SafeNet EMS Showcase: Ingredients for an Evolution
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"The Ingredients for an Evolution" Sentinel EMS Product Overview/Demo

"The Ingredients for an Evolution" Sentinel EMS Product Overview/Demo
Chris Holland, Vice President, Software Rights Management, SafeNet, Inc.

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  • Seismologists have long been predicting a major shift in the software licensing landscape- it's no longer a question of if, but when. With so many forces working together to alter the status quo, it's no wonder that traditional licensing practices are no longer effective, or relevant. This IDC presentation will identify the shifts we are observing in the industry, and how these are changing the fundamentals of pricing and packaging software. The speaker will also provide guidance to software publishers that are trying to adjust to new market realities as well as plan for the future.
  • This is a classic IDC showing the varying approaches to software delivery and licensing that paint the market landscape. Most software today is still delivered as a perpetual, on-premise product. However, that is changing.
  • Copyright 2007 IDC. Reproduction is forbidden unless authorized. All rights reserved. Title of Presentation Client The second signal of disruption, referred to as "type 2" disruption, is the ability to address the needs of nonconsumers. Nonconsumption can be found in two different forms: potential customers that are not using any products and those that may already have a solution implemented but aren't utilizing it or find that it isn't meeting their needs. This phenomenon of "competing against nonconsumption" enables a new population of customers to access a product (or in this case, a service) where none existed previously. To serve a new market, an entirely new value network (the ecosystem of companies and systems necessary for the production, delivery, and service of a comprehensive solution) often emerges to complement the innovator and its innovations. In the software industry, nonconsumers are companies that do not/cannot use application software because they lack the necessary skills or financial resources to do so. Nonconsumers for software could also be departments or individuals within a larger organization where the enterprise owns a license but only a select few have the expertise to utilize the application. To some degree, companies providing ASP services have attracted nonconsumers at small and medium-sized companies that want access to the same function-rich applications that large companies utilize. However, the Web-native applications providers built their businesses based on the needs of nonconsumers. These nonconsumers are found in small or otherwise IT resource–challenged organizations that were unable to implement enterprise software internally and therefore could not utilize it unless it was delivered in a less cumbersome way (in this case as a service), as well as in departments and regional offices of large organizations. In both cases, these nonconsumers are happy to have some functionality, even though these applications are not as mature as the packaged applications that dominate the software market today. In addition, these nonconsumers are attracted to the pricing model of Web-native applications providers, which does not include an up-front software purchase: Instead, customers pay one monthly subscription for the software and the hosting service. By entering the software market with "good enough" technology — and by competing against nonconsumption — Web-native application providers are establishing a strong beachhead in the software market. Over time, the lessons learned and the innovations that companies such as Salesforce.com, NetSuite, UpShot, and others are building into their solutions will enable these applications to begin tackling larger and more mission-critical tasks — and eventually, to disrupt the established software market with a less expensive alternative (see Figure 3).
  • Copyright 2007 IDC. Reproduction is forbidden unless authorized. All rights reserved. Title of Presentation Client -> real value is the ease, intuitiveness, and seamless ness of the experience
  • Title of Presentation Client Copyright 2007 IDC. Reproduction is forbidden unless authorized. All rights reserved.
  • IDC has just finished updating it subscription and SaaS market forecasts. It’s interesting to note that most subscription revenue in the industry today is associated with on-premise software, not SaaS, but that SaaS makes up a growing portion of this segment. The final bullet provides a good comparison between the growth of SaaS, compared to all SW and all APPS WW. It also provides some guidance for makers of applications: that customers increasingly want the flexibility of SaaS delivery, and also that there is a faster growth trajectory for native SaaS applications, if you are a provider looking for a new path to market. During a tough economic time, resellers will always look to recurring revenue among the portfolio of what they sell, and ISVS are finding willing partners to take their offerings to customers.” Title of Presentation Client Copyright 2007 IDC. Reproduction is forbidden unless authorized. All rights reserved.
  • Copyright 2007 IDC. Reproduction is forbidden unless authorized. All rights reserved. Title of Presentation Client Disruptive innovations typically have enabled a larger population of less-skilled or less-wealthy people to do things in a more convenient, lower-cost setting, which historically could only be done by specialists in less convenient, centralized settings. Disruption has been one of the fundamental causal mechanisms through which our lives have improved. Disruptive Innovation and Relevance to IT: Opportunity: Create new markets by using technology to reach customers with a fundamentally different business model New companies emerge that are not hindered by conflicts of interest Threat: Existing, often proprietary, systems are replaced by modular architectures Profit migrates to new areas in the value chain Salesforce.com is competing against non-consumption Type 1 disruption Salesforce.com is addressing over-served customers with a lower-cost business model Type 2 disruption

SafeNet EMS Showcase: Ingredients for an Evolution Presentation Transcript

  • 1. Today’s Evolving Licensing Landscape Amy Konary Director, Software Pricing and Licensing IDC
  • 2. Tectonic Shifts
      • Perpetual -> Subscription
      • On-Premise -> SaaS
      • Clear -> Cloudy
    • License Broadly -> License Narrowly
    • License Opaque -> License Transparent
    • License Afterthought -> License Strategic
    • License Haphazard -> License Deliberate
  • 3. Why is this Happening?
      • The software industry is maturing
      • Customers are dealing with a complexity crisis
      • There is a price-performance-value disconnect
      • New delivery models and hybrid software/service vendors are gaining acceptance
      • Underlying technology is changing (multicore, virtualization, etc.)
  • 4. Software Industry Landscape Software as a Service 88% of WW software revenue in 2009 Perpetual Subscription LICENSING APPROACH Service Product DELIVERY APPROACH These approaches can be mutually exclusive!
  • 5. What’s Wrong with this Picture?
    • To survive, vendors must continuously push new products and features, making software more costly and complex to obtain and manage
    • Customers believe that they only use 16% of the capabilities of their software
    • These customers are overserved
    • Because software is so costly and complex, a population of underserved customers exist
    • Overserved and underserved customers are attracted by a solution that provides most if not all of the features they need at a fraction of the cost and complexity
    X
  • 6. New Software Value Framework Product
    • Defined by vendor
    • Value typically based on cost to vendor of bringing the product to market
    Experience
    • Defined by customer/ vendor interaction
    • Value based on ease, intuitiveness, and quality of the experience
  • 7. The VOMIT Chart
  • 8. Experience-Based Value Creation Subscription Consumption Outcome Capacity Metering/ Tracking Service Importance Prevalence
  • 9. Total Software Revenue Mix, 2006-2014 20% 6% 1% ‘ 09-’14 CAGR%
  • 10. Subscription is Here- Vendors
    • Of the top 100 software vendors worldwide by revenue, 40% report subscription revenues
    • For 13% of the top 100, subscription represents greater than 50% of total software revenues
    • Salesforce.com is the only pure-play SaaS provider to make it into the top 10 vendors according to software subscription revenue
    • Projected growth in SaaS impacts the subscription forecast, with SaaS-revenues making up 32% of the overall subscription forecast in 2008 and 33% in 2009.
    • 2009 Spending on SaaS (est $9.5B WW) is YoY growth of 42% vs. All software: (3.4%) vs. All Applications (5.6%)
  • 11. Licensing Model Attractiveness
    • Q: Please rate the attractiveness of the following (1-7 scale). A pricing model which:
    Source: IDC Software Pricing Survey, April 2009 N=326
  • 12. Cloud Services Definition Consumer and Business products, services and solutions delivered and consumed in real-time over the Internet Cloud Services
    • Shared, standard service – built for a market (public), not a single customer
    • Solution-packaged – a “turnkey” offering, integrates required resources
    • Self-service – admin, provisioning; may require some “on-boarding” support
    • Elastic scaling – dynamic and fine-grained
    • Use-based pricing – supported by service metering
    • Accessible via the Internet/IP – ubiquitous (authorized) network access
    • Standard UI technologies – browsers, RIA clients and underlying technologies
    • Pulished service interface/API – e.g., web services APIs
    • NOTE: Cloud Services is a mix of technical and business model attributes.
    Key Attributes “ casual description”
  • 13. Why Cloud? Q: Rate the benefits commonly ascribed to the 'cloud'/on-demand model (Scale: 1 = Not at all important 5 = Very Important) Source: IDC Enterprise Panel, 3Q09, n = 263 54.0% 63.9% 64.6% 67.0% 68.5% 75.3% 77.7% 77.9% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Seems like the way of the future Sharing systems with partners simpler Always offers latest functionality Requires less in-house IT staff, costs Encourages standard systems Monthly payments Easy/fast to deploy to end-users Pay only for what you use Source: IDC, September 2009 % responding 3, 4 or 5
  • 14. What’s in it for Software Vendors?
      • Increase competitiveness
        • Allows lower entry price for customers
        • Improve customer experience
        • Get out in front of public market competitors who may be slow to launch subscription pricing
      • Increase predictability of license revenues
        • Public market valuation metrics reward subscription pricing and recurring revenue business models
      • Decrease management/sales pressure to close marginal deals at the end of the quarter
        • Remove customer pricing leverage
        • Increases importance of customer satisfaction in ongoing “sales” process (e.g. product management commitments & customer support)
  • 15. Two Likely Reactions at this Point in the Presentation 1) 2)a 2)b
  • 16. Case Study: Siebel and Salesforce.com MORE FUNCTION-ALITY HIGH-COST PERP. LICENSE TRADITIONAL DEPLOYMENT LARGE ENTERPRISE PARTNERS LOW-COST SUBSCRIPTION SERVICE DEPLOYMENT SMB PARTNERS LESS FUNCTION-ALITY “ I believe I have never encountered them competitively in nine years. And I am absolutely satisfied that they do not have a business model .” Tom Siebel on Salesforce.com (Source: destinationCRM 10/2002)
  • 17. Underlying Technology Change by the Numbers
    • By the end of 2009, VMs will outnumber physical servers
    • By 2012, VMs outnumber physical servers 2:1
    • VMs per server has increased from 3.0 in 2005 to 6.3 today and will rise to 8.0 in 2012
    • 50% of the workload described as production
    • 10-40 fewer servers acquired on average annually
    • 70% are very satisfied with virtualization
  • 18. A Delicate Balance
    • Simplicity/Complexity
    • Adaptability/Predictability
    • Existing Clients/New Clients
    • Technology Must Play a Key Role
  • 19. Software Licensing Technologies
  • 20. Licensing Technology Forecast by Phase ($M) Source: IDC Software Product Lifecycle Management Forecast, Dec. 2008 15% CAGR 12% CAGR 9% CAGR
  • 21. Role of Licensing Technology- Case Studies
    • Enable more flexible licensing
      • Floating or concurrent models
      • Sub-feature licensing
      • “ Real-time” licensing
    • Enable trials
    • Generate more revenue/improve margins
    • Reduce the number of SKUs
    • Stop “giving away a lot of software” due to piracy or non-compliance
  • 22.
    • Mask complexity
    • Move away from error-prone, manual processes
    • Move away from physical protection
    • Reduce the number of SKUs
    • Improve the customer experience
    • Create a unified view of licensing
    • Work more smoothly with partners
    • 24x7 self service capabilities, up-to-date reporting
    • Better intelligence
    • GROWING PAINS
    Role of Licensing Technology- Case Studies
  • 23. Challenges
    • Connecting licensing to KPIs.
      • Sometimes workarounds, usually manual processes, ensure KPIs are met even when current systems have shortcomings
    • Identifying the licensing champion
    • Getting the attention of senior management
    • Making a strong connection between licensing and customer/partner satisfaction
    • Making a clear connection to lost revenue due to noncompliance
    • Realizing that any approach will take time and money.
  • 24. Guidance
    • Policy is the best Policy
    • Choice is Good
      • Flexibility is where it is all going, but need to mitigate complexity with:
        • Education
        • Communication
        • Technology
    • Not a question of if, but when
      • Take head out of sand
      • Your customers are moving on, with or without you