Who Cares About Entitlement Management?

By: Cris Wendt

In the software business, entitlement management describes the rights that you acquire when you purchase a software license as well as the ongoing management of those rights.

To describe software entitlement management by analogy, we can look at the purchase of an airline ticket.  When you purchase the ticket, you are entitled to travel from, say, San Francisco to New York in seat 15A on November 11 at 8:50 a.m.  You are also entitled to receive frequent flier miles equivalent to the total miles flown for the trip if you’ve enrolled in the airline loyalty program.  To poke a little fun at the airline industry, we can also say that you are entitled to flight delays, poor food, unfriendly flight attendants, and a hard seat.  When you actually fly, then we say that you’ve fulfilled those rights.  But, if you change your mind, you may be able to change the flight date and destination, given the particular entitlement rights associated with the airline ticket purchase.

The reason that entitlement management is such an important concept for the software business can be illustrated by some real life incidents that I experienced.  Several years ago I purchased some anti-virus software for my home computer.  Based upon what I purchased, I was entitled to use the software anti-virus engine and access virus signature updates for a year. 

Near the time that my subscription was about to expire, I purchased another computer.   When I went to update my subscription, I made a request to purchase the anti-virus software subscription for 2 computers for a year. In a sense I was renewing the annual subscription for my existing entitlement and purchasing another entitlement.  After conducting the online purchase, I ended up with a total of 2 years of anti-virus subscriptions that worked on both of my computers.  This resulted in what we call “over-entitlement” – a situation where I was trying to do the right thing, but I received more than I was entitled to receive.

Near the expiration of that term, I found out that my internet ISP fees entitled me to use the same anti-virus software as part of my standard monthly fees.  As a result, I decided to access the software entitlement that was provided by my ISP and to not renew my existing entitlements.   So, I enrolled in the ISP’s program.  Meanwhile, the previous entitlement that I purchased had expired.  No problem, I thought.  However, the expiration of my old entitlement also made the entitlement that I was supposed to receive as part of my ISP service to disappear as well.  

So, ultimately what happened is that the anti-virus software company lost some revenue at the first subscription renewal. They had increased support costs to rectify the situation, and they had an unhappy customer, who may switch anti-virus providers at the next opportunity.  In addition, by not knowing who their customer is, they are losing great up-sell opportunities

Furthermore, the lack of accurate entitlement tracking can lead to problems for customers of the software producer.  If the customer is responsible for ensuring compliant usage of software, to what benchmark are they supposed to measure compliance if the software producers themselves cannot keep track of what customers are entitled to use?    Without knowing what entitlements are in effect, how do software users manage compliance?

As it turns out, this entitlement management scenario is not that unique.  We find that software companies often have much more intricate and complex entitlement management situations that occur reasonably often.   Fortunately, the airline industries can teach us a lot.  

Next Time: ERP’s Dirty Little Secret – Entitlement Management.

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