Software licensing must evolve, execs say

SAN JOSE, CALIF. — Software licensing practices must change to accommodate economic and technology trends, stressed officials at the SoftSummit conference here on Thursday.

Officials from Macromedia, which is using an electronic licensing-based format for some of its applications, and Macrovision, which introduced the FlexNet e-licensing platform, both stressed the criticality of evolving software licensing schemes.

“Pricing and licensing is not as sexy as [technology], but you know it’s a pretty hot topic,” said Tom Hale, senior vice president of business strategy at Macromedia. “Our customers are more and more diverse and having different needs. It’s a very big challenge for us to have to deal with this.”

One-size-fits-all solutions are no longer the rule, Hale said. “It’s very rare that you see off-the-shelf deals anymore. Everything’s customized.”

Customers pick and choose what features they want to use and licensing must accommodate that, according to Hale. Vendors, meanwhile, are trying to create ongoing, predictable revenue streams and battle issues such as software piracy, he noted.

Macromedia is using e-licensing, which has customers electronically entering serial numbers for access to software so they get the software they pay for, Hale explained. Through e-licensing, Macromedia has been able to electronically deploy product activation, said Hale.

“We actually need to educate our customers so they understand the benefits of e-licensing,” he said.

Macromedia was able to simplify shipping by bundling both Macintosh and Windows versions of software in the same box and have customers license which version they want electronically.

In relaying its message about licensing, Macromedia has stressed the term, “casual copying,” as opposed to the term, anti-piracy, Hale said.  The company has found about 17 percent of total activation volume is denied in the company’s anti-piracy efforts, he said.

Macromedia has activated tens of thousands of clients with its product activation plan. “We’re not seeing a huge groundswell of negative comments,” although there have been some tough comments, said Hale.

The enterprise pricing model, including long implementation times and product service arrangements, is dying, to be replaced by software as a service, Hale said. It is being outmoded by arrangements such as the ASP model, which has seen online CRM vendor salesforce.com make a dent in that marketplace, he noted.

Deployment of software on devices such as PDAs also requires new licensing models. For example, a telecommunications provider may be licensing software on behalf of PDA users, said Hale.

He also rejected an industry report that said the software industry is mature, saying there is much more innovation possible. “We’re on the cusp of a huge opportunity,” he said.

Macrovision, meanwhile, introduced FlexNet, which can be embedded into a software publisher’s source code or “wrapped” around it, enabling the publisher to electronically generate, track and enforce licenses, according to Macrovision.

The software supports a utility pricing model for software, according to Dan Stickel, executive vice president and general manager at Macrovision. “You’re paying for what you actually use,” he said.