. As the world has flattened and more and more software revenues are being realized outside of North America, this risk has increased as many countries don’t have the same laws or respect for intellectual property. This has really emphasized the need for a strategic solution to manage application usage and has greatly benefited Flexera Software. Our solutions are proven with some of the world’s leading software producers who use our technology on a global basis.

Our licensing solutions enable application producers to:

--Ensure only licensed and credentialed users can access their products—on-premises and SaaS offering—according to their software licensing terms – without impacting usability and customer satisfaction. We deliver sophisticated machine binding that ties a license to a specific user or machine, preventing unauthorized usage or copying.

--Enable customers to manage software licenses and subscriptions as needed without negatively impacting compliance

--Turn off software licenses to prevent abuse during deactivation, transfers, or upgrades

--Provide binary hardening capabilities to prevent attacks on software

--How does software licensing help developers improve their business operations and yield higher revenue/profit?

With Licensing, Flexera Software helps application producers by reducing accidental use, monetizing features/products and enabling new licensing models. With our electronic delivery, we help producers reduce their distribution costs (often quite significantly). With our Entitlement Management solution, we help producers with self-service, channel partner communications, automation of upgrades and renewals and a large number of other operational items. This often leads to significant costs savings.

From a pure licensing perspective, it’s all about monetizing your products, which directly drive revenues. That’s the simplistic view. But, there’s a lot more than that. With a strategic solution for licensing and entitlement management, companies can create specific product configurations and offerings to meet unique geographic, customer segment or other market requirements. This flexibility allows you to easily target specific offerings at the right price points to meet each segments needs. And, you can do this without having to create multiple products themselves. The right solution allows you to do this in the entitlement management system without having to impact the product itself. This flexibility is a huge competitive advantage and a significant cost savings. That ability to react to changing market conditions faster than the competition drives direct revenue and profit benefits.

Patrick Barnard is Group Managing Editor, TMCnet. In addition to leading the online editorial department, he focuses on call and contact center technologies. He also covers IP communications, networking and a variety of other topics. To read more of Patrick's articles, please visit his columnist page.

Edited by Patrick Barnard