I’ve worked with hundreds of software producers and device manufacturers who have undertaken software licensing and entitlement management initiatives and there seems to be a pattern:
- Transformational initiatives get large returns on their investment
- Under the radar initiatives get very low returns
Transformational Business Initiative Characteristics
- These initiatives are large and have large objectives, for example:
- Shift from hardware to software-centric revenues
- Shift from perpetual license/maintenance to re-occurring revenue
- Revamp customer experience end-to-end
- These initiatives start from the top – often from CEOs or CFOs and have multi-year horizons. Examples include:
- One initiative I worked on was one of the top 5 initiatives for the next 2 years from the CEO’s desk. A Steering Committee was created with heads of most business units. The target was financial – and quite large – increase EBIDA by moving away from selling hardware.
- Another initiative started with the creation of a new subscription department. The goal was to increase recurring revenue from 15% to a much larger %. The initiative had a 3 year objective and reported to the CFO.
- Often large System Integrators are involved – (i.e. companies like Accenture, PwC and others) as both integrators and initiative keepers. All these are business-led initiatives – sometimes the program management would organize it – but most often it is special teams pulled from a variety of departments reporting to a C-level steering committee.
- Usually the first step is to create a vision of the end result. Typically – these visions are quite large:
- In a few years, no longer selling upgrades
- Single customer experience (removing 25 different web sites)
- Then designs were made, with large cross functional teams.
- The first go-live is long – it has lots of moving parts – 12-18 months from start.
- To reduce risk, as this is such a critical initiative, there is never one go-live; there are always multiple phases and multiple go-lives.
- To measure success, there are established metrics (multiple) – i.e. revenue type % change, customer satisfaction surveys, etc.
- They all spanned the entire organization – sometimes starting with 1-2 products, but with a migration plan/target of the entire portfolio of products.
- Teams are a sizable % of the organization (direct and indirect).
Under the Radar Project Characteristics
- These projects are typically triggered and sponsored by IT or R&D.
- The goal across the portfolio (or subset of) is typically either to:
- Add licensing to ensure compliance
- Add licensing to monetize the software in a new way
- Provide consistency across multiple/acquired products
- Update a few products automaticall
- Typical duration is 6-8 months. There might be one additional phase planned (“to catch up”).
- Sometimes the project is part of a larger quote-to-cash project, often an after-thought.
- Sometimes a “sustaining” group is created to ensure that this solution stays current.
Seldom are these projects strategic, teams are fairly small (1-2% vs. 20% of staff), metrics are not established, steering committee might be at the VP level and are often IT lead.
Results are Quite Different
As you can probably predicted, I’m going to say “results= what was expected.”
If done “Under the Radar” these projects tend to be low risk and just “get done.” The results typically are fairly small gains – 3-5 % revenue increase for adding licensing (increased compliance) and/or 1-5% decreased costs. These projects are often under-funded (which becomes evident in 3-5 years later) and are considered a painful necessity.
If done as “Transformational” these projects tend to be high risk and take a lot to get done. The results are often quite large, some producers have seen 20-30% revenue increase and/or 10-30% decreased costs. More importantly, they often change some aspect of the organization – terminology and/or organizations reporting or departmental objectives and/or customer experience and/or products.
Real-life Example: Two Competitors, Two Different Approaches Over 7 Years
With one “Transformational” project, after 5 years, we noticed:
- Early reports of large revenue increases from simple compliance/enforcement
- Large EBITDA growth (shifting from hardware to software)
- Large organization changes (including creation of a software division)
- Large # of people were shifted from operations to other organizations
- Several products were radically changed
- Meters were changed for most products (as they could enforce them now)
- Introduced software maintenance
- Large terminology changes in the organization (hardware-centric terminology like “deliver” to adding software terminology like “entitlement”)
During that same time, their competitor did a “Under the Radar” project and saw:
- No EBITDA growth
- Addition operational costs (due to not thinking about the end user experience and therefore adding manual steps to the fulfillment process)
- After 5 years, most employees asked “what is an entitlement” and even “this licensing is too hard, can’t we just remove it”
Have you seen the results of any transformational projects like this?
What experiences and insight can you share about transformational business initiatives?
Most licensing and entitlement management business initiative begin with an assessment. During the Licensing, Entitlement Management and Delivery Assessment, Flexera Software's experts analyze the way you license, price, package, install, update, monetize and renew your products and identify specific areas for improvement.