The digital transformation has begun. Companies and their customers are moving to software-centric solutions and on-demand usage. That calls for an entirely new way of pricing and packaging so the organizations that provide the software can get the best possible return on their product.

But it’s not as easy as it may sound. Making these changes will require new strategies, more flexible software licensing and monetization tools and practices, and the will to execute all of the above.

While the adoption of virtual network functions in carrier networks would indicate that’s already underway, it’s still early days for software-centric networks, and the old way of doing business sometimes still gets in the way. For example, Light Reading recently reported comments from John Isch, director of the network and voice practice of Orange (News - Alert) Business Services in North America, who complained that the carrier wants to pay its virtual network function vendors for those VNFs only when its business customers turn on those capabilities, and that it wants its VNF vendors to turn off the meter once end customers turn off VNF capabilities. That’s not happening today, says Isch.

Flexible software licensing and monetization solutions can help allow for the kind of flexibility Orange Business Services (News - Alert) and other software customers are seeking.  Jeffrey Kaplan, managing director at consulting firm THINKstrategies Inc., explains that software licensing and monetization solutions provide software companies with the ability to monitor, meter, and determine how to price for their software. Metering allows software companies to track customer usage of their software so they can bill for it appropriately. Monitoring enables software companies to observe how their software is being used so they can determine whether (and how) to price for and package their software in different ways to meet their own business goals and better address customer needs.

The monitoring capabilities of software monetization solutions provide a continuous feedback loop on how end customers are using software so businesses can better tune their packaging, pricing, and products to be more relevant in the marketplace, adds Jamshed Khan, vice president of professional services and business development at Gemalto (News - Alert),

A mix of established independent software vendors that are looking to expand the way they price for and package their offerings beyond just on-premises perpetual licenses, and enterprises and hardware companies that are moving into the software arena in light of the digital transformation and the rise of on-demand services and virtualization, are employing software monetization solutions today.

“Software is showing up everywhere,” notes Khan.

For example, Aspen Technologies Inc., which provides software for the oil and gas industry, recent employed Gemalto technology to introduce a token-based model of payment, Khan says. Rather than asking customers to select from a wide array of software options, which can sometimes be a complicated endeavor, the company now offers them tokens. Customers can use these token to purchase whatever Aspen Technologies software they require at any time. Aspen Technologies provides its customers with a portal through which they can track their token usage (so the customers can get a better handle on their typical spend each month) and buy additional tokens when needed.

Software licensing and monetization solutions are also important for companies shifting from selling physical items – like automobiles, medical equipment, tires, or pretty much anything else you can think of – to models that charge for on-demand use of those items, Khan adds. For example, he says, Michelin is now evolving from simply selling tires to providing customers with the option to buy based on the kilometer for vehicles or by the number of landings of aircraft.

“This is a great example of the most unlikely candidate moving to a new way to price and package for its offering,” Khan notes.

Software licensing and monetization helps companies better understand users’ utilization of their software and their preferences, so they have the right products and packaging in the marketplace when customers want them. That requires both software licensing and monetization software, says Khan, and collaboration between IT and operational and R&D departments. Gemalto, he adds, helps build bridges between those parts of its customers’ businesses, and to assists those businesses in establishing consistent licensing models across their organizations.

Aria (News - Alert) Systems provides a billing system that can work with the Gemalto software monetization solution. Parker Trewin, senior director of content and communications at Aria Systems, explains that it handles invoices; integrates across billing, CRM, ERP, and finance systems; provides a product catalog; does pricing and packaging around that; and allows customers to buy how they want to buy.