Software Pricing and Licensing Survey Results and 2012 Predictions

Software Pricing and Licensing Survey

Results and 2012 Predictions

Amy Konary

Research VP

Software Licensing and Provisioning

IDC

The Survey

2

ISVs and Intelligent Device

Manufacturers

• Sample Size = 205

• 77% describe primary product

as high-price/low-volume

• 82% identify as software

producer

Enterprises

• Sample Size = 97

• Wide range of

industries

• 54% $1B+ revenues

• 55% 5,000+

desktops

Where is your company or division headquartered?

North America (United States, Canada, Mexico)

Europe

Asia Pacific Region

South America/Central America

Where is your company or division headquartered?

North America (United States, Canada, Mexico) Europe

Asia Pacific Region

South America/Central America

The Survey - Enterprise Spending Profile

3

Q: Looking forward two years, will your software budget...

22.9%

20.8%

10.4%

7.3%

2.1% 1.0%

2.1% 1.0%

0%

5%

10%

15%

20%

25%

1-10% 11-20% 21-30% 31-40% 41-50% 51-60% 61-70% > 70%

(%) of Software Budget for New Licenses

Source: 2011 Key Trends in Software Pricing & Licensing Survey, n=93

(%)

Decrease

Stay the same

Increase

Do not know

The Survey - ISV Licensing Revenue Profile

4

Q: In the next 2 years, my company’s licensing strategy will...


(%)

Stay the same/no change

Moderate changes

Significant changes

Dramatic changes 47.0%

7.2% 9.6%

4.8%

8.4%

2.4% 4.8%

15.7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Less than $10 million

$11 - $30M $31 - $50M $51 - $100M $101 - $500M

$501M - $1B

+ $1B Don't Know

Annual Product Licensing Revenues (%)

Software Industry Megatrends

5

1. Shift from Perpetual to Subscription

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

2007 2008 2009 2010 2011 2012 2013 2014 2015

Subscription

Maintenance

License

WW Software Revenue Mix, 2007-2015, $M

Source: IDC, Fall 2011

6%

16%

58%

ISV Survey- Perpetual Domination

6

• 79% of software revenues derived via perpetual,

15% via subscription

• In next two years, group expects:

– perpetual license revenues to decline an average of 10%

– subscription revenues to increase by an average of 6%

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Year 1 Year 2 Year 3 Year 4

Re

co

gn

ize

d R

eve

nu

es

($

)

Perpetual

Subscription

Software Industry Megatrend

7

2. One Megatrend to Rule them all

Source: IDC, 2011

74% of companies

using cloud expect

to increase cloud

spend in 2012 by

> 20%

US Businesses will spend

$36 billion on cloud-

delivered IT services in

2015

70% of NA

companies

currently

using public

cloud

SaaS spending will

grow by 105%

IaaS spending will top

$33 billion

PaaS spending CAGR

hits 48.5%

2011-2015:

82% of net new commercial apps

will be developed for cloud in 2012

30%+ of 2014 spending on enterprise

apps will be via the cloud model

>80% of Global 2000 will still

have 50% of IT onsite in 2020

33% 33% 28%

Improve Business

Agility

Increase Scalability

Cost Flexibility

Source: IDC NA Cloud Computing Survey, January 2011 n=603, and IDC #228845 (June 2011)

Two (Three) Approaches to Cloud

Deployments

8

• Designed for a market, not a single enterprise

• Open to a largely unrestricted universe of potential users

• Customers buy at specific level of abstraction (server, application, platform)

• Single-vendor or multi-vendor

Multiple unrelated

enterprises (shared)

Hybrid

• Enterprise’s cloud services portfolio includes both private and public cloud services

• Some specific services are delivered in a combination of public and private models (e.g., private cloud “bursting to” a public cloud service)

Virtual and physical (non-

cloud) resources and

applications

Private

• Designed for, and access restricted to, a single enterprise (or extended enterprise)

• An internal shared resource, not a commercial offering

• IT Org is the “vendor” of the shared/std service to its users

Resource

Isolation

Single enterprise/

extended enterprise

(dedicated)

ISV- Metrics

0%

10%

20%

30%

40%

50%

60%

70%

80%

Processor Core Seat (per machine/per

server)

Seat (named user)

Concurrent user

Usage metric Financial metric

(revenue, royalty)

Today +2 Years

9

-18%

34%

-11%

-8%

7%

98%

43%


Metrics, Satisfaction, Customer Preference

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Processor Core Seat (per machine/per

server)

Seat (named

user)

Concurrent user

Usage metric

Financial metric

(revenue, royalty)

Today ISV Satisfaction (%) Customer Pref.

10


ISV- Focus on Usage-Based Pricing

• Consistent with the results of last year's survey, with usage metrics experiencing the most growth compared to other models.

• Of the total survey population, 47% of vendors surveyed do not monitor customer usage today.

• Of the survey population that is offering usage-based pricing today or plans on offering usage-based pricing in the next two years, 48% do not monitor customer software usage.

11

0%

10%

20%

30%

40%

50%

Usage metric

Today

+ 2 Years


12

3. It’s a Virtual, Multicore World

In 2005, virtual machines represented 4.5% of server

shipments; typically, there were three virtual

machines per physical server.

By 2014, IDC estimates that VMs will represent

23.3% of server ships, with a density of 8.5 VMs

per physical machine.

As for the server market, quad-core x86 is now the

standard, accounting for the majority of shipments.

IDC research indicates that six-core processors

are quickly gaining ground and are poised to be

the new standard within 12–18 months.

Source: IDC, 2011

ENT Survey- Virtualization Adoption Profile

13

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Server virtualization (% of servers)

Desktop virtualization (% of desktops)

Hard partitioning (% of physical servers)

> 80%

60-80%

40-60%

20-40%

< 20%


Q: Which virtualization technologies has your organization adopted?

ENT Survey- Virtualization Management

14


Q: How do you manage software licenses in your virtualized environments?

Automated commercial license management software

Software provided by the (virtualization) vendor

Automated homegrown software

Manual methods, including spreadsheets

We don’t manage software licenses in our virtual environments


15

4. Focus on Software License Compliance

Source: IDC/BSA Study, 2011

Software Piracy Losses by Country

ISV and ENT- Audit Statistics

• Most of the ISVs surveyed did not perform any audits or reviews at all in the last year (60%)

• Most ISVs that performed audits did 10 or less

• For the vast majority of ISVs that performed audits, the award was less than $100,000. The enterprise survey corroborated this data.

• The vendors listed by enterprises as providing audits within the last year included Microsoft, Oracle, IBM, and SAP.

16

ENT- Tracking Usage

• Most customers track usage for compliance purposes, but

31% are tracking primarily to reduce shelf-ware

17

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Commercial SAM

Manually, including

spreadsheets

Homegrown SAM

Vendor-provided tool

Do not track

How Usage is Tracked, Satisfaction Level

Response (%) Satisfaction (%)


ENT- Over/Under

18

0% 10% 20% 30% 40%

0%

1-10%

11-20%

21-30%

31-40%

41-50%

> 50%

Don't Know

Over

Under


Q: What % of software license spend within your organization do

you estimate is associated with applications that are:

Enterprises- Compliance Challenges

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

N/A

Very difficult

Difficult

No difficulty

19


Q: For which types of software is it difficult to maintain compliance?

65%

tracking

via SAM

Enterprises and ISVs- Enforcement

0% 50% 100% 150% 200% 250%

ISVs

Enterprises

ISVs Enterprises

Network licensing 56.2% 47.9%

Product activation 48.3% 22.9%

Serial numbers checked locally

28.1% 1.0%

Trust with audit 28.1% 15.6%

Dongle/USB 25.8% 0%

None 7.9% 0%

Vendor-supplied automated-monitoring

mechanism with annual true-up

7.9% 12.5%

Enforcement Preferences and Profiles

20



21

5. 2012 Predictions

►Monetization models for Cloud will move to the forefront

2012 will be a big year for private cloud services adoption and

deployment

Public cloud services adoption will grow at over five times the rate of

overall IT spending

►Change will continue at rapid rate

Even ISVs that indicate that current models are effective plan on

making changes to their licensing in the next two years

Approaches will help ISVs and ENTs adapt to challenges in

managing/tracking license compliance, add options that respond for

customer preference for efficiency.

►Many things will stay the same….

Concurrent user approaches

Network licensing and product activation

Caution around certain aspects of Cloud

Questions

22

1-617-202-9339

[email protected]

Twitter: @mizkonary

Amy Konary

Research VP, Worldwide

Sofftware Licensing and

Provisioning Research

IDC

www.idc.com

Technology

Software Pricing and Licensing Survey Results and 2012 Predictions