Modern techniques for Generating Software Revenue

Overview:

Organizations that rely on the sale of software as a revenue stream need to be concerned with maintaining flexible licensing while still preventing piracy. The violation of software licensing, whether intentional or unintentional, equals lost revenue for software vendors, who must work to minimize this loss. However, when implementing software protection solutions, vendors must be careful not to negatively affect customer acceptance with, for instance, the accidental prevention of use for legitimate users or onerous license activation processes.

When deciding to introduce software protection, it is important to consider the nature of the software being sold, the target audience, the intended market and the amount of the existing piracy. Highly specialized software that requires extensive training and support is not likely to have broad appeal on a P2P network.

Strategies for generating software revenue:

1. Reducing Software piracy

Software is one of the most valuable technologies of the Information Age, running everything from PCs to the Internet. Unfortunately, because software is so valuable, and because computers make it easy to create an exact copy of a program in seconds, software piracy is widespread. From individual computer users to professionals who deal wholesale in stolen software, piracy exists in homes, schools, businesses and government. As the number of PCs and Internet use grow, the incidence of software piracy is growing, too.

The complex and dynamic nature of online piracy makes effective monitoring by individual companies challenging. Accurate assessments of piracy threats often require time intensive manual reviews to verify the authenticity of software titles. The continued growth of piracy sites means ISVs must invest in extensive resources in order to conduct piracy monitoring. In addition, factors such as the emergence of open source clients and community supported protocols further the need for dedicated anti-piracy monitoring resources.

PROTECTION MEASURES

a). Increase Public Education and Awareness

Reducing software piracy often requires a fundamental shift in the public’s attitude toward software piracy. Public education is a critical component of any successful effort. Governments can increase public awareness of the importance of respecting creative works by informing the public about the consequences of disobeying the law, expressing their intent to strictly enforce those laws and encouraging the use of legitimate software.

b). Step up Enforcement with Dedicated Resources

Too often, software thieves are not treated as seriously as other criminals, and the punishment is too insignificant to be an effective deterrent. We can achieve this through creating specialized intellectual property enforcement units at the national and local levels, and providing dedicated resources to investigate and prosecute intellectual property theft.

c). Controlling CD piracy

There should be appropriate mechanisms for controlling CD piracy in the market. We can achieve that though regulating the manufacture of optical discs, by legislation if necessary, through registration and licensing of replication plants and compulsory use by plants of unique identification codes such as Source Identification (SID) codes. Such a step would not only prevent the considerable pirate manufacture of CDs that takes place within the Single Market, but will also set an important precedent for third countries.

d). Using software audit tools:

Audits are a key component of any comprehensive software asset management plan. Tools like Monotype Imaging, Express Software Manager Professional, Novell ZENworks Asset Management® are designed to help you identify and track licensed and unlicensed software installed on your computers and networks.

e). Technical Measures

Technical measures that increase the difficulty of duplicating software can be categorized as obfuscation, encryption. Code obfuscation is the deliberate altering of program code, whether at the source, object or machine code level. Encryption techniques include systems where the code to be executed is encrypted in some way and requires the correct key and subsequent decryption to run.

2. Time to Market

Getting products quickly to market is often a high priority for software vendors. Delays in deployment can be costly and reflect poorly on the software development team. Software protection is typically implemented at the end of the software development cycle, when pressure to get the product to market is highest. This forces developers to require a solution that can be implemented quickly without extensive training or programming.

A robust set of developer tools can cut development time while increasing the functionality delivered.

3. Synchronization

When implementing software licensing and protection, fulfillment must be considered as well. Software protection solutions almost always involve sending a license, either a hardware key or an electronic license, or even a paper license, to the end user. These licenses need to be tracked and managed.

The extent of back office integration, the amount of licenses being delivered, and the license models being implemented all impact the integration of software protection into an application.

The tracking and management of licenses are often done manually and records are maintained by the software division or business unit. The more divisions there are, the more difficult it is for a company to make decisions or gather information about all their products. It is virtually impossible to have a standard process for fulfillment and a centralized repository of licenses if each department implements their own protection scheme.

With a good Synchronization mechanism, software companies can generate revenues from the licenses

CONCLUSION

Software faces equally significant piracy challenges. Reducing software piracy rates requires the combined efforts of policy-makers, software developers and publishers, businesses, journalists and concerned individuals. The losses suffered through software piracy directly affect the profitability of the software industry.The consolidation of software protection techniques allows companies to reduce the time and effort required to implement and maintain a solution and to allow scalability.

Significance of a Successful Partnering Ecosystem for ISV’s

Ecosystem is so important for all the constituents involved in bringing products to market and into the hands of customers. In today’s complex, highly distributed computing environment, organizations purchase software solutions, consulting, and systems integration from a variety of suppliers. While customers need to be able to purchase innovative solutions, they also want to be guaranteed that these offerings are supported through a concrete and strong ecosystem. This strong ecosystem ensures that the technology supporting these business partnerships operates without interruption so that customers are able to gain the same transparent consistency of service as these types of partnerships evolve.

What Is a Business Partner Ecosystem?

Business partner ecosystem is a network of partnerships between the OPD companies, Independent Software Vendors (ISVs), Regional Systems Integrators (RSIs). The network can also expand to include channel partners, infrastructure leaders, and other complementary software vendors. The goal of this ecosystem is to present a complete solution built on an integrated platform to the end customer.

While partnering ecosystems have become a primary business practice, all approaches are not the same. Successful partnering takes a concentrated effort by all parties to ensure that a partnership is more than a signed contract with no follow through. Many partnerships begin with the best intentions but end up being a disappointment to all parties.

What Are the Best Practices for a Successful Partner Ecosystem?

OPD companies structure their partnership programs based on a business cycle perspective. The programs should offer a variety of elements ranging from technical information to helping partners plan their business and identify new market opportunities. These programs should provide a level of technical assistance that helps partners achieve technical proficiency as well as helping them build on the infrastructure to create sustainable innovative applications and solutions. Once the partner has reached this level of sophistication, the OPD Company should support the partner with comprehensive go-to-market programs.

With this 360 degree view, successful partnership programs can meet the varied needs and expectations of the different types of participants in a partnership ecosystem. Participants in a business partner ecosystem should have the ability to move into new vertical markets and geographies and deepen their technological expertise in ways that may not have been possible without the ecosystem. When all these elements come together, the partners are able to deliver a stronger, more effective product to the customer

The key benefits of a successful partner ecosystem include:

1. With Strong ecosystem ISV’s can generate new business opportunities and revenues through improved time to market and faster market penetration.
2. With the help of Ecosystem ISV’s can able to build complex and sophisticated products.
3. ISV’s can provide complete solution built on an integrated platform to the end customer.
4. It provides a variety of avenues for technical support, including a developer portal, 24-hour help desk and email support, mentoring, and more
5. ISV’s can improve their software quality through best-in-class QA processes.
6. In the eco system, Partners who complement each other's strengths, develop synergy in goals and create new benefits for customers.
7. Engaging with an OPD partner enables ISVs, especially start-ups, to exploit the low cost advantage with limited early stage capital
8. OPD enables ISVs to gain instant access to the development team that can bridge the gap in skill sets, including high-end product design and development activities.
9. Experience in dealing with multiple products enable OPD providers to bring best practices and mature processes to the table

Conclusion

The partner ecosystem between OPD vendors, Independent Software Vendors, Regional System Integrators, and consultants are becoming increasingly important. Much of this demand is being driven by customers who want focused industry solutions combined with the assurance that their technology investment is protected. By combining these components together, the end result is much stronger than any one participant in an ecosystem.

Top Challenges for Product companies

In a rapidly changing landscape of product engineering paradigms and market structures, ISVs face stiff challenges in facing competition, market demands and time to market. Understanding these challenges and forming the right strategy to counter them is important for survival and sustenance.

1. Maintenance revenue

In order to meet the needs of customers, ISVs tend to build in every little feature into the product. By doing so, your customer is happy and continues to pay your maintenance fees. Over a period of time, this approach to building software products results in bloated products that become very large and complex to upgrade and maintain.

Majority of the code in software products is hardly used used. The challenge for ISVs is to make a product for majority of the customers and customize for the rest. To execute this strategy the ISV has adopt an architecture that can support such a code base and implementation model and then adopt a services business model to deliver to customers who need the customizations.

For lot of ISVs, maintenance is a major part of the revenue. They tend to build in every little feature in the product and thus over a period of time they get into large and complex products which are difficult to upgrade and maintain. Question is, are you passing on this maintenance costs to customers as your revenue? How long will the customers keep paying this maintenance revenue and how long will you keep on adding complexity into your product probably will affect your product lifecycle. A management decision indeed!

2. Focusing on selling licenses

Maximizing revenues from licenses is a well known profitable business line. Services revenue – which forms part of the System Integration that goes into delivering a complete solution to the customer, has been carved out as a separate ball game which is handled by the System Integrators (Sis). Most of times SIs end up with 50-60% profit margins whereas the ISVs are left with just about 20% to 30%.

Hence the challenge for ISVs is to plan to not just focus on licensing revenue but to also be part of the services play which is proving to be more profitable. ISVs must plan to have the required implementation team and professional services arm in place, apart from the core product development team to provide the service required. Unfortunately by doing so an ISV may alienate the Sis and VARs who are channel partners and a part of the ecosystem. The challenge is to maintain healthy relations with this ecosystem and at the same time become more profitable in the services line of business.

3. Spending on Innovation

Innovation is probably the most overused word in the industry, so much that it has become a cliché.

Innovation is however in its truest sense essential to an ISV’s business success. ISVs strive for application innovation, product innovation, platform innovation, design innovation, marketing innovation, integration innovation, process innovation, value migration innovation, acquisition innovation… you name it!

When it comes to innovation, the ISV typically looks at the R&D budget as a benchmark in measuring innovation. However R&D commitment is just the beginning and is not really an indication of innovation spend. Up to 95% of R&D budgets are being used by ISV’s to build new features in current products to keep current clients onboard. This leaves a very small amount for boosting competitive positioning in the market where a major innovation budget needs to be. Optimizing the R&D budget remains a key challenge therefore.

4. Leveraging partner ecosystems

Concepts like SOA, SAAS, Open source, etc are evangelized very effectively by the large vendors as they quickly tie them into their sales and marketing strategies. Small and medium ISVs who have the technology know-how and delivery capability can sometimes get lost in the wave that follows such disruptive technologies.

The challenge for an ISV is to come up with an effective partnering model with the partners. For example, by creating pluggable or extensible products on top of a partner’s existing solution and services offering, customers can buy your best of breed functionality while enjoying the benefits of the big boys. This of course goes back to the challenge of innovating to come up with the right product that can be plugged into the vendor ecosystem and to keep abreast with a partner’s offerings and integration options.

5. Product development outsourcing goal

Experts say that ISVs should have at least two thirds of their product development lifecycle off-shored or outsourced. A large portion of that work needs to be entrusted to a services partners whose core expertise lies in that area.

Motivations for outsourcing is moving from pure cost arbitrage to value arbitrage – in which specialized companies can provide increased value in developing products with increased time to market and better quality. Hence the challenge for ISVs is to set up a seamless multi-shore development model which taps into the best talent, best cost structure and best quality wherever it exists in the world. There are plenty of options available in Asia and Europe – IndiaChina are known to be fore runners. and

Finally, ISVs should be ready for the next wave of competition from product companies that will emerge from countries like India and China – who can offer the product at half the cost! Its time to leverage your positioning and move on with the first mover advantage before that happens!