By Bashyam Anant As a SaaS provider, on occasion, we run into situations where our customers question their usage and bill related to our SaaS offerings. One of the SaaS products I manage helps software publishers and intelligent device manufacturers electronically deliver software updates automatically to end user machines . Our customers are able to lower support calls and costs as a result and also gain valuable insights about their installed base. Pricing for this product is based on the number of distinct end user machines (“endpoints” for short) that receive software update notifications from the software publisher during a given subscription term; one year, in most cases. Recently, one of our customers felt that they were overpaying for the service because they did not believe that the number of endpoints reported by our product was accurate. The customer felt they only had 20,000 endpoints whereas our system was reporting 30,000 endpoints which had resulted in a significantly higher bill than what they were expecting. (Note: their actual data is not being used but this illustrates the problem the customer was facing). While such discrepancies are very rare, it can happen. To resolve such situations, we have developed the following best practices. Best Practice 1: Easily-understood Usage Metric Definition of usage metrics should ideally be self-evident to customers. While the notion of endpoints for our product is relatively clear to most of our customers, it still stumps a few. As a result, we take pains to explain it in terms that the customer can relate to. For example, if the publisher's software runs on a server machine, the number of endpoints correlates to the number of servers on which the software in installed. Nonetheless, a few such publishers tell us that they sold far fewer copies of their software during a year compared to what our product was telling them. The explanation could be as simple as customers deploying the software on multiple servers to enable development, test and production environments to something more serious such as software piracy. Best Practice 2: Self-service Usage Reporting It is important to avoid surprises at the time of invoicing. As a result, our product features a simple dial that shows the current consumption against purchased quota of endpoints each time our customer logs into the system. Should customers feel things are not aligned with their usage pattern, they can flag it right away to our support organization. It's not only important to provide customers with self-service but to also be completely transparent at all times. Best Practice 3: Capture Detailed Reporting Data While customers may never ask for it, we have found it a worthwhile practice to capture and store detailed usage information for each customer. For example, our system captures details such as daily endpoint count, how long a given endpoint was active, the most recent date when a given endpoint called home and so on. An example of such a detailed report is below. This figure shows the number of distinct endpoints that were active for less than 30 days, bucketed by the final month in which the endpoint was active, for the customer mentioned in this article (Note: numbers have been purged to protect privacy). In simple terms, such endpoints represent software that was used for 30 days or less. Figure 1: Endpoints active for less than 30 days by final month of use Such a trend has no particular relevance to us but it made complete sense to the customer, and helped them correlate software usage with ebbs and flows in their business, as we point out below. Best practice 4: Understand the Customer's Story More than anything else, we have found it useful to engage customers in a discussion of what might explain their usage trends based on the detailed report we provide them. This customer, as it turns out, is a leading manufacturer of farm equipment. Like auto and engine manufacturers, they provide software that helps dealers and repair shops diagnose problems with their engines and equipment. Our software
Posts Tagged ‘Business’
Resolving SaaS Usage and Billing Disputes: Case Study and Best Practices
Posted in Software Piracy 
Tags: Business, customers, figure, planting, Product, Publisher, saas, software updates, software-piracy, summer, time, usage, usage-reporting 
Comments OffMaintenance Deserves the Same Respect as Your Software License
By Cris Wendt and Anna Connell IDC conducted a survey a few years ago that illustrated the importance of software maintenance to the overall revenue stream of an enterprise software company (generally offering a perpetual software license model). The result of the analysis was a simple, compelling graph. One line was the license revenue growing at an annual compounded rate of 7% (healthy, but not spectacular), and the other line showed the growth of maintenance revenue, priced at 20% (annually) of the associated perpetual license with an 85% renewal rate. It showed that within 10 years, the maintenance revenue was a greater portion of overall revenue than license revenue (and continues to grow). This illustrates the power of maintenance revenue over an ever-increasing software installed base. However, in the spirit of a marketing perception audit, if maintenance were a person, it would be Rodney Dangerfield, and would be quipping, “Hey, I get no respect”. While software companies generate substantial amounts of money from maintenance, maintenance is often treated as an appendage to the primary software products, with a surprising inattention to optimization of the offering. Here are signs that you may be neglecting your maintenance business and leaving millions of dollars of (mostly bottom line) revenue off of the table: Lack of a maintenance offering. Sometimes software companies seem overwhelmed or new to software and declare that they “provide updates and bug fixes for free for as long as the customer owns the product. Maybe someday, we'll have an offering”. Maintenance is not treated like a product, where it is assigned a product manager, whose responsibility is define the product, price it, and communicate its salient features to customers and channel partners. Maintenance renewals are not handled by a separate and dedicated team whose role is to generate high renewals rates and protect/grow the existing maintenance revenue stream. Without this level of focus, maintenance revenue is frequently cannibalized in preference of new license revenue. The maintenance offering is often ill-defined other than “phone support and updates”. Little consideration is given to what is included in an “update” and what might the value be to the customer. Are there boundaries to what functionality defines an “update” you receive on maintenance as opposed to an option that is paid as an “upgrade”? Software companies often have poor discipline accurately keeping accurate records of their customers – either by company name or by key contacts at their customers. This means that the maintenance renewal process cannot be effectively performed, if it can be performed at all. The problem becomes worse if sales are made through an indirect sales channel. Keeping accurate customer and sales records allows companies to track maintenance revenue and renewal rates which can gauge the health of their business long term. Pricing for maintenance is very ad-hoc, over-simplified, and pays little attention to the product lifecycle. Maintenance may have 1 or 2 price points that reflect an annual price that is a simple percentage of the purchase price of the original software license. Little value is given to the fact some products may provide tremendous value with their updates and may reflect a different price than maintenance on another product. Also, phone support is rarely separated from software updates (although often for good reason). Maintenance and renewal are typically overlooked when an event occurs on the product associated with the maintenance. A price change to the list license price of the product has the same result to maintenance and must be explained at renewal. When products are re-packaged and re-bundled, entire customer configurations often have to be adjusted to reflect the new packaging and pricing, leading to many manual steps to align current product offerings with what the customer originally purchased. While many of the problems above are related to ” entitlement management ” business processes and systems where Flexera Software can help you, a good first step is to honestly evaluate your maintenance business and to make it a priority with good leadership.
Posted in Software Piracy Tags: Analysis, Business, customer, customers, entire-customer, entitlement management, health, Importance, license models, reflect-the-new, software compliance, software licensing, software updates Comments OffIf You Have a License Technology Problem, Start by Understanding Your Business Needs
The “Myth of the Plug-in Solution” By: Victor Hoisington, PMP, ITIL Today, almost every software vendor, and most intelligent device manufacturers (with embedded software) have multiple software license management systems acquired via acquisition, mergers, and divestitures. The problems that result are disconnected systems, manual processes, and the inability to create solutions from products that span the technology of the constituent companies. When this happens, IT is directed to fix these problems of inefficiency in a way to ensure no loss of continuity in the business (we need the revenue), so they try to merge existing systems in a patchwork way, retrofitting, and manually manipulating the systems so that they can deliver to their customers and keep the revenue recognition engine flowing. This works for awhile, but eventually these retrofitted systems simply don't work together and in fact, the situation may become worse. What happens next is that IT starts looking for a “plug-in” technology to fix their problems and make it all better, but – just like the common cold, there is no magic pill to make it better. I call this the “Myth of the Plug-in Solution”. The “myth of the plug-in solution” ignores some pesky systemic problems that probably existed before and that become worse after multiple years of poor definition of the business requirements and business intent behind software licensing and entitlement management . Or, the requirements have changed due to market conditions (e.g. new license models, cloud computing, virtualization, simpler customer experience, etc). As IT focuses on the systems and their connections, they sometimes lose track of the business drivers, and more importantly, the fact that a true solution will require a combination of process, policy, and technology. What's required is an examination of the underlying business requirements and supporting business processes with the involvement of stakeholders from across the entire business. What Flexera Software does when working with customers to solve these problems is to use a defined, top-down framework that starts by examining the business and market requirements then proceeds to understand and share “best practices” on commercial realization models (e.g. product structure and license models), the compliance and enforcement strategy, and finally the “prospect to support” use cases that define the customers' relationship with you. This business first definition of the requirements leads to the systems (of record) and interconnection strategies needed at the IT level and now we can begin to define the technology which most closely meets the needs of the business. Failure to lead with a business first philosophy will lead to propagation of bad solutions. Using a business first based framework to define a business solution and truly understand your business requirements, policies and customer use-cases will drive the correct combination of policies, procedures and finally technology to create the synergy needed to meet your needs and your customers' expectations. Want to know more about our framework and business first process, let us know and we'd be glad to help.
Posted in Software Piracy Tags: Business, business-first, compliance, constituent, entitlement management, involvement, license models, like-the-common, meets-the-needs, plug, Requirements, revenue, Systems, the-business Comments OffDon’t Put Your Software License Business in Jeopardy – Entitlement Management BI has the Answers
By: Chris Wendt I found a way to beat Jeopardy, especially when my software license business is at stake. When I need answers, I found that I only need to ask the right question, “What can a COTS software licensing and entitlement management system do (provide) for me that an ERP or a homegrown system can't provide?” Software entitlement management systems are an integral part of protecting your organization's valuable IP, generating licenses, and providing the customers with a nice self-serve portal to manage licensing and compliance. But, such a system can also provide you with valuable information from which you may be able to tune your business. An entitlement management system is often integrated with other systems such as CRM, ERP, and LDAP to perform the operations backbone for all business processes. An entitlement management system is also the system of record for software downloads, and license key generators and can provide valuable information for improving processes and increasing revenue. Consider the following, “What can a COTS software licensing and entitlement management system do (provide) for me that an ERP or a homegrown system can't provide?” Determine channel velocity, or, sales effectiveness through a channel –determine the elapsed time from when an order is shipped to a channel partner, to when it is eventually activated by the customer to find interesting patterns in different partners and partner processes, helping you to improve the time to revenue, and perhaps increase revenue. Measure the effectiveness of new upgrade campaigns by measuring the time it takes for customers to activate new versions of products from the time the release is made available. Establish support business readiness parameters for support by knowing, based upon the historical time from shipment to activation, when you may receive the bulk of support calls regarding features/functions in the new release. Find where piracy may be occurring, or, where there are up-sell opportunities, via standard reports to determine which licenses are activated multiple times, or attempted to be activated multiple times and establish patterns. Find sales opportunities by looking how many demo license activations actually convert to revenue licenses, and, if in the process there are patterns around channel partner, geography or type of user that allow the tuning of such programs. When selling through a channel, get more real time-data on which products are selling best by looking at product activation reports. By viewing activation reports in an indirect sales model, tune up-sell programs by knowing which combinations of products are actually used in combination, and correlating that to geography, channel partner, or type of customer. By viewing patterns in activations for new product releases, determine how many products are still active for obsolete or end-of-life products, so that you can determine the need to create a campaign to migrate these customers to new releases?” So, are you ready for some Jeopardy? If you need answers, just ask the right question, “What kind of business intelligence can I get from a COTS entitlement management system ?”
Posted in Software Piracy Tags: Business, channel-partner, customer, data-on-which, effectiveness, entitlement management, license models, obsolete-or-end, Organization, selling-through, software licensing, time Comments OffWant a Better Customer Experience, Think Software Licensing: Try the “Out-of-Box” Experience
By: Cris Wendt Want to make it easier for customers to adopt your software products, license models and technology? If so, try
Posted in Software Piracy Tags: Business, customer, entitlement management, Installation, instructions, Internet, license models, Organization, Process, Product, renewal, software updates, Tool Comments OffThink Monetization Before Enforcement with Subscription Software Licensing Models
By: Cris Wendt If you are a software vendor, a subscription software license model can be an excellent addition to your product pricing portfolio. The subscription software licensing model can offer a lower cost of entry for your customer, making it a more cash-flow friendly if they need to closely manage cash flow. The subscription license model is often accounted as an operational expense rather than a capital budget item for the buyer, which may also be appealing to your customers who prefer this method of purchasing software (this is popular with engineering software where software license procurement is viewed as a project expense). And for the vendor, the subscription software license model offers the promise of a more predictable annuity revenue stream. This is quite appealing to a CFO who can plan and budget more accurately with known revenue streams. Of course, the subscription software license model isn't always a fit for all software in all markets. However, there are cases where we find that a subscription software license model is a perfect fit for the business, yet the software vendor is reluctant to adopt it. The argument I often hear can be paraphrased as, “Yes, it's the perfect model, but we can't have our software stop running because a license key expired. Our customer's business can't go down.” This is a case of backward thinking – there is an inaccurate technology view of the subscription software license model that affects its adoption. If the subscription software license model is the right monetization and customer-friendly model then it can and should be adopted. Next is the enforcement decision, which can be applied somewhat separately from the software monetization decision. It too, is a business decision, and not a technology decision. If your software is mission critical to your customer's business, and if you trust your customer, then your compliance philosophy should be never to stop the customer from running, but to monetize this over-usage when possible. An enforcement mechanism, such as a license manager, does not actually stop software from running. The license manager simply informs the software that the license has expired, and it is up to the business policy coded into the application that decides on what to do. There is an entire range of possibilities from simply messaging a customer that the software license has expired, all the way to the hard stop of an application. In fact, the business policy coded into the product can be designed to vary by a number of factors (mission criticality of product, product lifecycle, geographic region of sale, size of customer, etc.). If your customer is running your software in a mission critical environment, then simply give them a message that their license has expired. And, be sure that the associated entitlement management systems are providing the business information that a license is about to expire so that a sales conversation can be arranged. Subscription software license models are a great way to grow market share and increase customer satisfaction. If it makes sense, adopt the software license model, and tune the enforcement mechanism to align with your compliance philosophy.
Posted in Software Piracy Tags: Business, compliance, customer, Enforcement, License, license-manager, Product, software compliance, software licensing, software-license, the-enforcement, vendor, your-customer Comments OffAnyone for 1 quadrillion intelligent, connected devices on the Internet?
By: Randy Littleson I came across an interesting article in the last week ( Cisco: 50 billion things on the Internet by 2020 ) that highlighted a debate between Cisco and IBM in terms of how many intelligent, connected devices were going to be connected to the Internet in the next few years.
Posted in Software Piracy Tags: already-exceeds, article, Business, Cisco, competitive, customers, entitlement management, high-tech manufacturers, Internet, license models, machine to machine, randy-littleson, software licensing, the-competitive Comments OffTrue Pay-As-You-Go Software Licensing Model – Myth or Reality?
By: Mathieu Baissac I recently came across this post – Is IT Ready for True Pay-as-you-go Software Model? – o n the IT Business Edge blog. In the post, Ann All states, ” While customers are eager to take advantage of the pay-as-you-go usage model promised in the early days of the cloud, software vendors are understandably reluctant to give up their large licensing fees and ongoing support and maintenance revenues.” I wanted to share my perspectives… Software vendors for complex software solutions will have a hard time making it simple enough to make it predictable. Look at the Azure/Amazon pricing—it's a mess. I have had several CIOs complain to me already that what they expected vs. what they paid were quite different. When you price 100s of different features—you're going to have a very hard time doing pay as you go models. Enterprises will accept some variability – but no more than 5-10% (I suspect). They are accountable to budgets and can't blow them up. In theory, pay-as-you-go is about reducing costs. So the software licensing models must be simple, tied to something fairly predictable and software vendors must provide information to enterprises as they use it. This is why we have meters in cabs. Enterprises will want ability to verify the data – especially when the meter is usage-based instead of # of employees or other controllable metrics. Cabs in most countries have placards explaining the metric and the price for each. Enterprises won't want to pay weekly/monthly – they will want quarterly or semi-annual payments at most. The cost of invoicing, etc. is large. Until software vendors can provide simple metrics that are highly predictable/controllable with a lot of verifiable data points, enterprises will not adopt pay-as-you-go software licensing models – even if it means potentially significant savings. What's your perspective on pay-as-you-go software licensing models?
Posted in Software Piracy Tags: azure, Business, controllable, data, mathieu-baissac, pay-as-you-go, perspective, perspectives, Price, software licensing, software-model, verifiable-data, verify-the-data Comments OffCharacteristics of a Successful Software Licensing Program
By: Michael Smith Licensing is one of those programs where when it's not working well it quickly becomes a top initiative for any CEO.
Posted in Software Piracy Tags: agile-framework, all-operational, Business, entitlement, highly-cohesive, license models, product-revenue, Programs, quickly-support, successful, such-as-usage Comments OffExploring the Software Licensing Implications of Cloud Bursting
By: Jeanne Morain For many enterprises and software vendors alike there are details that must be solved around people, process, and technology when designing your cloud strategy.
Posted in Software Piracy Tags: Applications, Business, cloud-bursting, double-dipping, Enterprise, Implications, Industry, Internet, leap-the-impact, license models, network, Provider, software licensing, virtualization Comments OffIs Your Current Software Pricing Approach a Barrier to Adopting New Pricing Models?
By: Cris Wendt When pricing software licenses, there is always the classic tradeoff of generating more revenue and market share versus managing the cost of sales and deployment. On one the hand, you can offer multiple price points for the software by grouping different functions into products, or, by offering many new software license models. This gives you the precision to attack different market segments or types of users based upon specific value and need. The downside of this approach is that it may be more complex to figure out exactly what combination of product and software license model fits your customer(s) needs. You will typically see such pricing approaches for large enterprise software that is scalable to address a wide variety of customer needs, such as an ERP or CRM package. On the other hand, there is the approach of offering fewer price points and simpler pricing. With this approach, there is less pricing precision, but it is typically easier for the channel and customers to figure out what to buy. On the surface, this is clearly a less sophisticated approach. This type of software license pricing model is often used in desktop productivity software such as Microsoft Word. Selecting a software pricing approach can be a complex exercise, as many factors need to be considered. However, one of the many factors I like to emphasize is the deployment model behind your product – this means the number of copies of software licenses you sell, and, the corresponding channel model. If you are selling deployment that offers a single instance of your software typically with a direct sales model, then using multiple price points is a good way to drive the revenue model. A direct sales force is more capable of explaining the value, and the pricing model allows revenue scale based upon the organization's size, need, and growth. SAP's ERP software is priced on such a model. At the other extreme, if you are selling tens, hundreds and thousands of copies and use a channel, then it may make sense to make the software products and license models much simpler. This makes it easier for customers to understand what to buy, and, for the channel partners (who often sell products from multiple vendors). In this case, revenue is based upon volume and sales velocity. This is why Microsoft Word doesn't offer too many variants of pricing, such as offering different prices for the spell checker, interfaces to Excel, etc. Such a model probably already makes sense to companies in one or two of the categories. But, it can be a good lesson if you are in the business of offering more sophisticated software with complex pricing models, and then trying to go “down-market” with high volume deployments. The institutional culture behind pricing and selling a more complex model often creates a mindset and a barrier to changing the underlying pricing model to accommodate market needs. Complex models usually include sophisticated sales tools, direct customer interaction, finance and entitlement systems that require a knowledge of the customer configuration in order to perform any expansion sale, and often the presence of a services engineer to install the software. Trying to price software for different market needs becomes difficult because no one thinks that way, and no systems are set to support that type of business model. This can lead to a failure of “down market” initiatives. That's why it's difficult for large enterprise software companies to move into more high volume markets. Clearly, this becomes more than a software license pricing issue…systems and processes are involved, but simply understanding that a new, simpler software licensing and pricing model is required as a first step is paramount to making the transition. Change requires change. Next Time – What does it mean to your entitlement management system when you move to a high volume software business?
Posted in Software Piracy Tags: approach, Business, Channel, customer, entitlement, license models, makes-it-easier, Microsoft, microsoft-word, Organization, sap, software licensing Comments OffKiplinger’s Home & Business Attorney
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