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App Revolution is Changing How Enterprise Software is Licensed

By Mae Kowalke, TMCnet Contributor

The consumerization of IT is manifesting itself as more than just bring-your-own-device (BYOD) policies. The trend is also is affecting enterprise software itself, as employees are starting to demand that their enterprise solutions perform as simply as their consumer and BYOD software does already.

The “appification” of enterprise software is already underway, with enterprise software developers adjusting their solutions and their software licensing schemes to suit this new app model of delivery and use.

Most apps work from the principles of utility software licensing, where users pay based on how much functionality the software delivers. A recent survey by software licensing solutions provider Flexera Software and research firm IDC (News - Alert) found that 17 percent of software producers said they now offer utility software licensing models. While this still is a relatively low percentage, it is up from 9 percent the year before. The report expected 23 percent of software producers to offer the model by next year.

Apps also are easy to install, with features that can be added after the fact instead of the need for an entirely new software package. Developers are following this trend, too. According to the Flexera report, 44 percent of those surveyed said they were simplifying their access and activation models and now offering in-product activation, up from 29 percent in 2012.

Dongles also are on the decline, with only 19 percent of producers using hardware dongles last year as their licensing technology. This is down from 27 percent the year before.

“As consumerization of IT gains hold within the enterprise, increasingly we’re seeing business users want more flexible buying models allowing them to align cost to value,” noted Amy Konary, research vice president of software licensing and provisioning at IDC, in a recent Flexera Software blog post. “Usage-based licensing models give producers a new way to capture revenue from customers that want to pay based on how they’re actually using an application.”

This appification of enterprise software should profoundly change how software is licensed. The old model of perpetual licensing and dongle activation for high-value software is going the way of the dodo, and in its place will be utility-based pricing, subscription models and feature-unlocking.

This will of course put more strain on software developers, since there’s more licensing overhead and the need for several different licensing models simultaneously. But with automated software monetization solutions such as those offered by Flexera Software and others, this challenge can be met.

The app revolution is still underway.