L I C E N S I N G
New Business Models for Software , Machines , and Materials
In the past , the software industry relied on the simple one-off sale of software . This had specific drawbacks for both the software developer and the user buying it . The seller had no dependable income beyond the incidental sales , and the user had to fund a major upfront investment . Software developers could create more reliable revenue streams with maintenance and support agreements , but would then have to offer substantial discounts to counter the impact of high original purchase prices – and discounts are not the most popular approach for the people forced to offer them .
Pay-Per-Use for Machines This business model is very similar for machine makers . Again , the upfront costs are usually very high . Maintenance agreements or service fees are an appealing after-sales revenue stream that helps pay for new product developments . On top of software , the sale of spare parts and consumables is another source of income , be it the cutting of the basic material used for dental implants , for example , or more straightforward printer ink , toner , or 3D-printing granulate . Frequently , the makers of the machines also sell these consumables , which creates interesting avenues for other business models – for instance , giving the users a pay-per-use option that lets them pay only for what they are actually using . In the short term , this means lower investments and lower risks from purchasing the machines . In the long run , the machine maker has a reliable income stream , at least if the user remains a satisfied client .
Pay-Per-Use for Software Only One might think that pay-per-use is only an option for machines or consumables . This could not be further from the truth , as the concept also works for software-only solutions . Imagine software that calibrates pumps . Your business model might then be based on having the user pay for each calibration . In practice , this would mean creating software licenses , like CodeMeter does . You charge a fee per license , which CodeMeter has been doing reliably for almost 15 years . And this is only one of many already successful pay-peruse models .
You could also bill your users for the time they spend using your software . The approach chosen for several years by CivilServe GmbH , Germany , when addressing international markets is very interesting in this respect : Their users can buy contingents of 10 hours of use time for their entire construction software portfolio . This is a very enticing option for clients that need different components of the software , but only for a temporary period on one project . For the developer , it is also a promising choice , as it creates a relationship with clients who might eventually buy the full package .
Maintenance Agreements and Subscriptions
Classic choices for software include support or maintenance agreements and subscription models . They are technically closely related to the pay-per-use models . The end of the update period or usage period is set in the software license , and a process would be started automatically to renew the license . The difference when compared with pay-per-use licenses is that this renewal is a cyclical event and does not consider the actual use of the software or machine . Models and procedures of this type have been described in more detail in other issues of our KEYnote .
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