SafeNet Claims Usage-Based Licensing Breakthrough For On-Premise ISVs

July 30, 2013 Alex Woodie

For the last several years, the software licensing experts at SafeNet have helped software as a service (SaaS) vendors sell their stuff based on what features their customers use and how often they use them. With a recent update to its Sentinel Cloud license management and software monetization offering for software publishers, SafeNet says it can now provide on-premise software vendors with access to the same usage-based licensing and pricing capabilities as their SaaS cohorts have enjoyed.

Sentinel Cloud was originally developed for SaaS vendors, but the need for a usage-based pricing model for ISVs who sell on-premise software was too great to ignore, says Dave DiMillo, a principal consultant with the Belcamp, Maryland, company.

“Forget about making your product go the cloud,” he tells IT Jungle. “If you’re not in a position to do that, you can take an on premise application, enable it for Sentinel Cloud, and when your users run it, the application will automatically collect the usage locally–whatever types of usage you want it to collect–and it will refresh back into cloud server periodically, and update our cloud with all the usage data.”

The software enables on-premise software vendors to charge for their software using any number of usage-based pricing metrics, such as by the number of users, the number of executions, the duration of use, the number of virtual machines (VMs) that are spawned to run a given workload, or other measure of use (the software has certain usage models built in, but others could be developed). When the capacity under the metric of use is consumed, Sentinel will cut off access to the product or feature, just as if the customer’s license key has expired.

The solution requires ISVs to embed SafeNet’s API calls into their Windows or Linux application. Applications that run on other platforms, such as IBM i, could be supported through the company’s REST-based Web services, SafeNet says.

A New Licensing Model

Usage-based licensing has emerged as a hot topic among software vendors of all stripes, including both on-premise and SaaS vendors. For on-premise vendors, the potential move to usage-based pricing schemes is seen as one more crack in the on-premise wall as SaaS startups outmaneuver established on-premise vendors and lure customers away with comparable software functionality offered under more flexible licensing terms.

While on-premise ISVs may cling to the old model that involves large upfront payments, annual maintenance, and perpetual licenses, many of them understand they will eventually need to evolve their business models to compete effectively with the SaaS and cloud vendors. With solutions like Sentinel Cloud, they can keep selling on-premise solutions, but adopt other aspects of the SaaS and cloud business model that customers seem to prefer.

This isn’t the first time that SafeNet has attempted to give its on-premise ISV clients access to usage-based data. Years ago, SafeNet developed technology that gathered information about how software products are actually being used, but it has been mostly a flop because it is “inefficient, complex, error prone, and has a lot of problems,” DiMillo said.

DeMillo elaborates on the problems of this approach. “Traditional certificate-based license managers offered by many licensing vendors can collect usage data but the problem is that those technologies rely on creating text-based log files. This results in the ISV and customer end up having to transfer and parse text files which has ultimately proven to be complex and error prone. SafeNet embraced this problem by building usage collection, transfer and aggregation of usage data into Sentinel Cloud as an inherent part of the product.”

The change has the potential to reshape the software licensing landscape, DiMillo says.

“Everything becomes easier–the sales process, the deployment. There are no license keys to manage, no activation codes,” he says. “We allow them to easily go from trial to purchase, and from purchase to add on features, and make that experience really clean and easy for the end user.”

Sentinel Cloud requires an on-premise application to have periodic access to the Internet so it can send usage reports back to the Sentinel server, which is hosted on the Amazon Web Services public cloud. When the agent calls home, it also checks for any additional usage rights the customer may have purchased in the meantime, such as enabling another 50,000 units to be consumed, or whatever the metric may be. This approach has the potential to streamline access to software from the customer’s point of view, while opening up new revenue streams for the vendor.

“I’ve been doing this for over 20 years, and I’m fired up over what we have here,” DiMillo says. “If you take a step back and look at our business and our competitors’ businesses, we have technology that helps vendors control end-user applications and helps them monetize them. But there’s always been a tax. That tax is, you have to get a license key, or have to get something and plug it into a computer. There is always an obstruction. With Sentinel Cloud, we’ve solved that problem. There are no license keys to manage. You can engineer an experience where the end user identifies themselves as themselves, and begins using the product.”

Software monetization is one of two core businesses at SafeNet, which is a $300 million company with more than 1,000 employees; the other business is encryption. Its Sentinel license and rights management software has been used by more than 10,000 customers over the course of decades, including big software houses such as OpenText and Micro Focus and big hardware vendors like Cisco Systems and Brocade Communications.

SafeNet controls access to Sentinel Cloud using subscriptions, and charges for it based on a “value-based” scheme that sees larger software publishers paying more than smaller ones (no perpetual licenses here). A smaller shop can get started with the Sentinel Cloud hosted service and access to the APIs for about $20,000 per year, or about $850 per month. For more information, see www.safenet-inc.com.