Blog Entry

Nov 8
2011 

In Licensing, The Best Defense is a Great Offense

Diehard baseball fans like me have found ourselves at the end of one of the best seasons Major League Baseball has had in years.  What truly distinguished this season is that the old adage of “defense wins titles” didn’t quite pan out. Instead, we got to see teams with ordinary starting pitching somehow make it to the championship games.

Focusing on offense over defense seems to be the trend lately in the software world too.

Larger software companies have gotten away with defensive tactics for a while. These include, but certainly not limited to:

  • Leveraging large Enterprise License Agreements (ELAs) to hold on to large customers under big contracts, and putting more of their software under the same contract, independent of usage requirements of the enterprise;
  • Consolidating the market by acquiring competitive software offerings;
  • Fighting trends (such as “cloud” as a delivery model) rather than adopting them, thus limiting the options their customers are seeking.

However, prudent software companies are realizing that it is time to go on the offense. Why? First of all, a new wave of start-ups, specifically in Software-as-a-Service (SaaS), are aggressively offering equivalent functionality at much lower price-points and in a way that consumers are ready to adopt.

Secondly, enterprise customers are increasingly questioning the “value” they are getting from large software purchases.  Are they really using all the functionality and software under the ELA?

Having a winning offensive strategy means there are strategic changes that larger software companies have to go through:

  • Start with listening to your customers.  Are they satisfied with the licensing schemes you have implemented? Have their usage patterns changed? What are their opinions of delivery models of software?
  • Investigate your new competitors.  Who are the ones using alternate mechanisms to deliver the same value proposition as you do? For example, a company that may have just come up with an app available on Windows and mobile devices that improves document collaboration within enterprise but does it all in the cloud. They don’t monetize the app but charge for each transaction. You may want to reconsider charging for a massive enterprise app that achieves the same thing but requires significant upfront setup and license investment.
  • Develop a future-proof strategy.  Decipher a strategy that blends what you do well today with an aggressive new strategy based on what you heard from your customers and competitive analysis. Essentially, leverage your strength – large software business and customer relationships – to introduce new ideas, and reinvent the business.

An offense strategy is hard to adopt for larger organizations, but if you don’t, you can become irrelevant pretty quickly. You rest on your laurels, and there is someone else right there to eat your lunch.   Just like in baseball. Ask the Philadelphia Phillies fans how they feel about the St Louis Cardinals.