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Are 'Freemium' Sales Models Ideal for Software Licensing?

By Susan J. Campbell, TMCnet Contributing Editor

The concept of “freemium” sounds pretty good to those of us left holding the bill. How can we take advantage of key offerings and not have a large debt due at the end of the arrangement? At the same time, how does software licensing fit into the mix? After all, these companies need to make money, too.

According to a recent blog post by software licensing company Flexera, freemium sales models have grown more than 200 percent. A software monetization process enables enterprise software producers to leverage this growth and still make money. How do you do that in the corporate environment when this model has been focused on the individual user?

For instance, freemium is a strategy we have become accustomed to as Web and mobile users. Consider Apple (News - Alert) AppStore. You see an app you want to put on your phone. You’ve read the reviews, but you want to decide for yourself whether or not you like it and will use it. You download the free version and give it a test run. If you don’t like it, you’ll delete it. If you do, you’ll keep it and may even upgrade to the paid version.

This very successful model is why freemium growth has been centered on mobile and web-based applications as enterprise software is difficult to fit into the freemium model. To that end, success is dependent upon building a flexible freemium model as hardware will continue to get less expensive and more devices will connect to the Internet.

With software monetization, the freemium process is allowed to work as it enables software licensing and entitlements for ease of use. The solution is then available in versions that are free and versions that have an associated cost. The process also includes the ability to message users, as well as update software and firmware on applications.

But where is the AppStore for the enterprise? It doesn’t exist. And, large enterprises aren’t really accepting of the try and then buy model if it means every user puts it on a device, first. There could be more effective methods for adoption here if a proven strategy is put in place. The more complex the product, however, the harder it is to fit into this model. Plus, vendors don’t generally want to give away support to make sure users have the optimal experience and want to bump to the next level.

It is possible to overcome the challenges of freemium in the corporate environment, but enterprise software producers have to implement effective software licensing and entitlement management systems to do so. Can the AppStore concept be duplicated effectively for the corporate environment? Software producers are readily hoping for a yes.