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To improve the capacity to deliver software licenses (including license keys) and software, most high-tech device manufacturers require some basic changes to their internal supply chain processes and systems. The supply chain ERP, MRP, and CRM systems employed by most high-tech device manufacturers are designed for processes that build and sell a physical device. These processes are designed to build, ship, and then "forget" about the device. As mentioned in earlier blogs, because software has a "lifecycle" that potentially involves upgrades, updates, moves, emergency and end-of-life processes, the end product is constantly evolving in the marketplace.

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In software companies, as many as 80% of the product transactions with customers are administrative in nature. That is, they are non-revenue generating transactions. What this means is that the software may be purchased once, but the user has the right, for example, to move or even update the software without requiring another financial transaction.

To be effective deploying software and license keys in a high-tech manufacturing environment, it must have the following characteristics:

  1. The ERP financial systems that process financial transactions must be separated (but integrated) with the entitlement management systems that fulfill the software and licenses (a corollary to a manufacturing system). This means that once an order is placed in a financial system, the information from the order should be passed in an entitlement management system. It is in this system where software bits and license keys are fulfilled (or applied) either in the manufacturing process, or, in the field. Rules in the entitlement management system allow administrative processes such as software downloads, license key downloads, and moves/changes to be managed through a self-serve portal without overloading the ERP financial systems. In addition, an effective entitlement management system allows the integration of multiple key generators into a single process (single integration with ERP and a single customer self-serve portal), to provide a single platform for acquisition of more companies that deliver software and license keys. The entitlement management system becomes the system-of-record for the deployment and location of software and license keys.

  2. In cases where license keys are locked to a device ID, a "late binding" strategy should be used. Device ID's that are required as part of the process to generate a license key should only be required at the time the license keys are generated either in manufacturing (for "configure to order" processes), or, in the field (for "up-sell" or "change" orders). The way this process should work is that once an order has been entered and approved in an ERP system, the contents of the order will be sent to the entitlement management system. Immediately following, a notification will be sent to an internal or external resource to generate the license keys (this notification can be the revenue recognition trigger in many cases). The person receiving the notification will then provide the Device ID and generate the license key. The Device ID information should not be required at the time the order is placed. The Device ID information is a burden for ERP systems to manage, and, is often inaccurate because the person at the customer site who creates the purchase order, probably doesn't have the accurate Device ID information. As a result, orders are delayed, or, $0 orders are created to modify the order to provide an accurate Device ID.

If you are a high-tech device manufacturer looking to sell more software, be sure that your supply chain and processes are software and license key ready.

Stay tuned next week for Step 10, the final step covered in: The Ten Step Process: Converting Your High-Tech Company into a Thriving Software Company