2. Back Office Requirements for
Electronic Software Licensing
Overview
When a software vendor takes advantage of software
licensing to restrict unauthorized use of their product and
enable more flexible licensing policies, a system needs to
be in place to handle the license generation infrastructure.
The systems that comprise a standard back office, such
as financial, order entry and customer management are
generally understood for most industries. There are several
commercial offerings for these products that have common
capabilities. This is not true for an electronic licensing back
office. Due to the diverse requirements in an electronic
licensing back office no common standards have been
established to operate such a system.
Licenses usually consist of a unique file or key tied to
a computer identifier. A license generally needs to be
generated from a set of information that includes the
customer order, computer identification, licensing policies/
terms and a description of the software being licensed.
The manner in which the licensing process is to be handled
and the license distributed will depend upon the number of
licenses generated by the software vendor, the complexity of
the licensing policies selected and the ability of the software
vendor’s customer to understand the licensing process.
The following is a list of elements affecting the needs of a
software vendor:
• Number of license generators/technologies that need to
be supported
• Number of licenses generated
• Business requirements for data collection
• Software vendor and customer relationship
• Computer skills and online connectivity of the end user
• Software licensing policies
• Self-service Web access to obtain licenses
• Integrating licensing with software downloads
• The software vendor’s Web page appearance
• Integration with other back office systems
• Use of distribution channels
• Desire to outsource licensing tasks
These elements are now discussed in more detail.
Number of License Generators/Technologies
that Need to be Supported
When a software vendor is standardized on a single
licensing technology, entitlement management is inherently
simpler to address. However, for large software and
hardware vendors, mergers and acquisitions are fairly
routine. This leads to large vendors often needing to support
multiple license generators and technologies. This results in
a poor end-customer experience and high operational costs.
A single entitlement management solution that can easily
integrate multiple license key generators can solve this
problem.
Number of Licenses Generated
Small numbers of licenses generated by a software vendor
(say, fewer than five per month) can be well satisfied in the
back office system with a simple spreadsheet or database
tool. In this scenario, software license certificates are
dispatched to the end user by methods such as fax or email.
As the number of licenses increases, the software vendor
incurs more record keeping and delivery issues. A more
efficient solution is required.
Back Office Requirements for Electronic Software Licensing
Flexera Software: FLEXnet White Paper Series
3. Back Office Requirements for Electronic Software Licensing
3Flexera Software: Flexnet White Paper Series
Business Requirements for Data Collection
The back office system that handles software licenses tracks
several pieces of valuable data that can be very powerful
aids to making business decisions. Rather than collect
reporting requirements after implementation of the licensing
back office, a best practice for publishers is to include
business owners and their data gathering requirements in
the planning process. Data that business owners may like to
collect from a licensing back office server include:
For example:
• On average, how long do customers wait before they
activate a product?
• Which platforms do customers use?
• Which license models are most widely used?
• Detailed entitlement history by customer…?
A scalable back office system that has powerful reporting
capabilities will be immensely valuable to the business.
Vendor and Customer Relationship
The manner in which the software vendor handles
licensing, distribution and interaction with their customer
base will vary considerably with the dollar value of their
software. In the case of expensive software, the software
vendor usually maintains a close relationship with the
buyer. This relationship tends to affect the manner in which
the software vendor implements licensing policies, such
as having a desire to keep the customer happy under all
circumstances and providing the ability for the customer
to re-configure their software licensing any time there is
a computer failure, without allowing the utilization of
additional unlicensed copies. In such a case, the vendor
may provide easy access for the end user to collect a
temporary (short duration) license to cover the period
of the failure.
At the other end of the spectrum, we have the software
vendor who issues hundreds or thousands of licenses a day,
for relatively inexpensive software, to customers they cannot
possibly know. In the case of high-volume/reasonably
priced application software, the software vendor cannot
deal directly with his or her customers to build a trusted
relationship. Servicing, in cases of computer failures, and
the customer need of utilizing other machines may require
more liberal licensing policies.
Experience shows that there are many “shades of gray”
between the two extremes discussed above and so we
end up with many different implementations of a back
office system and licensing strategies. Some examples
of these variations are:
• Software vendors who sell a few orders of very
expensive software. The installation of the software and
training may be performed by vendor staff, who then
installs the licenses
• Hardware vendors with embedded software features
(few licenses and high value)
• Vendors with products costing a few thousand dollars
where the delivery mechanism becomes the driving
force behind a back office design
Computer Skills of the End User
Software licensing is steadily being incorporated into
almost all areas of computing: the enterprise corporate
installations, small companies, home office and domestic
use. The use of software licensing has been accelerated with
the increasing use of the PC, in particular computers using
Microsoft software. No longer is software licensing confined
to workstation environments where Unix was a dominant
player. The end users of applications, controlled through the
use of electronic software licenses, now range from the very
sophisticated to the novice. The inexperienced end user
may only have enough skills to run one or two basic
software applications.
These customers have to be handled very differently
from customers that have information technology
services in-house. Connectivity of the end user is also an
issue – for users that may not be able to access the Internet
or are behind a firewall, options to activate licenses by
phone or via email must be provided.
Software Licensing Policies
When thinking about software licensing and the back office
issues one has to consider the differences between generic
policies and customer specific policies. The generic policies
may be applicable in many situations, where customer
specific policies will require a combination of generic
policies combined with specific exceptions.
See example 1.1 on page 2.
4. Back Office Requirements for Electronic Software Licensing
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Self-Service Web Access
The software vendor and customer both benefit from the
ability to obtain licenses via the Internet. The vendor costs are
reduced as the customer collects licenses and provides host
computer identification. The customer may collect licenses
as necessary and has the ability to retrieve the same license
again if lost. The customer can collect a new license in an
emergency or move the license to another machine through a
re-hosting process.
Separation of the license fulfillment process from order
processing is mandatory for an efficient back office. Many
orders are processed in the last weeks, days or hours of
the quarter.
Requiring order processing personnel to obtain the data
required to fulfill licenses will both hinder a vendor’s ability
to process orders and will lead to license re-hosting issues
for the vendor and customer later on, as frequently the
information provided will not be correct.
Separating license fulfillment from order processing is hence
crucial for both customer satisfaction and the vendor’s
ability to minimize licensing related costs.
Online self-service leads to better customer satisfaction
when the interface is user friendly. It is important that the
proper end user experience is designed consistent with
the skills of the customer base and the complexity of the
software vendor’s software applications. Such a complexity
arises when the vendor is providing (at one time) a mixture
of licenses that may be hosted on different computers. The
customer may have the option to choose to take all or a
limited number of products, as well as the option of having
each product available in some quantity.
A by-product of providing this service is that some
software vendors are able to recognize the revenue for the
application software as soon as the customer is provided
the ability to get a license and not when the license is
activated, provided that all other revenue recognition
requirements have been met. This is valuable when the
customer may have purchased several items on an order,
but because they have not decided which computers all
the software will reside on, cannot fulfill them all at the
same time. Contact your accounting advisors for guidance
regarding these issues.
Demonstration and Evaluation Licenses
The distribution of demonstrations or evaluations of the
application software that is licensed can present another
policy decision. An effective policy may be to make the
application software available to unknown end users but
require them to activate a license for its use. The software
vendor can then collect the registration information of the
potential customer, which provides quality sales leads.
When this process is completed over the Internet without
needing to contact customer support, the process is painless
for both the vendor and the potential customer.
Appearance of the Web Pages
Whether or not the distribution of licenses is integrated with
the download of the vendor’s software, the vendor needs
to provide a Web experience that mimics the standard
appearance of their commercial site. This generally means
that their pages need to be sensitive to the licensing
processes and the type of information that needs to be
provided to and obtained from the end users.
Generic Policies Customer Specific Policies
How to license the application software product
• Network licensing
• Locked to one computer
• Time limited
• Unlimited for specified domain
Scenario:
A software vendor’s customer order consists of the
purchase of multiple software applications products. After
a time, some remain under maintenance while others do
not, and only those on maintenance are entitled to an
upgrade of the software and license.
How to get the license on the end user’s network or
computer
Scenario:
A company splits. Some licenses go with one division and
some with another division.
How to handle common policies:
• License renewals
• New licenses for product upgrades
• Re-hosting of the license on another computer
• Allow end user to retrieve a lost license.
Scenario:
One company is bought by another company and the
license owner changes
Example 1.1: Software Licensing Policies
5. Back Office Requirements for Electronic Software Licensing
5Flexera Software: Flexnet White Paper Series
These Web pages need to provide a unified end user
experience to connect to the vendor’s Web pages with
single logon and password procedures.
In addition to simply providing the license on demand the
vendor needs to provide facilities for the end user to view
their licensing entitlements, get another copy of the
license in case of disk error on their computer, obtain license
upgrades, etc.
Integration With Other Back Office Systems
Electronic Software Licenses are usually generated to fulfill
an order from a customer or to make demonstration/
evaluation products available. When there is an order
from a customer, the software vendor now has the customer
details and may place this information into back office
systems that handle these orders and their related financial
processes. It may be necessary to use this same order
information to generate software licenses. It is very unlikely
that order processing systems in place are sensitive to the
policies described above and whether the systems in place
can provide the Web facilities and end user experience that
are necessary.
The consequence is that the policies, licensing generation
and distribution of licenses need to be easily integrated with
the existing order entry back office systems.
Smaller software vendors, as well as some divisions of
larger companies, may not wish to integrate into an
order processing system, because they have no access to
corporate systems or because they have no suitable system
to integrate with. In this case the licensing back office has
to be sensitive to the order information and may well act as
the primary repository for the orders. When the numbers of
licenses generated are small, the need for integration with
order processing systems diminishes.
Use of Distribution Channels
When a software vendor uses channels for their software
distribution, the licensing policies and the vendor’s back
office need to be able to effectively support that
distribution method.
The software vendors may choose to provide unlimited
copies of the application software to channels, but to
control the process of license generation by issuing license
certificates over the ISV’s own Web site.
Normally the ISV would allow the channel to sell the
software and provide them with a key for the end user to
obtain the software license from a central point under the
control of the software vendor. With this solution the ISV
can still make it appear that the license comes from the
channel through composition of the Web pages or allowing
the channel to physically ship the license certificates.
Outsource Licensing Tasks
Increasingly software vendors are turning to companies
to outsource their downloads of application software. For
these software vendors, the opportunity exists to move the
electronic license generation, management and distribution
of licenses to the outsourcing channel who can better
supply the 24/7 service needed. The determination of the
licensing policies still rest with the software vendor but the
day-to-day requirement to keep computers operational and
to manage the electronic licensing back office systems is
the responsibility of the contractor. The determination on
whether this approach is suitable for a software publisher
depends upon the size of the customer base, the scale of
operations, and the available internal infrastructure.
Summary
We have addressed some, but not necessarily all of the
issues that need to be considered by a software vendor
when setting up a “back office: for license generation,
tracking and delivery.
Although one can find a common set of operations for
a large proportion of software vendors, there any many
unique requirements dictated by the manner in which the
company determines the marketing and licensing policies of
their applications and services.
About Flexera Software
Flexera Software is the leading provider of strategic
solutions for Application Usage Management; solutions
delivering continuous compliance, optimized usage and
maximized value to application producers and their
customers. Flexera Software is trusted by more than 80,000
customers that depend on our comprehensive solutions-
from installation and licensing, entitlement and compliance
management to application readiness and enterprise license
optimization - to strategically manage application usage
and achieve breakthrough results realized only through the
systems-level approach we provide. For more information,
please go to: www.flexerasoftware.com