SoftSummit 2010 Key Trends Survey

2010 Key Trends in Software Pricing
& Licensing Survey
Sponsored by Flexera Software LLC

2010 Key Trends in Software Pricing and Licensing Survey 2
2010 Key Trends in Software Pricing
& Licensing Survey
Sponsored by Flexera Software LLC
Overview of Survey Findings
The 2010 Key Trends in Software Pricing and Licensing Survey of 234 participants, prepared jointly with IDC, found
that software vendors and their enterprise customers, increasingly challenged by the current economic downturn, are
looking for better strategies to derive more value for their organizations through software licensing and pricing.
While, not surprisingly, some of those strategies diverge between vendors and customers, many are complementary
and serve to strengthen the positions of both. Some of the key findings include:
Cloud Computing on the Rise
The 2010 survey reveals that cloud computing is on the minds of software producers, who are planning on a
significant market shift towards private and/or public cloud-based models. 60% of producers indicated that
their licensing will need to adapt to the cloud over the next two years, and 30% expect that the change will
be significant.
Implicit in this trend will be the need for both producers and enterprises to manage the heightened
complexity associated with cloud-based computing. For producers and high-tech manufacturers, this means
more sophisticated entitlement and compliance management. For enterprises, this means more
sophisticated software asset management and enterprise license optimization to ensure, among other
things, continual compliance.
Increased Emphasis on Usage
The survey also reveals an increasing demand for more flexible licensing models, which in turn is going to
fuel the demand for more sophisticated application usage tracking tools. For instance, 22% of producers
currently offer usage-based pricing (up from 15% in 2009), and over the next two years 41% expect to offer
usage-based pricing.
In the midst of this shift, while 70% of enterprises report that tracking software license usage is important,
one-third of the software producers that have or plan to have usage-based pricing do not track usage at all
today – not even manually. Just over 50% that have or plan a usage-based pricing model in the next two
years are offering tools to help their customers track application usage. For both producers and enterprises,
the ability to track and understand current usage is a prerequisite to making an intelligent decision to migrate
to a usage-based model. Thus, both sides will have to acquire better tools as this pricing model takes hold.
Producers Still Lagging in Usage Tracking & Enforcement
The 2010 survey indicates that despite the growing complexity of software licensing models and increased
enforcement, producers are not adequately tracking software usage. 43% of Producers indicate that either
they do not monitor software usage or they do not know if they do. Likewise, 13% of Producers indicate that

they still have not implemented any means of enforcement, although this number is a vast improvement over
2009 when 28% reported that they had no enforcement mechanisms. These numbers belie the growing
importance of software compliance and speak to an absence of industry-wide standardization and
automation of software usage tracking and enforcement.
Preferred Enforcement Mechanisms Converging
Given that software license enforcement is a necessary reality, the 2010 survey indicates a convergence of
both producer’s and enterprise’s preferred enforcement mechanisms. Overwhelmingly, 66% of enterprises
prefer network-based licensing enforcement, up from an already-strong 60% in 2009. Software producers
are responding to this preference, with 46% now reporting that they use networking licensing (more than any
other method), up from 28% last year. This enterprise desire matches the findings around trends towards
more usage-based licensing models.
Software Audits: A Growing Reality
13% of software producers report in 2010 that they use compliance team audits as an enforcement
mechanism. While this number is low compared to other methods, including serial number checks (39%),
product activation (36%) and dongles (24%), audits are on the rise. Last year only 3% of producers used
audits as a compliance mechanism. Looking forward, 18% of producers expect the use of audits to increase
over the next two years. This increase in audits, often initiated as a result of mergers and acquisitions, and
changes in environment such as virtualization, while adding to the producers’ coffers can also add tension to
the relationship between producer and customer. Tools that help producers and enterprises better track
usage and ensure continual compliance would ultimately serve both parties more effectively by better
identifying under- and over-utilization and spreading the costs to the parties actually using the licenses.
Value Satisfaction – Is Value Equal to Price?
Software producers and enterprises are largely in agreement that pricing models capture the value of the
software. The survey asked enterprises to rate their satisfaction of pricing for database, middleware, ERP,
CRM, engineering and desktop applications. Most respondents indicated they were largely satisfied.
Enterprises were most satisfied with database software pricing -- with only 10% of respondents registering
dissatisfaction; they were least satisfied with ERP software pricing, but not by a significantly higher amount --
only 20% registered dissatisfaction.
79% of software producers, likewise, said that their company’s pricing and licensing strategies captured the
value of their software effectively. Notwithstanding current satisfaction levels, producers also understand
that their customers want more choice in licensing models. Most producers are increasing the flexibility of
licensing by adding more choice. They are doing this in order to generate more revenue (72%) and improve
customer relations (69%).

Survey Background
The 2010 Key trends in Software Pricing and Licensing survey was conducted by Flexera Software and IDC’s
Software Pricing and Licensing Research division under the direction of Amy Konary. This annual research project
looks at the software licensing, pricing and enforcement trends and best practices around the licensing of software.
The survey reaches out to executives at software vendor firms, high-tech manufacturers and enterprise customers
who use and manage software and devices. Now in its sixth year, the survey is previewed at the annual
SoftSummit
®
Conference and made available to the industry at large each year.
Methodology and Sampling
In total, 234 respondents participated in the survey, including 77 enterprise executives and 157 software vendor
executives.
Enterprise Demographics
About one-half of the enterprise respondents were from larger enterprises of more than $500 million in
revenues, and about a quarter were from companies between $100 - $500 million. 66% were from North
America, 25% from Europe, 8% from Asia Pacific, and 1% from the Middle East.
Where is your company or division headquartered?

Software Producers and High-Tech Manufacturer Demographics
The largest proportion of software vendor respondents (34%) came from companies with under $10 million in
revenues. The remainder of respondents were divided relatively equally across all revenue levels. 84%
were from North America, 11% from Europe, 4% from Asia Pacific, and 1% each from Africa and the
Middle East.
Where is your company or division headquartered?

Individual Findings
Pricing Flexibility and Value
Growing Demand Amongst Enterprises for Usage-Based Pricing:
The overwhelming majority of enterprises (59%) prefer concurrent user (floating/network) licensing.
However, the demand for usage-based pricing models is growing significantly – 16% (up from 11%
last year).
What is the software pricing model you prefer
for enterprise class applications?

Software Vendors Continue to Offer a Wider Variety of Software Pricing Models:
While we saw fewer software vendors offering seat (named-user) (28%) and financial metric (revenue, cost,
royalty) (5%) pricing models in 2010, on the whole, variety increased, with the largest growth in seat (per
machine/server) (65%) and concurrent user (63%) licensing models. Producers, clearly responding to
growing enterprise demand; saw usage based software licensing increase to 22% -- up from 15 percent last
year. Gains were also seen in processor core pricing models. Over the coming two years, 41% of
Producer’s expect to offer some sort of usage-based pricing.
Which pricing models do you offer for your software today?
(Select all that apply). Software that is priced per…
Looking forward in the next two years, which pricing models do you
expect to offer? (Select all that apply). Software that is priced per…

Revenue Generation & Customer Satisfaction Driving Changes:
39% of Producers have indicated that they have changed their pricing and licensing policies over the past
two years to make them more flexible. Overwhelmingly, the two reasons for this shift have been to generate
more revenue (54%) and improve customer relations (50%).
Generate
more
revenue
Improve
relations
with
customer
Accelerates
the sales
cycle
Free R&D
resources
Decrease
development
cost
Not
applicable
Other
(please
specify)
Both Enterprises and Producers Are Largely Satisfied with Current Pricing Models:
The survey asked enterprises to rate their satisfaction of pricing for database, middleware, ERP, CRM,
engineering and desktop applications. Most respondents indicated they were anywhere from neutral to
highly satisfied. They were most satisfied with database software pricing -- with only 10% of respondents
registering dissatisfaction; they were least satisfied with ERP software pricing, but not by a significantly
higher amount -- only 20% registered dissatisfaction.
If you answered yes to question 11, did providing more flexible licensing
and pricing policies help the company (Select all that apply):

Database Middleware ERP CRM Engineering
/Technical
Applications
Desktop
Applications
Likewise 79% of software Producers said that their companies’ pricing and licensing strategies captured the
value of their software effectively.
.
How would you rate the overall effectiveness of your
company’s pricing and licensing strategies in capturing the
value that your software provides to customers?
How would you rate your level of satisfaction with the value received for the
price from the following types of software? (Please rate all that apply.)

Software Usage, Delivery and Enforcement
Cloud Computing on the Rise:
Cloud computing is on the minds of software producers, who are planning on a significant market shift
towards private and/or public cloud-based models. 60% of producers indicated that their licensing will need
to adapt to the cloud over the next two years, and 30% expect that the change will be significant.
Please rate the level of your agreement with the following statement (enter a number
between 1 and 4 with 1=stay the same/no change; 4= change dramatically):
In the next 24 months, my company’s current licensing strategy will need to change in
order to adapt to the requirements of cloud computing.

Subscription Software Licensing Models Continue to Grow
While perpetual licensing models continue to dominate, Producers report an increased percentage of their
revenues associated with subscription models – 85% in 2010 compared to 79% in 2009. Producers expect
that percentage to grow over the next two years to 88%.
Thinking of your total software license revenue, what percentage
is associated with the following license types?
Looking forward in the next two years, what percentage of your total
software license revenue will be associated with the following?

Disconnect in the Enterprise Between Confidence and Compliance:
85% of enterprises responded that if audited, they are at least somewhat confident that they are in
compliance with all of their software license agreements. However, when pressed, that confidence is not
justified. 53% of enterprises also responded that at least some of their software license spend is associated
with applications that are overused and therefore out of compliance. 85% responded that at least some of
their software license spend is associated with under-used software, or shelfware.
If you were audited by a vendor or a third party today,
how confident are you that your company would be in
total compliance with all of your licenses?
What percentage of software license spend within your
organization do you estimate is associated with applications
that are over-used and therefore out of compliance?

Many Software Producers Still Don’t Track Customer Usage
While the percentage has declined over 2009, a surprisingly high number of Producers, 35% in 2010 versus
43% in 2009, still do not monitor software usage, and 7% do not know whether or not they monitor usage.
How do you primarily monitor your customers’ software usage?
What percentage of software license spend within your
organization do you estimate is associated with applications that
are under-used and therefore over-licensed (i.e., shelfware)?

Enterprises Use a Variety of Tracking Methods
71% of enterprises agree that tracking software license usage is important. However they use a variety of
methods to do so, including Software Asset Management software (32%), homegrown systems (18%),
vendor-provided software (9%), and manual methods (9%). 4% of enterprises say they do not currently
track usage. Reducing software costs and ensuring compliance are the two most oft-cited reasons for
tracking usage. More than a quarter of enterprises are dissatisfied with their current software license usage
tracking model.
How do you primarily perform tracking and reporting of
your software license usage today? (check only one)
If you are currently tracking your software license usage, what
is the most important reason for doing so? (check only one)

If you are currently tracking your software license usage,
how satisfied are you with the current method?

Compliance Audits Soar
While network licensing, local serial number checks and product activation continue to be ISV’s preferred
method of enforcement, use of compliance audit teams have risen nearly fourfold, up to 13% in 2010
compared to 3% in 2009. This trend will continue over the next two years as 18% of Producers predict that
their use of compliance audits will increase.
None Serial #
check
locally
Dongle
USB Key
Product
Activation
(Internet)
Network
Licensing
(LAN)
Compliance
audit team
that visits
customers
None Serial #
check
locally
Dongle
USB Key
Product
Activation
(Internet)
Network
Licensing
(LAN)
Compliance
audit team
that visits
customers
Projecting ahead 2 years, do you see your company’s use of each type of
enforcement as increasing, decreasing, staying the same, or not using?

Enterprises Would Prefer Enforcement via Network Licensing
66% of enterprises would prefer network licensing enforcement of their software license – software activated
by an internally shared license. Lesser-preferred methods include product activation, vendor-supplied
monitoring with annual true-up, and, of course, compliance audits. Dongles and locally-checked serial
numbers were the least preferred enforcement mechanism.
If a software vendor gave you a choice, which of the
following means of software license enforcement
would you prefer most? (check only one)

Lack of Automation Stymies Usage Tracking in Enterprises
Enterprises said that for compliance purposes, tracking usage of Middleware, ERP and CRM software is the
most difficult. They most frequently (46%) cite lack of automated tracking mechanisms as the reason.
Database Middleware ERP CRM Desktop
Applications
For which types of software in your environment is it
difficult to track usage for compliance management?
If you checked “difficult” or “very difficult” to any software
type in Question 12, what is the primary reason why?
Engineering/
Technical
Applications

Most Producers, However, Believe Their Customers Understand Their Entitlements:
62% of Producers believe their customers understand what products they are entitled to use. The methods
Producers attribute to their customers’ entitlement management varies from use of tools to manual tracking.
However, a large percentage (27%) of Producers don’t know what their customers use.
Do you believe your customers know what products they are
entitled to use and what they are actually using?
What do you believe is the primary way your customers
manage their entitlements today?

Many Producers, Still Lacking Automation to Monitor Customer Usage, See the Need to
Adopt Better Tools:
43% of Producers say they either do not have technology in place that enables them to know what product,
product version or platform their customers are using – or they simply do not know. Not surprisingly, given
this figure, 46% of these Producers say that over the coming year they will need to deploy technologies that
better track licensing, and 40% say they will need to deploy better enforcement technologies .
Yes No Do not know
Do you have technology in place that enables you to know what
product, product versions or platforms your customers are using?
In the next year, in what ways will your licensing
strategy need to change (check all that apply)?

Vendors and Customers Prefer Electronic Software Delivery
Not surprisingly, electronic delivery for software media and documentation is overwhelmingly the preference
of both enterprises (83%) and Producers (62%), up significantly from 2009, when only 47% of Enterprises
and 55% of Producers preferred this delivery method. Producers site cost reduction and customer
satisfaction and loyalty as the reasons for their preference.
Looking forward, how would you best describe your
primary software delivery strategy 1 year from now?
How would you best describe your preferences
for software delivery? (pick one)

Do not plan on
adopting an ESD
solution
Cost reduction Customer
satisfaction and
loyalty
Opportunity to
drive revenues
SOFTWARE LICENSING AND PROVISIONING RESEARCH AT IDC
IDC's global Software Licensing and Provisioning research practice is directed by Amy Konary. In this role, Ms.
Konary is responsible for providing coverage of software go-to-market trends including volume license programs,
evolving license models, global price management, and licensing technologies through market analysis, research
and consulting. In her coverage of software maintenance, subscription, electronic software distribution and licensing
technologies, Ms. Konary has been instrumental in forecasting future market size and growth. Ms. Konary was also
the lead analyst for IDC's coverage of software as a service (SaaS) for eight years prior to focusing exclusively on
pricing, licensing, and delivery. For more information about IDC, please see www.idc.com
ABOUT FLEXERA SOFTWARE LLC
Flexera Software is the leading provider of strategic solutions for Application Usage Management; solutions
delivering continuous compliance, optimized usage and maximized value to application producers and their
customers. Flexera Software is trusted by more than 80,000 customers that depend on our comprehensive
solutions- from installation and licensing, entitlement and compliance management to application readiness and
enterprise license optimization - to strategically manage application usage and achieve breakthrough results realized
only through the systems-level approach we provide. For more information, please go to:
http://www.flexerasoftware.com

Copyright © 2011 Flexera Software LLC. All other brand and product names mentioned herein may be the trademarks and registered trademarks of their respective
owners. FX_2010KeyTrendsSurvey_Oct11
Flexera Software LLC
1000 East Woodfield Road,
Suite 400
Schaumburg, IL 60173 USA
Schaumburg (Global Headquarters),
+1 800-809-5659
United Kingdom (Europe,
Middle East Headquarters):
+44 870-871-1111
+44 870-873-6300
Japan (Asia,
Pacific Headquarters):
+81 3-4360-8291
For more locations visit:
www.flexerasoftware.com

SoftSummit 2010 Key Trends Survey

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SoftSummit 2010 Key Trends Survey