Today’s businesses run on software, but the ways they want to license it are changing. To keep pace with end users’ expectations and to stay competitive, software companies are embracing more types of licensing models, including perpetual, subscription, pay-per-use, hybrid and others. On-premise licenses are being supplemented with or replaced by SaaS alternatives, and more developers are selling apps via app stores.

Meanwhile, intelligent device manufacturers are putting more emphasis on software because it helps them differentiate their products and take advantage of new revenue opportunities. As technology evolves and as user expectations continue to change, software developers and intelligent device manufacturers need reliable and flexible means of protecting, monetizing and monitoring the use of their intellectual property.

(Related: The big business of software licensing)

“We’re noticing a steady shift away from the traditional models. What’s still top of mind is how you get from a perpetual license to a subscription-type model,” said Jon Gillespie-Brown, CEO of Nalpeiron. “Quite a few people say they like what Adobe did with Creative Suite, [not realizing] what it took to do that, but in general people want to know how they can transform their businesses.”

Intelligent device manufacturers are changing their business models too.

“Software is becoming a more significant part of their IP, and we often find our hardware customers are spending 70% to 80% of their R&D budget on software versus hardware,” said Shlomo Weiss, SVP of software monetization at Gemalto. “With the cloud connectivity, the environment in which the devices are being deployed, they’re starting to think how they can become service providers as well as device vendors. [They want to] start offering recurring business models and become players in the Internet of Things.”

Maximizing revenue potential and profitability from a new business model is easier said than done. Adopting subscription models has forced software providers to rethink how they build, package, price, sell, license, deploy and maintain their software, which impacts virtually every area of the business.

“You have to think about how to support a subscription model, the move to a cloud offering, [and] a hybrid offering where I’m selling on premise and in the cloud,” said Weiss. “How do I support my customers that are deploying software in a virtual environment? The pure software companies are going through a business transformation.”

About Lisa Morgan

Lisa Morgan is an analyst at Strategic Rainmakers.