In the first part of our interview with Manfred Bauer, Major Account Manager at Flexera Software, we talked about trends in the manufacturing industry and challenges and opportunities hardware manufacturers are facing as they are moving towards the Industrial Internet of Things or Industry 4.0.
Now, let’s look at Software Monetization processes and how they support lean production, IP protection, data analytics and monetization of new IIoT (Industrial Internet of Things) offerings.
Software is playing the major role in IIoT and digital transformation projects. Traditional hardware manufacturers are tackling these new requirements with joint-ventures, cooperations, mergers and acquisitions or by founding their own Software or IoT companies. Nevertheless, are manufacturers prepared for running a software business and everything that’s connected to it?
Software is playing a major role and we see two software divisions in each IoT project. There’s the embedded part that is close to devices and necessary to control, change and update features, capacity and capability online. On top of that, we see new software offerings that are being developed to enable all the great use cases we talked about in the first part of the interview. Here, we are talking more about Software in its traditional sense, often delivered as SaaS or Cloud solutions.
Manufacturers are usually in a good position to build SaaS and Cloud applications, but it is hard for them to manage their software products throughout the full lifecycle, to offer a unified end user experience and to protect and update their software products continuously.
So, how can Software Monetization help?
IP Protection is playing a major role. We are working with many customers in this field because they see that this is something that requires mature processes and technology. Imagine these new software offerings don’t work properly or even get hacked! Many companies come to us seeking protection of their applications through licensing and to add different layers of security like tamper resistance or trusted storage. Likewise, it is important to have automated and fast processes in place to get security patches out to customers.
Software is being used to activate new features on devices electronically. This creates great up-selling opportunities for manufacturers. At the same time this is a threat because the manufacturer has to ensure that only customers who paid for it can actually access and use these features. Managing software entitlements in the back office and automating all related processes is new to many device manufacturers and they can benefit from a purpose-built solution.
Managing and delivering updates and upgrades and changing configuration over the air is another huge area of improvement and enables self-service models in an industry that so far mainly depended on manual workshop and service processes. In the automotive industry for example, Tesla is the only manufacturer that was brave enough to do this step so far but I guess that others will follow.
We have talked about new services based on data. Manufacturers need to be able to gather usage data to find out how their software products are being used.
Last but not least, tracking devices in the field is another requirement that can be solved by a software monetization platform and is crucial for preventing grey market abuse.
With new IoT offerings, device manufacturers also start to implement new, flexible monetization models. From your point of view, which models are most popular?
Software monetization strategies are closely connected to the success or failure of new digital offerings. Subscription models are already being widely used and create new and predictable revenue streams.
Many manufacturers want to move to to usage- or outcome-based models to profit from the ability to define metrics that work for their customers and enable additional monetization options. Most home-grown licensing capabilities do not support these new licensing models and are difficult to build so that is why many manufacturers work with us to support these new business and monetization models.
User-based licenses are another important point. Whilst in the past there was usually a 1:1 connection – one user using one device – we now see sharing models with multiple users using the same device with different features.