Software Licensing Revolutionizing the Appliance Market—Take 2!

In my recent blog post — Software Licensing Revolutionizing the Appliance Market – I talked about how software licensing models are helping high-tech manufacturing companies transition from low profit products to high profit successes.  I shared how many device manufacturers are now in the software business or how they want to be in the software business.  In my example, I talked about a networking company who has been in the business of selling blade servers and their desire to get out of the business of sourcing hardware and moving to virtual appliances, but didn’t mention why they wanted to do that.

Here are some more details on what is driving this transition.

If the manufacturer allows their customers to install and configure their software on hardware chosen by the customer, the manufacturer will be forced to accept the technical support responsibility for diagnosing mis-configured deployment environments—which could result in higher support costs. Virtual appliances greatly reduce this possibility by not only allowing the manufacturer to pre-install and pre-configure the machine, operating system and software stack, but also allows the manufacturer to lock-down the configuration of the virtual appliance (for example, with VMware’s ACE tools).

Virtual Appliance The manufacturer explained that their customers often buy general-purpose hardware in greater volumes than the manufacturer, so the customers can get better hardware discounts. Here is an example, say the manufacturer buys general-purpose hardware and pre-installs and pre-configures the operating system and software stack, then resells both as a unit. If the manufacturer pays, say, $1,500 per unit for the hardware; they must fold that cost into the bundled offering. However, if the customers can buy that same general-purpose hardware at, say, $1,250 per unit, they are often willing to install and configure the operating system and software stack themselves in order to save 17%. However, for the reasons mentioned above, the manufacturer doesn’t want to lose control of the deployment environment, so delivering a virtual appliance instead of an installable software application is a good compromise.

How are you redefining the way you do business? Are you moving to virtual appliances?

In the meantime, want to learn more about how machine virtualization impacts your business—join us for our upcoming webinar on May 26th. Hope to see you there!

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