By Michael Costa
Most software publishers have an opportunity to significantly improve business results by offering new, innovative software license models to their customers. We’ve seen publishers achieve 10-200% more revenue and successfully expand into new markets. For example, aligning pricing and software licensing with customer value attainments and budgets, often opens sales opportunities that would not otherwise exist. And, giving prospects a range of software license models that provide an optimal mix of flexibility, access and efficiency reduces the amount of time & support required to win new customer business and renewals. Subscription, term and usage-based license models have helped many software publishers capture incremental revenue, expand into new markets and reduce sales time and cost.
There are, however, a few challenges associated with implementing new software license models. The time and cost associated with developing new models is often prohibitive and, in most cases, operational problems are likely to occur. Most IT systems and associated business processes are not inherently flexible enough to support new license model implementation without significant changes and, in many cases, major changes to ERP, CRM, billing and other systems and processes – including a significant amount of system customization. Also, because software license model development is not a frequent occurrence, there is usually a critical shortage of the necessary internal expertise. New license model development and implementation is not usually a software publisher’s core competency.
The challenges software producers face when trying to develop and implement new software license models are numerous. It starts with internal IT business systems, business process and software licensing that are purpose-built for a specific, fixed set of license models. For example, most systems are built solely to support a perpetual license model.
So, when you want to develop new models or make changes to existing models, you have to update your business processes and then update & integrate your IT business systems and update your products to implement the new or changed models. Then you have to test and release the IT business system and product updates to ripple the changes through your organization, partners and customer base.
Also, because license models tend to involve most of your business functions, you’ll need knowledge of how the new or changed software license model impacts all of those functions. In order to address enough of the cross-functional interdependencies, you’ll have to maintain balance between each of the functions – tending to their requirements and interdependencies without undermining optimal business results or getting stuck in analysis paralysis.
In addition, in order to minimize the possibility of increasing downstream time, cost and disruption, you’ll want to anticipate and prepare for your future software license model needs. You won’t want to fully implement license models that you might need later, but you’ll want to make sure that you at least enable future license model development with the least amount of time, cost & disruption possible.
And, if you’re like almost all of our customers, because accomplishing all of these goals is not something that you have to do more than every 5-10 years or so, you don’t have the expertise readily available to reliably achieve these goals the first time.
Going through all of this takes a great deal of time, costs a lot of money, and it can be very disruptive to your business from an internal, partner and customer perspective.
Many companies utilize rigid software license models that are very difficult to change. That’s a challenge because the need to change these license models quickly is a fact in today’s market. What’s needed are a set of tools to enable you to quickly develop and deploy new license models. The only alternative to a dynamic licensing system built on flexible software licensing and entitlement management technology is to have hard-coded licensing which requires engineering involvement for every change or to remove licensing entirely which is unacceptable to most companies.