Lack of Flexible Software Licensing Costing Vendors, Finds Thales

• 91% of independent software vendors and intelligent device vendors (ISVs and IDVs) are losing revenue due to limited flexibility of licensing models and entitlement management
• 90% of software vendors are concerned about their products being compromised
• Nearly three quarters (74%) of software vendors expect an increase in the delivery of software as a service (SaaS) via the cloud

More than 90% of independent software vendors and intelligent device vendors (ISVs and IDVs) are missing out on revenue because they’re not offering the flexible licensing models customers demand, new research from Thales has revealed. Of those vendors, over half (54%) admit that this is due to their customers requiring more flexible license models.

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This research comes as the software delivery and entitlement management landscape is changing. Surveying more than 400 global ISVs and IDVs, the 2022 Thales State of Software Monetization Report has found that nearly three quarters (74%) of software vendors expect an increase in the delivery of software-as-a-service (SaaS) via the cloud, while two thirds (66%) anticipate increased delivery of software in a hybrid manner that leverages both on-premises and the cloud.

Vendors cited significant benefits gained from approaches like SaaS, with improved user experience (40%) deemed the most important, ahead of better customer value (34%) and increased revenue opportunities (30%). However, the push towards a digital approach also means considerable challenges for vendors when it comes to licensing and entitling their software. In fact, a full 40% of those surveyed admit to experiencing challenges in licensing their solutions across multiple devices, while the same number report struggling with different deployment environments. Over a third (37%) find it hard supporting the growing number of users who work remotely.

Compliance and misuse costing vendors

On top of these challenges, vendors could also lose out due to customer misuse and compromised software. ISVs and IDVs estimated that more than a quarter of their software was unlicensed in the last year.

Nearly all vendors surveyed (90%) say their revenue is directly impacted by licensing agreement violations and are worried that their software might be stolen, tampered with or copied.

It’s clear that vendors need to offer flexible licensing and entitlement management in order to meet customers’ varying needs,” said Jake Fox, Vice President, Software Monetization, Product Engineering & Services at Thales. “In order to take advantage of the increased demand for more choices in deployment, packaging and managing entitlements, vendors must invest in new technologies and ensure their businesses are prepared to offer software in a variety of ways. Those who lead the way with flexible entitlements will gain in market share, while those who do nothing risk being left behind in an increasingly competitive landscape.”

Data use key to improving revenue

In order to execute an effective software monetization and licensing strategy, software vendors will need to better understand how their software is being utilized by end-users. Doing so will drive forward smarter innovation and improvements in products. Fortunately, over half (54%) of vendors plan to take greater advantage of data for business intelligence. The data points that vendors are relying on, focus heavily on feature usage, and include the features users search for most (43%), , least popular features(41%) and the features used most and least often (41%).

Fox continued. “Data should be an essential part of any successful business, but it must be used properly. Data can lay the groundwork for future product development, ensuring the business is investing in the areas that customers are using. On top of that, it can also underpin software growth strategies by enabling businesses to tweak entitlements, agreements and packaging in real-time to suit customer needs, in turn securing maximum return on their investments.”

About Thales

Thales (Euronext Paris: HO) is a global leader in advanced technologies, investing in digital and “deep tech” innovations – connectivity, big data, artificial intelligence, cybersecurity and quantum computing – to build a confident future crucial for the development of our societies. The Group provides its customers – businesses, organisations and governments – in the defense, aeronautics, space, transport, and digital identity and security domains with solutions, services and products that help them fulfil their critical role, consideration for the individual being the driving force behind all decisions.

Thales has 81,000 employees in 68 countries. In 2020 the Group generated sales of €17 billion.

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