5 Reasons Why Identity-based Licensing will future-proof your business

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5 Reasons Why Identity-based Licensing will future-proof your business

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People, products and organisations are always growing and improving. They are always moving forwards and delivering more for less as they mature. The software market is no exception. With software products accounting for up to 34% of your customers overall IT spend each year, those responsible for IT budgets are continually looking at how to optimise their spending. As a result, licensing models that enable customers to better connect consumption with value, such as use-time, concurrent and subscription licensing models are rapidly gaining popularity over perpetual licensing models. So how can software developers optimise their software revenues, while at the same time optimising software licensing for their customers?

Identity-based licensing to the rescue – 5 ways that ID-based licensing will future-proof your business.

1. Improved customer experience

B2B software vendors often monetize niche products and it is therefore the product that underpins the value they provide in the industry that they serve. As a consequence churn and customer attrition are less likely for B2B software vendors than for those that offer consumer software. But ultimately, ‘driving down the cost of IT’ will always be a business priority and if you can’t provide your customers with what they want then eventually someone else will. Providing your customers with what they want will always speak directly to your bottom line and this means moving away from the mindset of ‘one-time revenue’, fixed price and fixed consumption.

ISVs need to be able to offer their business clients more flexibility if they want to stay competitive, however a large portion of software vendors are still using outdated software license keys and this, combined with the distribution method chosen, often ultimately restricts the amount of flexibility that they can offer. How can your software company drive revenues, efficiency and flexibility though licensing?

In the past ISVs have turned to on-premise license server solutions in order to manage software licensing more efficiently, however again the mindset is still very much focussed on the use of software license keys. This approach will not remain competitive in the 21st Century as license server solutions require lots of IT infrastructure, without actually solving the problem of effective license management.

Identity-based licensing, on the other hand, can control access to digital products based on the authenticated identity of an individual. It can accurately enable a variety of licensing models from trial SaaS subscriptions, site-based floating licenses, PAYG subscription models and even aggregate use time licensing, without the requirement for any additional IT infrastructure.

2. Reduced access friction

Every software application has an activation process and if your customers are lucky the process will be straightforward, logical and transparent. If your customer is not so lucky the process will be complicated, poorly executed and will frequently fail with a lot of software downtime. Identity-based licensing provides operational efficiency when onboarding new customers, which not only equates with a great customer experience, it also increases your bottom line.

Shipping physical product keys or managing LIC files are both cumbersome (and unnecessary) processes that create a significant drain on resources. Unless you and your customer both have an unlimited budget you don’t want to introduce physical license keys or increase software downtime by using resource intensive software licensing processes.

Most software suppliers still operate with a high number of manual or outdated processes when they provide their software products to customers under license. Sooner or later these processes will break. However consolidating your software business into an identity-based software protection solution, instantly enables you to manage and automate your software licensing processes.

With identity-based licensing, licenses are accessed by end-users via a transparent process that begins with just their email  address. For node-locked or more advance license types, additional attributes can be added to a user profile to refine and detail specific licensing terms. Entitlements are managed via a simple web-based administration tool, which can also be integrated with an external system like a CRM application. There are no license keys to issue, no installers to run, no dongles to distribute and no on-premise license server to be installed at the end-users location.

3. Better IP Protection

Tracking and monitoring software can be a huge drain on resources for software vendors, however it is essential in order to provide complete software protection. Information compiled by the International Data Corporation (IDC) indicates that 56% of software audits resulted in additional charges to compensate for historical under-licensing.

The IDC also reported that 21% of the companies that were required to pay “true-up” charges in order  to reach a state of compliance, were charged in excess of $1 million. In many cases, under-licensing has less to do with a company deliberately trying to avoid paying license fees, and more to do with their inability to track or understand their own usage of applications internally – But $1 million is still a lot of missed revenue for any company. Helping your customers remain compliant ensures that you aren’t missing potential revenues.

Introducing flexibility into your licensing model means having to have even tighter control over access rights and user entitlements. You can’t effectively control software licensing with outdated software licensing solutions. Temporary LIC files with expiry dates are a possibility when providing trial versions of your software. However what about further along the customer journey when your customers require more complicated licensing models like floating licensing or aggregated usage?

Traditional licensing solutions that rely on software license keys or dongles fail to address non compliance adequately for software vendors. They fail to protect the IP of the ISV and offer no ability to ensure an accurate match between usage and license fees paid. However the tight mapping between end-user and software product provided by identity-based licensing means that an ISV can always know who is using their software products.  The status of the licensing system in terms of who is accessing what and who has access to a valid license is always available to the ISV in real time so you can easily reconcile the number of licenses purchased against the number of licenses in use. When it’s time for access to be revoked, end-user entitlements can be updated using a simple web-based administration tool and the next time they log in, they will have been downgraded to the new rights.

4. Product optimisation through business insights

The software and IoT world is bursting with new opportunities for software developers and their customers, yet due to outdated processes many software vendors don’t know how or even if their customers are using their products. Software needs to be licensed in order to protect revenue and the intellectual property of the ISV. However, thinking of software licensing as simply minimising unauthorised use of your software is a huge mistake. You don’t just need to know who your customers are, you also need to know if they’re getting value out of your products.

‘Discovery comes first’, is a well-worn phrase, but with good reason.  The simple fact is that you can’t manage what you can’t see and this has never been more true than with today’s multi-app, multi-platform networks. ISVs must have full visibility of the software assets deployed across their customer network, but not only that, they need to determine whether their software is being used.

Data-driven strategies usually require significant resources including funds and staffing, and organisations often have to employ complicated composite solutions to create a unified picture of customer usage data. An IAM solution that can control access to a digital product based on the authenticated identity of an individual end-user can easily capture access data related to individual end-users, enabling granular business insights. However not all IAM solutions are created equal because not all IAM solutions can provide IAM with integrated business insights, therefore due diligence when considering vendors is a must.

Adding actionable insights to your software licensing will help you identify and react to business changes and also offers opportunities to introduce product improvements. But this isn’t possible with outdated license key solutions, unless you dedicate a lot of resource to data gathering and even then there will be data gaps, simply because the right framework does not exist to begin with.  Where software is installed but not used, it is not delivering any value to an organisation. Identity-based licensing can provide total transparency regarding software usage, which means knowing which products and features your customers find most valuable – this means pricing those features accordingly.

5. Reduced internal license admin

Worldwide IT spending is projected to total $3.7 trillion in 2018, an increase of 4.5 per cent from 2017, according to the latest forecast by Gartner, Inc. Spending is also forecast to grow another 8.4 per cent in 2019 to total $421 billion. Despite the massive growth and evolution of the software industry, ISVs have largely failed to implement automated software licensing systems across their product lines, and their failure to modernise is hurting their business.

The estimated annual IT support costs for every 100 users is between  $147,000-$293,000. Depending on the licensing model and deployment method chosen, IT support costs for ISVs generate equivalent demands on resources.

Software license keys create access friction throughout the software license lifecycle, not just when onboarding customers. There are three main touchpoints involved in the use of any software licensing solution: onboarding the customer, supporting the customer in production and revoking access rights. As the licensing demands of modern software products have evolved, these three main touchpoints have become the three major failure points of licensing models that rely on static license keys or dongles and deployed with on-premise license servers. This generates a high dependency on ISVs through support tickets.

In an identity-based licensing solution, end-users can only gain access to those products for which they have a valid license once they have an authenticated session. Access friction is almost eliminated as it can be self-managed through the end-users individual user account.  Strict API controls automate the licensing process, significantly improving licensing efficiency, which means less dependency on manual processes. Identity-based licensing can reduce your licence administration costs by as much as 70%.

In today’s fast-paced, multi-app world, the best licensing solution that can be used to underpin an ISVs product distribution is one using identity-based licensing. For more information regarding how 10Duke products can work for your company, book a demo with one of our software experts.

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