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Survey Reveals Software Publishers Are Losing Up to 50% of Revenue

March 31, 2013 08:00 AM

Inadequate Licensing Models, Piracy, IP Theft, Lack of Usage Insight, and Back-Office Dysfunction All Hinder Software Monetization Potential

Prakash Panjwani
Senior Vice President

Software monetization leader, SafeNet, and the Software & Information Industry Association (SIIA) has released the results of a joint survey of more than 620 software developers and 194 enterprise software end users, revealing that developers continue to  struggle with how to secure their critical intellectual property (IP) without disrupting their business. As a result of not implementing the  right licensing models and security as a foundational pillar of their  business, software developers are finding that they are losing revenue,  seeing diminishing profitability and increasing the risk to their brand  and overall reputation.

Participants cited inflexible licensing models, insufficient software protection, and inadequate operational procedures as the main  impediments toward fully monetizing their software, protecting their  company’s most critical intellectual property and fully integrating  software monetization into their business model.

Some of the highlights of the survey include:

  • One out of two (53 percent) software publishers surveyed said they  would have driven higher revenues for their software if they had more  licensing flexibility.
  • Nearly one out of two (48 percent) software publisher respondents admitted that competitive IP theft had a significant impact on their business.
  • In addition to licensing and piracy issues, nearly one out of two (46 percent) software publishers now report that dysfunction in their back offices has had a significant impact on their business, with nearly  two out of three (60 percent) admitting that they struggle with  back-office licensing processes.

“These survey results highlight the tremendous need for a change in how software developers approach and execute their software monetization strategies,” said SafeNet Senior Vice President Prakash Panjwani.“Developers need solutions that address the four key elements of  software monetization

Tipping Point for Licensing Models
More than half (53 percent) of software publishers surveyed said they  lost revenue opportunities due to the limited flexibility of licensing  models, which negatively impacted their business. In addition, 61  percent of publishers admit that they struggle with the ability to price  and package their applications  at the feature level. Almost half (49 percent) of respondents admit that re-packaging offerings without engineering involvement is a challenge, and that they struggle to  support the license models their customers are demanding. Given the  issues faced by software providers, it is not surprising that inflexible  licenses were cited as the biggest software licensing headache by more than a third (35 percent) of end-user

Revenue and Brand Reputation Increasingly at Risk
Beyond licensing flexibility problems, nearly half of all respondents  also reported that lack of control over their software was a major  contributor to revenue loss 48 percent of software publisher respondents  thought that competitive IP theft had a significant impact on their  business, and 42 percent thought that lost revenue due to software  piracy had a significant impact. This result is not unexpected,  considering that 70 percent of respondents reported challenges with  piracy prevention, 63 percent reported challenges with  reverse-engineering protection, and 51 percent reported challenges with  code-tampering prevention. The responses from software end users justify concerns about the  business impact of software misuse

Back-Office Dysfunction Leading to Operational Inefficiencies and  Revenue Loss

In the past, when the software industry discussed revenue leakage, the focus was on piracy. As the industry has progressed, software publishers increasingly recognize other revenue barriers. Forty-six percent of software publishers now report that dysfunction in their back offices  has had a significant impact on their business. This is consistent with  the finding that nearly 60 percent also admitted they struggle with  back-office licensing processes, and only 31 percent of respondents said  they have integrated entitlement management processes. More than half of  publishers said they face the following operational challenges

Lack of Usage Visibility Restricting Business Intelligence

Business intelligence is critical for decisions related to new markets, product packaging, and efficient internal resource management.  Therefore, software publishers’ ability to track who is using their  software

An Effective Software Monetization Strategy is Needed for Maximizing  Value

Despite the challenges software publishers face, they recognize that an effective software monetization strategy can help them maximize the  value of their IP. In fact, more than 84 percent of respondents say that  an effective software monetization strategy could boost their revenue by  up to 50 percent.

Software developers are experiencing the evolution of software monetization. While strong security still tops the list of important software monetization solution features (63 percent of respondents), it  is followed closely by other key features, including flexible packaging/bundling functionality (52 percent), automated provisioning  and enforcement (51 percent), and minimizing the burden on engineering  (49 percent).

 The industry finds itself at a critical tipping point as software publishers look for more innovative and effective ways to maximize the value of their IP,” said Rhianna Collier, Vice President of the SIIA’s Software Division. “They need to better align their software  monetization strategy with their business objectives and drive those  strategies very early in the product development cycle. That way, they  can develop software packages to meet their customers’ current and  future needs, and build licensing into their software and back-office  systems.”

About SafeNet Software Monetization Solutions
SafeNet has more than 25 years of experience in delivering innovative  and reliable software licensing and entitlement management solutions to software publishers, technology vendors, and cloud service providers worldwide.

Easy to integrate and use, innovative, and feature focused, the  company’s family of Sentinel Software Monetization Solutions are designed to meet the unique license enablement, enforcement, and management requirements of any  organization, regardless of size, technical requirements, or  organizational structure. SafeNet clients are able to address each and  every aspect of the software monetization lifecycle from copy and intellectual  property protection to product catalog management and ongoing end-user experience improvement. With a proven history of adapting to  new requirements and introducing new technologies to address evolving  market conditions, SafeNet’s more than 25,000 customers around the globe  know that by choosing Sentinel, they choose the freedom to evolve how  they do business today, tomorrow, and beyond.

The Software & Information Industry Association (SIIA) is the principal trade association for the software and digital content industry. SIIA provides global services in government relations, business development, corporate education and intellectual property protection to more than  700 leading software and information companies.

Founded in 1983, SafeNet, Inc. security companies in the  world, and is trusted to protect the most sensitive data for  market-leading organizations around the globe. SafeNet’s data-centric approach focuses on the protection of high-value information throughout  its lifecycle, from the data center to the cloud. More than 25,000  customers across commercial enterprises and government agencies trust  SafeNet to protect and control  access to sensitive data, manage risk, ensure  compliance, and secure virtual and cloud environments.

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