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Software Licensing and Customer Satisfaction
 

Software Licensing and Customer Satisfaction

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New Strategies for Enhancing Customer Relationships and Revenues

New Strategies for Enhancing Customer Relationships and Revenues
with Entitlement and Compliance Management

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    Software Licensing and Customer Satisfaction Software Licensing and Customer Satisfaction Document Transcript

    • W H I T E PA P E R Software Licensing and Customer Satisfaction New Strategies for Enhancing Customer Relationships and Revenues with Entitlement and Compliance Management
    • Software Licensing and Customer Sat isfact ion Software Licensing and Customer Satisfaction New Strategies for Enhancing Customer Relationships and Revenues with Entitlement and Compliance Management Managing Entitlement: An Age-Old Problem in Through ECM, traditional licensing and digital rights Digital Industries management models are being rethought to enable a Twenty-five years into the modern software industry, revenue broader, more flexible approach that proactively improves growth is slowing1, and relationships between software customer relationships and satisfaction, and maximizes publishers and customers are frequently complicated by revenue. ECM also creates a process framework for multiple mergers and acquisitions (M&A). Additionally, understanding which organizations and/or individuals in today’s stringent regulatory environment, both are entitled to license rights, products, updates, support, publishers and enterprise customers must gain a clearer download rights, content access, online communities and understanding of software ownership to ensure compliance distribution rights. with legal requirements. In gaining a more granular, timely understanding of In parallel, a new industry for digitally distributed content customer relationships, ECM goes beyond maximizing is growing rapidly. Pervasive high-speed, high-bandwidth revenue and improving regulatory compliance. With it, Internet connectivity allows all manner of content – not just software publishers can leverage compliance strategies to software, but associated marketing, training and feedback drive operational efficiencies, achieve superior product on product usage, and platform demographics – to be differentiation and, ultimately, enhance exchanged with enterprise customers in a mutual, agreed- customer experience. upon fashion. Beyond the long-term challenge of reforming software licensing practices, these opportunities pose Flexera Software delivers ECM solutions for today – and the immediate question of how to license and provide the future entitlements for software published today. Flexera Software has a long history of helping software and hardware producers get the most value from their software Software licensing evolves into Entitlement and products. Flexera Software technology is a trusted standard Compliance Management in software licensing, installation and delivery, used by over As a result, the core concept of software licensing 50,000 software producers and deployed on more than management is changing. It is evolving from value-exchange 500 million desktops worldwide. Today, these capabilities model based on one-off transactions to an integrated have evolved into Flexera Software’s solution for ECM, a model built on an ongoing relationship between a software comprehensive suite that enables software producers to publisher and the customer. This model, called Entitlement increase revenue and simplify the customer relationship by: and Compliance Management (ECM), is designed to align the distribution and sale of software with the way it is • Creating a single, end-to-end entitlement management purchased and used by customers. Specifically, in the ECM system that eliminates manual processes paradigm, a customer’s entitlement to a product or service • Making it easier for customers to buy and use software intrinsically changes over time. with flexible packaging, pricing and licensing • Increasing and protecting revenue with accurate entitlement tracking and software compliance 1 The software industry has had only modest growth for the past several years; worldwide revenue increased from $195.6 billion in 2004 to $211.3 billion in 2005, an annual increase of only 8.0%. Source: IDC.2II Flexera Software: Ent it lement and Compliance Management White Paper Series
    • Software Licensing and Customer Sat isfact ion • Enabling a consistent customer experience across the On the enterprise side, customers have a strong desire, various products and a regulatory requirement, to properly license and pay for the software they use. Regulatory requirements such asFlexera Software’s solution for ECM delivers the capabilities the Sarbanes-Oxley Act in the US and the Basel II accordsprescribed for this category by IDC; it provides software in Europe compel public companies to improve controlproducers with a holistic approach to help productize, over their software environments. These regulations requiremonetize, deliver and install packaged software. IDC enterprises to have a precise, timely picture of allbelieves that companies offering solutions in this space must installed software.address the software producers’ “five Cs” of customer painpoints: compliance, costs, control, complexity and customer In sum, software publishers that cannot provide a completesatisfaction. IDC forecasts that worldwide spending in this and accurate view of licensing status do disservice not onlymarket will reach approximately $1.2 billion by 2010. to themselves – 87 percent of software vendors claim some revenue loss due to unlicensed users2 – but to customers,Systematic Breakdown: The Disconnect between as well.Licensing, Revenues and Customer SatisfactionToday, software publishers are keenly aware that in this Why Traditional Licensing Practicesmaturing and competitive industry, product differentiation No Longer Workand strong customer relationships are the keys to survival.Ironically, most software companies haven’t applied • Inflexible systems and rigid internal processesintegrated applications to address their relationships with prevent publishers from creating flexible pricingtheir customers, resulting in silos of duplicate information and packagingand non-integrated processes. The software licensingpractices most companies use have not evolved appreciably • Lack of integration with ERP and CRM systemsover the decades. This fact has had a deep impact on the requires publishers to manually re-enter ordersoftware industry, resulting in: information to create licenses • A drumbeat of M&A that results in disjointed • Uncaptured revenues from non-compliant and processes, lack of clarity and a poor customer unlicensed use by existing customers. The Business experience Software Alliance (www.bsa.org) estimates that 22 percent of all copyrighted software in North America is • Inefficient software delivery and installation is the subject of unauthorized copying or distribution, a time-consuming and error-prone figure that rises to 35 percent worldwide. The revenue leakage problem is intensified by the complexity of the • Poor design of the activation experience requires typical software lifecycle, which can last for many years users to search for and enter unfamiliar inputs to create a license • Poor ability to differentiate offerings and address • Lack of self-service, particularly for making customer needs with customized licensing options, changes to licenses and entitlements, slows down resulting in further loss of potential revenues processes such as returns and re-hosting • Declining customer satisfaction that stems from • Manual tracking of the installed base translates confusing licensing practices. Software publishers’ into manual, inefficient processes for tracking complex licensing practices can make it difficult for upsell and renewal opportunities companies to determine precisely which software they are entitled to, and at what costRegulatory issues complicate licensingIncreased government focus on the software industry hascreated a multitude of regulatory issues for publishers. Theseinclude SOP 97-2 compliance, revenue recognition concerns,FASB/GAAP and software export compliance. Softwarevendors are being forced to complete a costly review oftheir own policies around sales, entitlement, fulfillmentand maintenance.2 Source: 2007 KPMG License Compliance Survey, in which 34 percent of respondents said their revenue losses exceeded 10 percent, and 21 percent believed their revenue losses were greaterthan 20 percent.Flexera Software: Ent it lement and Compliance Management White Paper Series 3
    • Software Licensing and Customer Sat isfact ion A New Approach: Entitlement and An essential enterprise application for software publishers Compliance Management Entitlement and Compliance Management solutions provide ECM helps publishers and digital asset owners ensure that a strong complement to ERP and CRM systems, providing customers receive all the digital products and resources they functionality that is unique within the enterprise application are due. A detailed definition of ECM includes the ecosystem. Specifically, both ERP and CRM are highly following points: effective in addressing their original purviews, but are typically either too rigid or lack the functionality to manage • An entitlement is an object that defines what a the relationship between a publisher and customers’ customer has the right to use, download and update, entitlement rights. and the current state of those rights. • Entitlements include virtual or digital objects with Supplementing ERP and CRM systems with “bolt-on” changing properties such as versions, expiration dates functionality that even approximates an Entitlement and and business policies. Compliance Management capability requires expensive • Unlike a specific product order, entitlement rights evolve custom development and back office integration, as well as over time, triggered by the actions of the software constant engineering maintenance. Even when quasi-ECM producer or the customer. functionality is achieved, it reduces software publishers’ • An entitlement can include the rights to: flexibility to quickly react to market changes and make – Use software, documentation, technical support, product packaging modifications as needed. Eventually, the software maintenance, etc. back office begins to dictate business policies, rather than – Download software, documentation, training the converse. materials, channel content. – Obtain updated software in the form of patches or Flexible by Design: Flexera Software’s Solution for updates, along with new product versions. Entitlement and Compliance Management Flexera Software’s solution for Entitlement and Compliance Entitlement spans a product lifetime – and enterprise Management simplifies the relationship between software information systems producers and enterprises. Flexera Software’s solution helps Due to their constantly evolving nature, and the lengthy software producers reduce costly manual and redundant period of time they may span, digital asset entitlements administrative processes while enabling: are difficult to track. The value, and revenue, derived from any software asset is based upon increasingly sophisticated • A holistic view of software entitlements access rights that may change dynamically. • Digital delivery of software and updates • The ability to ensure compliant software usage The ability to understand what customers were entitled to in the past, what they are specifically entitled to today, Ideal for medium-to-large software companies that are and what they will be entitled to at any give point in the growing through M&A, Flexera Software helps publishers future yields powerful insight into a software publisher’s understand all aspects of customers’ entitlements. It business. Therefore, the overarching goal in implementing leverages existing enterprise software investments to an Entitlement and Compliance Management solution provide a common integration point and framework for all is “structured flexibility,” to allow change to be readily entitlement-related information, including that contained addressed over time. in multiple, disparate back office systems. The Flexera Software solution can be quickly deployed, enabling new Thus, ECM solutions address entitlement issues over the products and packages to be quickly rolled out without lifetime of a product, and a software publisher’s associated requiring IT resources. relationship with the customer. Entitlements are typically based upon a grant of rights such as a contract, but could Flexera Software Solution Overview also be unrelated to contracts, for activities such as an Flexera Software’s solution comprises the following key evaluation. Entitlements are influenced by events such as: components, which can be mixed and matched to meet the software producers’ specific needs: • Partial fulfillments • Product return • Entitlement and License Operations Management is • License renewal common integration point and framework for all • Product upgrade entitlement management. It enables integration • Partial or prorated maintenance contracts with existing enterprise systems, aggregating and • Usage increase normalizing entitlement data, and provides user • Company and product mergers access via a Web portal. Entitlement viewing and • Product end-of-life management for customers and channels enables 24x7 • Product transition customer service for fulfillment and changes. • New product bundling Ancillary benefits include eliminating the need to change back office infrastructure whenever new4 Flexera Software: Ent it lement and Compliance Management White Paper Series
    • Software Licensing and Customer Sat isfact ion products are introduced, since a single build of supports – Which products does the customer own? multiple products. – Breakdown of products and versions – Number of support incidents against a specific • Electronic Delivery Management, including entitlement- product based electronic download and automatic updating, – Percent of customers who own Products X and Y increases customer satisfaction, reduces support costs that are on the latest versions and drives renewal rates. By using Flexera Software – Number of downloads during this period? to gather highly accurate and timely entitlement – How many people activated the product? information, software publishers can communicate with – Which customers are up for a renewal? customers in a targeted manner. Instead of sending general technical or promotional communications – Flexera Software Professional Services reduces business which can easily be construed as spam – software risk and speeds adoption companies using Flexera Software can target Implementing entitlement and compliance management can communications to the right contact person within be a major undertaking that can have a positive and wide- customer organizations. reaching, impact on many aspects of a software publisher’s • Compliance Management enables software publishers business. While the potential benefits are enormous, so can to help their enterprise customers remain in be the challenges. compliance with licensing agreements by providing a single, consistent view into the state of the software Flexera Software Global Consulting Services can reduce entitlement. Compliance monitoring provides passive implementation time and business risk with a range of reporting of software use, giving publishers the ability services and proven methodologies that leverage the to compare what has been sold to the software that is company’s expertise and industry best practices. To avoid in use. It also fosters customer satisfaction by allowing unexpected issues that lead to budget and time overruns, publishers to provide innovative product packaging, Flexera Software consultants follow a phased approach that flexible licensing and creative pricing. encompasses pricing and products, as well as entitlement strategy, discovery, design, implementation, knowledge • Customer Intelligence Reporting: provide both broad transfer and certification. Each phase in the licensing and granular business intelligence across products, implementation methodology includes a well-defined list of answering questions such as: deliverables that must be approved and accepted by the customer.Source: SoftSummit 2007.3Flexera Software: Ent it lement and Compliance Management White Paper Series 5
    • Software Licensing and Customer Sat isfact ion Flexera Software Global Consulting Services offers • Improve customer satisfaction by providing enterprises the deepest domain expertise available in entitlement with a consistent customer experience across the management solutions delivery, resulting in higher return on product family. It also provides greater visibility into the investment (ROI) and faster time to benefit. entitlements they own. Flexera Software’s Solution Drives Multiple Improvements Finally, Flexera Software’s solution for ECM helps in a Changing World enterprises handle vendor software audits with greater ease. Flexera Software’s solution for Entitlement and Compliance According to Gartner, software vendors will double the Management solves the technology issue that drives the number of audits performed as a method of increasing their business problems associated with software and hardware revenue. Many vendors will include audit clauses in their publishers’ inability to effectively manage software license agreements. In light of these realities, the majority entitlements. It allows software publishers to overcome of enterprise customers still want to acquire their software in common challenges that negatively impact customer flexible methods to meet their business needs. Furthermore, satisfaction, revenue capture and growth, and a majority of enterprises consider ensuring compliance with operational efficiency: vendor agreements a top business priority.3 • Mergers and acquisitions: In a consolidating industry, Flexera Software’s solution for ECM enables operational M&A makes entitlement management an exponentially efficiencies growing problem. Mega-vendors are emerging as they Flexera Software’s all-digital Entitlement and Compliance grow through M&A rather than organically. As technology Management solution allows publishers to achieve markets become saturated, software publishers are looking significant operational efficiencies, starting with the for new ways to differentiate their wares and sell more elimination of costly, environmentally unfriendly physical effectively to customers. Flexera Software ECM enables delivery. Digital delivery reduces time to market by operational excellence, and flexibility in bundling and eliminating media burning, stocking and shipping, as well selling software. as customer disposal. • Today’s digital world: The tremendous rise in broadband Flexera Software’s solution for ECM provides far more adoption worldwide has spawned new Internet and powerful capabilities than in-house download sites, which Web-centric technologies that are disrupting the do not allow for control and tracking of download by software industry. Software producers are making entitlement, and helps publishers to stay in compliance with the move to digital delivery; Gartner predicts that 50 export controls and other government regulations. percent of all enterprise software will be delivered electronically in 2008. This move also addresses the Summary high cost of distributing physical media, the production With the modern PC software industry passing the quarter- of which Gartner states as an average of 45 percent of century mark, the concept of entitlement today defines the total cost of packaged software. the manifestation of the producer-customer relationship. ECM is the operationalization of that relationship; Flexera Flexera Software’s solution for ECM enables Software’s solution for Entitlement and Compliance consolidated entitlement management and effective Management provides a consolidated ECM product offering electronic distribution of software. It meets software/ that integrates into the existing back office and supports all hardware publishers’ and end users’ desire to lower entitlement processes throughout the software lifecycle. upfront costs, reduce overall risk and ensure a higher rate of success with each technology deployment. Flexera Software’s solution for ECM is comprehensive suite that can readily scale to meet software producers’ changing • Revenue leakage and loss: Flexera Software’s solution needs. It satisfies simple and complex entitlements, software for ECM allows support contacts to be enforced by delivery and compliance requirements. For more information licensing, leading to lower support costs and increase about how the Flexera Software’s solution for Entitlement renewals. In addition, an entitlement rights strategy and Compliance Management can benefit your software enables software publishers to drive more revenue by business, please visit www.flexerasoftware.com. selling products the way customers wish to buy them, for example, through flexible bundling options. Flexera Software’s solution for ECM can also address the challenge of software use in virtual environments, in which there is a disconnect between the traditional per- CPU sales model and plural instances of the software running on multiple virtual machines. This allows software publishers to recoup previously uncaptured revenues.6 Flexera Software: Ent it lement and Compliance Management White Paper Series
    • Software Licensing and Customer Sat isfact ionAbout Flexera SoftwareFlexera Software is the leading provider of strategic from installation and licensing, entitlement and compliancesolutions for Application Usage Management; solutions management to application readiness and enterprise licensedelivering continuous compliance, optimized usage and optimization - to strategically manage application usagemaximized value to application producers and their and achieve breakthrough results realized only through thecustomers. Flexera Software is trusted by more than 80,000 systems-level approach we provide. For more information,customers that depend on our comprehensive solutions- please go to: www.flexerasoftware.comGetting Started with an Entitlement and Compliance Management Solution If your company… Start wit h… Customer test imonials… • Recently merged with or acquired FlexNet Operations “The Entitlement Management another company • Cut operations costs Solution from Flexera Software has • Simplify entitlement operations helped Alcatel-Lucent improve the way • Uses multiple CRM, ERP and • Get a single, holistic view of we view and administer entitlements. licensing technologies entitlements Now our license generators can be • Manage multiple licensing consolidated into a single system, • Offers complex product lines technologies saving us time and money while giving customers a more consistent • Is looking for ways to drive FlexNet Compliance Monitor experience.” revenue • Recoup lost revenue by monitoring software usage Alcatel-Lucent • Enable fact-based conversations with customers If your company… Start wit h… Customer test imonials… • Is looking to extend its offerings FlexNet Publisher “Our customers expressed a desire to easily meet changing market • Package, price and license the to pay for the software they used in needs way the market needs a more accurate way and wanted • Protect IP from piracy greater flexibility in applying licenses • Is entering new geographic across the entire product suite. markets FlexNet Compliance Monitor FlexNet is helping us to remain • Monitor software use competitive in the market, and we • Wants to ensure that customers • Engage customers in fact-based can now relate and adapt to our are not overusing your software conversations about usage customer’s needs more quickly and effectively. As we continue to evolve our product line, we see FlexNet as a key component of keeping us agile and customer-focused.” AVEVA Engineering If your company… Start wit h… Customer test imonials… • Wants to grow and maintain FlexNet Connect & FlexNet Delivery “FlexNet Connect makes it easy for us revenue from current install base • Understand your customer base to deliver software and data updates and how they use your products to all our users thereby increasing • Needs to reduce product • Promote new products and customer satisfaction and eliminating packaging costs updates to your customers costly support calls. It also enables us • Cut fulfillment and support costs to increase revenue by understanding our customer’s needs better and by enhancing customer communication.” EarthlinkFlexera Software: Ent it lement and Compliance Management White Paper Series 7
    • Flexera Software LLC Schaumburg United Kingdom (Europe, Japan (Asia, For more office locations visit:1000 East Woodfield Road, (Global Headquarters): Middle East Headquarters): Pacific Headquarters): www.flexerasoftware.comSuite 400 +1 800-809-5659 +44 870-871-1111 +81 3-4360-8291Schaumburg, IL 60173 USA +44 870-873-6300Copyright © 2011 Flexera Software LLC. All other brand and product names mentioned herein may be the trademarks and registered trademarks of their respective owners. ECM_WP_CustSat_Oct11