Managing Product Complexity in the Era of Digitalization

Software is becoming the key to innovation and competitive differentiation, while hardware is becoming a commodity with a short-lived competitive advantage, due to the constant integration of next-generation performance. To survive and succeed, today’s vendors have to offer a broad product portfolio – either through high yields, or by finding a cost-effective way to manufacture different product variants. However, IDVs (intelligent device vendors) are burdened with supporting a multitude of hardware product variants.

According to the latest research on the subject performed by Cambashi, Inc. in conjunction with UBM Canon, 52% of companies surveyed claimed that they have six or more product families in their portfolios, and 68% typically offer more than five versions of each hardware product. Supporting such large hardware product portfolios could be robbing vendors of profits. Furthermore, the support of multiple hardware equipment variants, configurations and SKUs adds to business and operational complexity and is very costly in terms of tooling, manufacturing, inventory, fulfillment and support costs. These increasing operational costs are leading to even higher-priced equipment.

A monetization strategy that includes a software licensing management solution opens the door to a world of flexible packaging opportunities. By using feature-based licensing and entitlement management, IDVs can develop and maintain a single, feature-rich application embedded in a single hardware device. End users can select the features required, leaving the vendor to simply enable or disable them electronically using a software monetization platform.

The use of embedded software coupled with a licensing and entitlement management system can reduce operational costs and the complexity of supporting multiple hardware variants. This allows IDVs to develop and maintain a single, feature-rich application embedded in a single hardware device.

IDVs embracing such a transition to a software-based business model are able to vigorously pursue a greater market share and reduce manufacturing and inventory costs, while still being confident that their intellectual property is protected against competitive threats. They are also able to cost-effectively expand their product lines and bring innovative new devices to market. In short, they are more agile and better positioned for the future, with the ability to simultaneously deliver a larger variety of products at lower production costs.

More about how to use software features to achieve product differentiation can be found in this whitepaper.

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