Grant Lloyd, group business development director at Softline, discusses the benefits of licensing and how it assists consumers to leverage value from technology and business automation.
While software vendors are endlessly compelled by consumers and the competitive market in which they operate to continuously re-evaluate all aspects of their business model, including licensing methodologies, it is premature and simplistic to anticipate the complete demise of the software licensing methodology.
Grant Lloyd, group business development director at Softline, a subsidiary of FTSE 100-listed Sage plc, is a passionate supporter of software licensing methodologies and says the effectiveness and relevance of these models are far too significant to the market and its players to ignore.
"Viewing software licensing as a simplistic or opportunistic IP (intellectual property) and revenue protection mechanism alone overlooks the inherent and considerable benefits to the consumer of deploying licensed software authored and supported by a major vendor with local representation. This model is particularly relevant in the critical area of business management and line of business applications," stresses Lloyd.
While Lloyd welcomes increased involvement within the software user and reseller community, he contends that the benefits of licensing, not only to the primary software vendor but also to the end-user and business partner community, are not insignificant.
Although software licensing may seem like it places more control into the hands of the software vendor as opposed to consumer, Lloyd maintains that the case for a software licensing model is strong. Benefits such as on-demand support, regular upgrades, software updates, cyclical enhancements and legislative software compliance rank among the top reasons why consumers should consider licensing. Other key benefits include off-balance sheet financing of software and a predictable annual software cost component for budgetary and cash-flow purposes, which ultimately restore much of the "lost control" and power back into the hands of the consumer.
Lloyd acknowledges: "10 years ago software vendors as well as their business partners and reseller community were reliant on buoyant one-off new sales revenue. Today, the reality is that these people are far more dependent on software licence payments for their own survival."
But, Lloyd says this symbiotic relationship between the vendor and its licensing methodology must not be misunderstood. The increased inter-dependence and focus on licence revenue generation translates into an important need for the software vendor to establish and nurture intimate and enduring relationships with clients. This ultimately results in value-added solutions and services for the customer.
"Establishing 'customer intimacy' is critical to ensuring relevant functionality is constantly designed and added to the application, allowing for customer-driven as opposed to technology-driven solutions, addressing increasingly complex business problems and ensuring the business applications remain consistently relevant in local geographies and rapidly-changing legislative environments," stresses Lloyd.
These relationships and the consequent functional application benefits and improvements in vendor and reseller service offerings are simply not possible in a "licence-free" software world.
In addition to the software vendor, its business partners and reseller community also benefit from the software licensing revenue stream, which is ultimately aimed at the consumer or user experience. Value-adds such as ongoing support, made possible by licensing methodology, further entrenches the need to focus on service excellence and the specific needs of the consumer. This drives relevant application functionality as opposed to closing a one-off deal where post-sales service and customer-care are often relegated to an after-thought.
Lloyd emphasises: "One should not for a minute assume these vendor-consumer relationships are sustainable in the long- or even medium-term; a concept further reinforced after the dot-com implosion of the late 1990s. Vendors unwilling to create ongoing and considerable tangible value for the customer in return for the payment of licence fees will quickly find themselves without a client-base from which to extract this revenue in the future.
"Despite its apparent in equitability, the system has inherent checks-and-balances ensuring value is preserved and delivered throughout the software supply chain.
"Don't believe that consumers are better served via the once-off purchase of 'licence-free' applications, which are replaced periodically by more suitable, newer models possibly from different vendors, as business needs and functional requirements dictate over time," says Lloyd.
Lloyd stresses that replacing business automation software, be it accounting, payroll, CRM, line of business or workflow-related is a considerable exercise. While 'software' may increasingly, and not necessarily correctly, be viewed as a commodity, it is nevertheless only one component of the complex and expensive task of business automation.
Consumers invest in software, hardware (itself a commodity), training of personnel, change management, application set-up and configuration, business process mapping, re-design and re-engineering and many other activities in the overall solution. Such an investment, particularly in relation to the training of personnel as well as business process automation, should be carefully protected and insulated as far as possible against the ravages of time, changing business needs and legislative transformation.
Having an intimate 'partnered' relationship with a vendor protects the consumer's considerable IT investment through tangible benefits accrued from a licensed software paradigm.
"Users need to carefully weigh the costs of frequent and materially expensive reinvestment in new software on an ad hoc basis against the benefits of a mutually beneficial and long-term licence agreement. When you view software licensing as a cost-benefit exercise against the alternatives, not to mention the other less tangible benefits, the results are often a pleasant eye-opener," comments Lloyd. For the discerning entrepreneur or business leader focused on leveraging as much value from technology and business automation as they extract from the business itself, software licensing is not an adversary. In fact, as the reciprocal relationship appears increasingly equal, the previously indeterminate benefits of licensing become more apparent," concludes Lloyd.
Share
Editorial contacts