The white paper discusses the evolution of software licensing towards Entitlement and Compliance Management (ECM) to improve customer satisfaction and revenue for software publishers. It highlights the challenges of traditional licensing practices, including compliance issues and inefficient processes, while proposing ECM as a solution that enhances operational efficiencies, customer relationships, and revenue tracking. Flexera Software offers solutions that integrate with existing enterprise systems, enabling better management of software entitlements and compliance with regulatory requirements.

1. 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

2. 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.
2
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3. 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 as
Flexera Software’s solution for ECM delivers the capabilities the Sarbanes-Oxley Act in the US and the Basel II accords
prescribed for this category by IDC; it provides software in Europe compel public companies to improve control
producers with a holistic approach to help productize, over their software environments. These regulations require
monetize, deliver and install packaged software. IDC enterprises to have a precise, timely picture of all
believes that companies offering solutions in this space must installed software.
address the software producers’ “five Cs” of customer pain
points: compliance, costs, control, complexity and customer In sum, software publishers that cannot provide a complete
satisfaction. IDC forecasts that worldwide spending in this and accurate view of licensing status do disservice not only
market 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 Satisfaction
Today, software publishers are keenly aware that in this Why Traditional Licensing Practices
maturing and competitive industry, product differentiation No Longer Work
and strong customer relationships are the keys to survival.
Ironically, most software companies haven’t applied • Inflexible systems and rigid internal processes
integrated applications to address their relationships with prevent publishers from creating flexible pricing
their customers, resulting in silos of duplicate information and packaging
and non-integrated processes. The software licensing
practices most companies use have not evolved appreciably • Lack of integration with ERP and CRM systems
over the decades. This fact has had a deep impact on the requires publishers to manually re-enter order
software 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 cost
Regulatory issues complicate licensing
Increased government focus on the software industry has
created a multitude of regulatory issues for publishers. These
include SOP 97-2 compliance, revenue recognition concerns,
FASB/GAAP and software export compliance. Software
vendors are being forced to complete a costly review of
their own policies around sales, entitlement, fulfillment
and 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 greater
than 20 percent.
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4. 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 new
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5. 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.
3
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6. 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.
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7. Software Licensing and Customer Sat isfact ion
About Flexera Software
Flexera Software is the leading provider of strategic from installation and licensing, entitlement and compliance
solutions for Application Usage Management; solutions management to application readiness and enterprise license
delivering continuous compliance, optimized usage and optimization - to strategically manage application usage
maximized value to application producers and their and achieve breakthrough results realized only through the
customers. 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.com
Getting 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.”
Earthlink
Flexera Software: Ent it lement and Compliance Management White Paper Series 7

8. 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.com
Suite 400 +1 800-809-5659 +44 870-871-1111 +81 3-4360-8291
Schaumburg, IL 60173 USA +44 870-873-6300
Copyright © 2011 Flexera Software LLC. All other brand and product names mentioned herein may be the trademarks and registered trademarks of their respective owners.
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