More than ever, embedded software is playing a central role in intelligent device manufacturers’ go-to-market strategies. This trend is especially apparent in markets such as telecom, test and measurement, healthcare, and industrial automation – where manufacturers are under increasing pressure to innovate, rapidly enter new markets, control costs, maximize incremental revenue from existing customers, and deliver a competitively differentiated customer experience.
As embedded software has become more integral to their business, more and more manufacturers are discovering the power of software licensing. With licensing, manufacturers can turn device features and/or capacity on and off as appropriate. This allows them to charge customers for the capabilities they want, while not charging them for capabilities they don’t want. Licensing thus enables manufacturers to more effectively use embedded software as a means of managing and monetizing the features and functionality they provide in their devices.
By adopting the right licensing models, industrial automation providers can:
- Produce different products on the same hardware chassis. This drives down costs by eliminating the need for additional production lines and minimizing the number of SKUs that have to be kept in inventory.
- Create innovative products on existing hardware chassis. This reduces the cost and time it takes to bring differentiated products to new or existing markets.
- Up-sell existing customers by simply activating additional device capabilities or capacity. This makes it easier to capitalize on incremental revenue opportunities.
- Meet evolving customer needs without requiring them to swap out hardware or otherwise disrupt their operations. This makes for a more positive ongoing customer experience.
These examples highlight why software licensing is such a compelling best practice for manufacturers.
In fact, in today’s highly competitive and fast-moving markets, the skill with which manufacturers structure the licensing of their embedded software – and the diligence with which they manage their customers’ entitlements – may well turn out to be what separates market leaders from other players. Today, manufacturers are applying software-based licensing principles to manage a wide range of functions in hardware ranging from medical devices and location intelligence equipment, to devices used in telecommunications, supply chain automation, automobiles, test and measurement, and storage management.
This whitepaper outlines key trends and opportunities influencing industrial automation solution providers today, and how Flexera Software FlexNet® Producer Suite for Intelligent Device Manufacturers can help these companies to fundamentally improve their business. In addition, the whitepaper illustrates the power of licensing-based solutions with a customer implementation scenario.
Trends and Opportunities in Industrial Automation
In today’s ultra-competitive global business environment, many intelligent device manufacturers are applying softwarebased licensing principles to hardware that uses electronics to control and manage a wide range of functions. Within the industrial automation category, this approach is being applied across many domains including:
- Building systems management, as the green building movement drives the development of sophisticated systems to control heating, ventilation, air conditioning (HVAC) and lighting.
- Industrial wireless, as these new wireless networks quickly become integrated with standard plant and office networks.
- Embedded software intelligence and diagnostics, as embedded software operating information and selfdiagnostics reduce the need for expensive on-site factory service.
- Machine-to-machine (M2M) communications that are unleashing a wave of new productivity such as improved asset management and new service initiatives.
- Automation system security, since most of today’s automation and control systems use the same hardware, operating systems, and communications as broadly deployed networks. Security has become an urgent issue.
- Consumer-influenced industrial automation, as trends such as Internet access via cellular phones drive the development of industry-specific applications.
At a macro level, complementary business issues are driving the software-based differentiation of industrial automation solutions – all of which can be capitalized upon with embedded software licensing solutions:
- Changing economics of intelligent device manufacturing: The underlying hardware and core operating system software in many devices is being commoditized, as industrial automation solution providers seek to gain economies of scale by using more standardized components. Industrial automation solution providers are increasingly buying, versus building, core subsystems and system software. As a result, their role is evolving to more of an integrator, and less of a manufacturer. Solution providers seek better ways to differentiate themselves; software is a key means to creating competitive advantage and driving incremental revenue.
- Growing revenue contribution from software: As a corollary to the commoditization of hardware, many industrial automation solution providers are focusing more resources on software development. As such, software enables new revenue sources and provides a way to deliver a superior, differentiated customer experience.
- Software-enabled supply chain transformation: With the underlying hardware becoming more powerful and at the same time commoditized, manufacturers can now build fewer base configurations and deliver more functions. Product capabilities, capacity, versions and price points can be created and modified based on functions that can be turned on and off by licensing of the embedded software. This dramatically streamlines the supply chain and manufacturing processes, as well as lowering inventory carrying costs.
The challenge for the industrial automation solution providers is to quickly bring to market devices that are tailored to meet the unique needs of a particular segment or new market, while keeping manufacturing costs low to meet margin requirements. Licensingbased approaches allow industrial automation solution providers to enter new markets with a full-function device, and then create lower price points with the same device by enabling a subset of capabilities/ capacity if lower-priced competition enters the market.
- Brand and revenue erosion from grey market abuse: As underlying device configurations become more standardized, grey market theft can be perpetrated more easily. For example, demonstration models of products increasingly find their way into the grey market via channels for selling used equipment. These devices are running improper software and typically do not function correctly, posing a serious threat to the customer experience. In addition, grey market sales jeopardize maintenance revenues, as manufacturers lose track of device ownership and thus the maintenance relationship.
- Customer preferences: In today’s ultra-competitive business environment, customers are demanding more flexible pricing models, easy access to upgrade features, and a superior customer experience. Embedded software licensing capabilities allow industrial automation solution providers to meet all of these customer requirements by enabling important capabilities such as field upgrades and a consistent, streamlined customer experience across products.
Turning to Flexera Software for Answers
As industrial automation solution providers address these trends, they increasingly recognize that they face similar issues as software companies. Today’s intelligent device manufacturers are looking to Flexera Software to help them:
- Reach new markets by creatively packaging and pricing embedded software
- Build revenues by better monetizing capability and capacity
- Cut manufacturing costs by using software to differentiate capabilities on devices, and thus reduce the number of unique SKUs
- Accurately track customer entitlements and usage
- Track channel partner activity, and maximize service and maintenance revenues
- Prevent unauthorized use of capabilities without cutting off legitimate customers
- Reduce the operational costs associated with shipping software upgrades