Consumption-based licensing, subscriptions, features-on-demand, and similar licensing models are opening up new business opportunities for manufacturers across many different markets, all based on creative software delivery strategies. While these models may be novel for software delivery, they are not new in other industries. Consumption-based pricing, for example, is standard in many traditional businesses. Consumers typically pay their utility bills based on the amount of services consumed (e.g, water and electricity). Usage is metered and billed accordingly. Subscription services have been around for a long time as well – newspaper and magazine subscriptions being the most obvious examples.
These business models and pricing strategies are also now becoming commonplace in the software world. Over the past two decades, the software market has slowly shifted from the traditional perpetual licensing model to subscriptions, usage-based, and the like. Microsoft and Adobe are the clear leaders in subscription services. According to a 2019 report from Zuora, subscription businesses grew revenues about 5 times faster than S&P 500 company revenues.
Many companies are testing the waters with new feature-based delivery strategies. The automotive industry is a good example. Subaru charges a monthly fee for a remote start function through an app and Tesla has used software to artificially limit the battery range of its lower end models for years. BMW is now selling subscriptions for heated seats in a number of countries. The company refers to the model as functions on demand. In this case, BMW owners already have all the necessary components installed, but BMW has simply placed a software block on their functionality that buyers then have to pay to remove. However, this model has created quite a bit of controversy and backlash from consumers, judging by comments posted on the online community network, Reddit.
Where, when, and how to introduce these new software delivery models can be a slippery slope for ISVs, as they need to be tailored closely to their customers business needs, usage requirements, and purchasing preferences. What is critical is for ISVs is to have a flexible licensing system that gives them the ability to structure and deploy the optimum licensing strategy that will gain consumer acceptance.
Let’s take a look at how a few of our customers have used our CodeMeter licensing platform to monetize their software in creative ways.
The French company Desoutter Industrial Tools designs and produces electric and pneumatic assembly tools. Desoutter found a way to monetize its software by providing greater versatility to their customers. Desoutter’s tools combine controllers, embedded systems, and software. Each piece of hardware used to have its own software on board with a traditional product license attached, which was cumbersome to manage for both the company and their customers. The company implemented an innovative concept that lets its customers dynamically draw from credits (in the form of Unit Values – UVs) to access only the products’ features and services they need at any time. If they no longer require certain services, they can recover the UVs and convert them into a different service or even redeploy them on another tool. The approach gives their customers a way to immediately reconfigure a workstation, for instance, for another purpose using their available UVs. CodeMeter facilitates management and secures the electronic process to purchase the UVs and monetize the software properly.
In the medical device sector, Fritz Stephan is a leading developer of specialized technical solutions in ventilation, anesthesiology, and oxygen supply. Their EVE ventilation family consists of three models that support patients from the emergency site to intensive care. EVETR is mainly used in emergencies and during transport, EVEIN is a fully-fledged intensive care respirator for patients in the hospital environment, and EVENEO is an intensive care ventilator for the neonatal unit. With the Internet Edition of CodeMeter License Central, they have structured a scalable licensing model where they can remotely activate features on-demand that create new post-sales revenues and responsive pricing models for their customers. Essentially, the device that was initially purchased by the customer stays the same, but it can be upgraded in the field, no matter where it was sold.
These are just two examples of how companies can leverage modern software licensing strategies to satisfy customers while opening new business opportunities. If you are considering adopting a new licensing model, I encourage you to visit our website. We have a number of webinars, technical articles, case studies, and other resources that can help you determine which license model would be best for your business and how to deploy it. The CodeMeter platform can accommodate all licensing strategies; both current strategies and strategies that your customers and sales team will dream up in the future – all without the need to change your code.