It's not unusual in the competitive market of intelligent device manufacturing to spend years developing the next great device only to find that several months after introduction there's a new grey market for the product. Valued and loyal dealers and channels must compete with grey market versions for sale through unauthorized dealers, eBay, or a host of other internet sites.
To remain viable in today's competitive marketplace intelligent device manufacturers must continually innovate to capture new market opportunities, enhance product offerings, and defend against device piracy and grey market abuse. Definitions vary, but the central theme is that a grey market consists of trading through unofficial channels or distribution sites. Depending on the popularity of your device, these unauthorized dealers can spring up anywhere and continuously and are very difficult to stop.
Savvy manufacturers, however, can take some strong, innovative steps to prevent grey market abuse of their devices through embedded software. By putting the power of software licensing into the device, manufacturers hold the keys to the device's unique features and functionality. Embedded software licensing can minimize or prevent piracy, but can be an effective way to fully monetize your intellectual property.
Best practices to prevent grey market abuse and piracy
Embedded software is playing an increasingly significant role in high-tech device manufacturers' go-to-market strategies and anti-piracy models. This is especially true in markets such as telecom, test and measurement, health care, and industrial automation, where manufacturers are under constant pressure to innovate, rapidly enter new markets, control costs, maximize incremental revenue from existing customers, and deliver a competitively differentiated customer experience. These devices are typically introduced at high price points, making grey market abuse very attractive.
How does embedded software help prevent grey market abuse? With software licensing, manufacturers can turn device features and/or capacity on and off as appropriate. In many cases, it is not the device itself, but the power of the software inside that makes the device valuable and attractive to consumers. Manufacturers and their official dealers or channels hold the keys to turn on capabilities, charge for those capabilities, and when the device is no longer needed, turn those capabilities off.
To get started, manufacturers must embrace two best practices to tap the full potential value of embedded software:
- Become smarter about how software licensing strategies can help your business—as a means to prevent grey market abuse but also to grow top-line business performance. While preventing loss, software licensing strategies can help monetize the value manufacturers deliver through feature sets, services, volume/user thresholds, and upgrade rights as well.
- Implement more powerful systems for accurately tracking and managing software entitlements. Such systems are essential for reducing operating costs, pinpointing up-sell and renewal opportunities, gaining better visibility into channel sales, and improving overall insight into market dynamics.
Combined, these two disciplines offer device manufacturers can have a powerful impact on business performance. For example, inadequate licensing practices allow unauthorized resellers to sell devices bundled with software. Effective licensing and entitlement controls, on the other hand, help prevent these unauthorized grey market activities.