IoT and Software Licensing: What You Need to Consider

It doesn’t seem so long ago that the Internet of Things (IoT) sounded like a futuristic concept. Now it has become a day-to-day reality, with sources variously showing market growth of around 20-30% year-on-year. As the months and years go on, we are becoming increasingly connected to each other, our appliances, and the world around us.

An article by the COMPAREX Blog Editorial Team

From Amazon’s Alexa or Google Home, to internet-enabled cars, smart meters and connected toys, internet-connected objects are rapidly starting to penetrate our homes and businesses.

As the number of simple sensors embedded in everything from smart watches to smart packaging grows, we’re likely to see connected devices become an increasingly integral part of both our personal and professional lives. However, the prospect of vast numbers of devices generating value through ad-hoc connections raises a host of questions for CIOs and procurement managers regarding software licensing.

New devices, new possibilities

Suppose, for example, a smart fridge can order milk when supplies run low. If that fridge needs to interact with a separate order management system, will the fridge itself need a software license? Who will manage this, and how? How will license usage be assessed, and the fees collected? What about ad-hoc interactions between simpler devices?

Several suggestions have been made as to how licensing costs might be handled in situations such as these. Several vendors have touted the idea of ‘IoT App Stores’; good for reasonably ‘smart’ objects with an easy method of interaction, but perhaps not so good when it comes to, say, a low-cost sensor embedded in a wall. There is also general cross-industry consensus regarding the need to establish some form of widespread Licensing and Entitlement Management (LEM) strategy, but as yet no universal model has emerged.

An open question

As the IoT grows in influence and increases in size, questions regarding how to license interactions between objects will increase in frequency, especially given the significant amounts of potential revenue involved. As far back as 2015, Gartner was pointing out that,

“…by 2020, a failure to put in place an LEM system will result in a 20% drop in potential revenue generated from software for device manufacturers connecting to the IoT.”

Gartner

This could amount to costing billions per annum. As of this moment, no one has come up with a definitive, cross-industry approach to licensing for IoT devices. However, as the IoT continues to expand, (while also driving growth in associated cloud services) that point will surely come.

As a business with many years of experience in handling (often highly complex) licensing issues for its clients, COMPAREX continues to closely monitor trends surrounding and within the IoT. As new business challenges, and eventually some kind of industry consensus emerges, COMPAREX is continually developing its services to operate at the highest level, and to offer best-practice advice to our clients around IoT licensing issues.

Do you need guidance in managing your software assets?

Regardless of whether it's for man or machine, rules and restrictions around licensing can get rather tricky.
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Leipzig, 24.01.2018

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