Entitlement and Compliance Management

Entitlement and Usage Management Headaches Part II: Too many product models & configurations…strategies for reducing SKUs

By: David Znidarsic

Previously we discussed how to some, "SKU reduction" means simplifying a complex product portfolio. This time we will discuss how others view "SKU reduction" as a means to efficiently producing a complex product portfolio.

Efficiently Producing a Complex Product Portfolio
You might be spending too much money and time producing the multiple products that comprise your complex portfolio. In this situation, you are convinced that you must continue to offer the complex combination of products and options you currently sell. In fact, you might even be planning to provide more product combinations and more options. Here, you are not trying to reduce the complexity of your portfolio, but trying to produce your complex portfolio more efficiently.

Often a company doesn't plan to create a complex product portfolio. Instead, it happens over time when markets demand products derived from an already successful product. Those derivatives could be a result of capabilities added to or removed from that product; then there are derivatives of those derivatives, etc. After a few years or few product releases, you've met the immediate customer demand, but you can't sustain the cost of providing all of these options.

In this example, at the core of all these derivatives is a base product. The best way to efficiently continue to provide all derivatives is to engineer one master product, to which and from which capabilities can be added and removed. If those capabilities are implemented in software (or firmware), then use an electronic software license management system to control which customer gets to use which capability. Even if licensed capabilities and capacities are implemented in hardware, electronic license management systems may still be able to help. If the hardware's configuration can be controlled by firmware or software, then that controlling firmware/software can interrogate an electronic license and instruct the hardware how to configure itself.

Implementing an electronic license management system to efficiently produce and maintain a complex product portfolio is a best practice followed by thousands of hardware and software providers. The flexibility of such a system allows you to introduce additional capabilities to existing customers, as well as reduce capabilities in order to reach low end markets without eroding your high-end price points.

How have you tackled "SKU reduction" and "SKU complexities"? What are your best practices?

Entitlement and Usage Management Headaches—Part I: Too many product models & configurations…strategies for reducing SKUs

By: David Znidarsic

The term "SKU reduction" is thrown around a lot these days, but it means different things to different stakeholders. To some, "SKU reduction" means simplifying a complex product portfolio. To others, "SKU reduction" means efficiently producing a complex portfolio.

Simplifying a Complex Product Portfolio

If your prospective customers are confused by the complexity of your product portfolio to the point where they don't buy (or buy less) because of its complexity, then you need to simplify that portfolio. You can do this by either dropping products or by bundling products and options together.

However, be aware that while a complex product portfolio might be a problem for your high-end prospects, the fact that your low-end customers were able to buy only the products and options they needed may be the only reason you have low-end customers. Complexity can be perceived as either choice or chaos.

However you get to the conclusion that your product portfolio is too complex, simplifying your portfolio cannot be done over night. Of course, you may have entered into contracts which commit you to provide certain product combinations into the future. But, more fundamentally, you may not even know who is using what product or product option and how they are using them.

Making the decision about what products and options stay, go, or become consolidated starts with knowing who is entitled to what products and options. It then proceeds to who has fulfilled, deployed, and configured those products and options. While it may be a challenge to even get that far, you can go further. Instrumenting your products with usage management technology can allow you to harvest information about the environment in which your product was deployed as well as when and how often it has been used. Usage management technology can even provide this information back to you through your multi-tiered product distribution channel. Visibility into any or all of the transactions mentioned above will give you the information necessary to decide how to reduce the complexity of your portfolio.

Next time: Part II—Efficiently Producing a Complex Product Portfolio

Software Entitlement Management & the Compliance Burden of Proof

By: Cris Wendt

If you buy software licenses, you will probably be presumed guilty until proven innocent for ensuring that you are using software in compliance with your software license agreement. The burden of proof of evidence is place upon the user of software. If an audit occurs, you somehow must match the deployment and usage of software to some combination of documents to show entitlement rights.

However, if the burden of proof were placed on the shoulders of the software vendors, then the story may be different. This is especially true in the world of B2B enterprise software.

As a colleague of mine once said, "compliance is like the sound of hands clapping – one hand is usage reporting and software asset management from the customer, while the other hand involved in the clapping represents the software vendor's entitlement management systems." In most cases, the hand representing the software vendor's entitlement management system would be missing, or at least missing a few fingers.

Many software vendors will readily admit that their records of what software licenses customers are entitled to use are so bad, that they often call their customers to find out what the customer should own. In fact, I think that every software vendor over $1M in annual revenue has dirty data in their entitlement management systems.

How can this be? There are several problem areas that seem to contribute to an ever-worsening situation. Below are some of those problem areas:

• Non-standard agreements with little auditability: Many software vendors derive the lion's share of their revenue from large ELAs (Enterprise License Agreements )– deals designed to meet the specific needs of their customer, but they are often non-standard in nature and include many terms that cannot be tracked without spreadsheets, and knowledge inside of people's heads. One example is the "remix" – an approach to allowing customers to remix their licenses annually, based upon a formula that involves the list price of the software, and, the percentage of the total software purchased.
• Fuzzy license models: Some software vendors sell concurrent licenses, but aren't clear on the distribution of those concurrent users – are the users all local to one building, or, can they be dispersed geographically? The issue arises when licenses are being used on a worldwide-basis (24 hour usage), but the pricing intent was for the licenses to be used locally.
• Product packaging changes: Over time, software entitlements change because the underlying software product packaging changes. As the result of M&A, market re-branding, or end-of-life processes, customers may be "migrated" from one set of products to another, using a method that is customer friendly, but difficult to track or audit in an entitlement management system.

• Using ERP systems as entitlement management to track license rights: ERP systems were designed to track the manufacture and delivery of physical goods. Upon delivery, the product is shipped, and the role of the ERP typically ends. With software, the trouble usually starts after the software is delivered, as exact mix and version of software, including who exactly is entitled to use the software evolves over time due to upgrades, updates, moves, M&A, and product repackaging. Over time, software vendors often lose track of which customer is entitled to own a product. A true entitlement management system is needed, and must be properly integrated with an ERP system to effectively manage software entitlements.

Next week – How to approach improved entitlement management…

Leveraging Software Entitlement Management to Better Meet Customer Expectations

By: Randy Littleson

 

Jason Ruppert, Director of Operations at Harmonic, discusses why they moved away from a homegrown software entitlement solution to a solution by Flexera Software. They did so to better meet customer expectations for self service and reduce internal costs of maintaining and enhancing the system. Jason explains the process they went through and the benefits they realized in doing so.

Becoming the “New Polymath” – Using Embedded Software to Help Transform Your Hardware Business

By: Vikram Koka

I recently read a very interesting article published on SandHill.com called, Software in an Age of "AND not OR". In the article, Maryann Jones Thompson from SandHill.com interviews IT and innovation expert Vinnie Mirchandani and asks questions about his new book, The New Polymath. What I found interesting and also reinforces what I see often in companies that I talk to is the idea that there is a transformation going on in the software and hardware industries. We see traditional software companies moving to hardware and vice versa…hardware companies moving to software companies and everything in between.

Specifically, I see this first hand as I work with many "hardware" companies which are now becoming polymaths by turning into hardware + software + services companies as they deliver a truly integrated and complete solution to their customers. I see hardware companies using software licensing and entitlement management to help monetize their devices more effectively using embedded software while giving them the ability to easily turn on/off device capability and capacity. I see this often in telecom, networking, and data centers of all types and sizes. I see service providers and enterprises transforming themselves by working with their suppliers to dramatically increase machine utilization and dynamically moving capacity driven by demand.

In addition, I see traditional hardware companies becoming polymaths by increasing their sources of revenue and improving margins—moving beyond the peaks and valleys of box purchases driven by demand to subscription/ recurring revenue models. They are driving faster adoption of new technologies by their customers by using their already existing deployed equipment as a "platform" for new applications, services, and content.

I even see some hardware companies going further down the polymath chain and becoming pure software companies by making themselves "ingredients" into other hardware products. Truly a transformational move by reducing all the manufacturing costs and leveraging the distribution channels of larger companies. And in other cases, hardware companies are making the move of increasing service revenues and directly managing their equipment at customer sites, so that the customer does not have to build up expertise and competencies which is not core to their operations…another transformational revenue change.

How are you transforming your business? Is your business becoming the new polymath?

Software Licensing – Don’t Think “Software Asset”, Think “License Entitlement”

By: Cris Wendt

It's probably heresy among many to suggest that we don't think of a software license as an asset. Anyone with SAM in their title responsible for managing compliance in their company is probably cringing at this thought. Why even suggest that software isn't an asset? Purchased software fits the definition of an asset as it's used within most organizations, and it's a well accepted perspective within the software industry.

It's not about "wordsmithing", but about how the words we use shape the way we think. And in some cases, the way we think, may limit possibilities and have unintended consequences.

It's certainly not wrong to think of software as an asset, but it is more powerful to think of software as a right-to-use, or an entitlement that entitles usage rights in the form of a software license. It is these usage rights that provide the value that will be licensed (and not just "tracked") and monetized. It's not the installed instance of a software image on a machine that provides value, but it's the effective usage of the software through its entire lifecycle that provides value and benefit. Instead of thinking of software as a physical device, like say a pencil, software should be viewed as a service that provides continuous value over its lifecycle. The value it provides can depend upon the entitlement of the software license, in essence the "who, what, when, where, and why" - who is using the software, what part of the software is being used, when it's being used, where it's being used, for what purpose it's being used. Certainly, trade-offs need to be made to simplify the purchase experience and not make every buying decision all about who, what, when, where, and why.

Companies that purchase a software license and think about its financial benefit to a business process or business task, and not just something to be tracked for purposes of "inventory management", realize that different license models can be applied to provide value that is a closer match to what the business needs. For example, a license model that enables the usage of extra software for peak periods during the year, or, enables easy access to more software in a portfolio for a particular business process will yield better business results.

The same applies to companies that provide software licenses, or "provision access". ISV's (and high-tech device manufacturers) use traditional ERP systems (that are built upon the premise of delivering physical goods), often fall short when they are trying to provide an entitlement to use a software license. The systems don't track the software entitlement over the lifecycle, and, awkward physical delivery processes don't lend themselves to tracking the deployment of software license rights. As a result, an entitlement that allows users to upgrade, and update their software over time, is typically not tracked well. In addition, traditional ERP systems don't track customers or end-users very well. As a result, you will see ISVs with a lot of manual processes. This is why the most productive ISVs are using an entitlement management system, and not just an ERP system to run their business.

If you want to make a small change in the way you think which can be leveraged into larger benefits, start to think "license entitlement" and not "software asset".

SoftSummit 2010: The Premier Software Licensing and Entitlement Management Event

By: Flexera Software

Effective immediately, registration is open for SoftSummit 2010—The Premier Software Licensing and Entitlement Management event designed specifically for Software Vendors and High-Tech Manufacturers. If you develop and/or sell software or intelligent devices, this is the event for you!

This year SoftSummit attendees will have the opportunity to analyze, dissect and discuss the newest technologies and trends concerning virtualization, cloud and SaaS, compliance and consumption licensing – while learning about strategies to help adapt your business to stay competitive and win in today's fast-paced market. 

 

SoftSummit 2010 attendees will:

• Hear analyst insights and strategies for capitalizing on the latest technologies and trends impacting software licensing, entitlement and compliance management, and device lifecycle management
• Engage with real customers who have embraced the newest technologies and trends to transform their business and prosper
• Network with the best in the industry—analysts and peers—while sharing and learning best practices
• Hear strategies and best practices for growing and adapting your business, streamlining processes and cutting costs
• Spend 1:1 time with Flexera Software executives and product management teams

Want to learn more or register for SoftSummit? Visit http://www.softsummit.com/ to view the agenda, review proposed sessions, see who should attend and register.

We look forward to seeing you at SoftSummit 2010!

Intelligent Devices Proliferate Due to Abundant Processors and Embedded Software

By: Steve Schmidt

Making device lifecycle management more pervasive requires two key ingredients: 1) Additional device intelligence (devices with sufficient processing power and embedded software) and 2) Internet connectivity. For high-tech manufacturers, providing additional device intelligence will allow the device to be initially configured, updated, monitored and remotely supported.  The device will be able to log usage levels, confirm successful reconfiguration, report on physical status, and provide a trial of new capabilities, among other activities that take full advantage the second ingredient, internet connectivity.

So how does device intelligence become pervasive?  At the recent AMR Research (Gartner) Supply Chain Executive conference, Brian Krzanish (Intel's Senior VP and General Manager of Manufacturing and Supply Chain) discussed "The Foundations of Information Infrastructure: View from Semiconductor".  In the presentation, it was pointed out that –" Intel's new capabilities enable the future of 'smart'".  Intel is producing high volumes of low cost processors for all types of devices.  They generally have 5 generations of processors under production at any given time.  Since each generation of technology lasts approximately 2 years, they have 10 years of technology in production, with each generation at a different price point.  We are at the stage that even 10 year old technology is a good enabler for intelligent devices, and the fabrication facilities can produce in tremendous volume and low cost.

In the Q&A session following the presentation, it was stated that Intel is "getting smartness into the supply chain".  Along with other processor providers, they are enabling goods (intelligent devices and systems) that travel through the supply chain more innately capable of streamlining the supply chain.  A secondary, out-of-band tracking and configuration mechanism to support the supply chain will decrease in importance.  The device itself, leveraging embedded software with  software licensing and entitlement management technologies, will report on its status, support a strategy of postponed configuration, and flexibly reconfigure or retire itself.   This type of capability will provide positive reinforcement within the system, accelerating its evolution in this direction.

Where and how do you see device intelligence becoming pervasive?

Using Embedded Software for Better Device Lifecycle Management

By: Steve Schmidt

While waiting for news regarding the state of a stereo amplifier, I was once again struck by the need for better device lifecycle management capabilities on devices/equipment that we use daily. My stereo amp is just under a year old and seemed to stop working about two months ago.  Trying to narrow down the problem and avoid unnecessary trips to the electronics store, I ran a few tests at home, swapping out speakers, wiring, cables, sources and other system components.  The configuration of the amplifier was reset multiple times.  The limited system indicators looked good, but all other signs suggested that the amplifier was the culprit.  The result was a trip back to the retail store with the unit, after a couple phone calls with the technician to explain what had happened, he finally got to the job. The technician ran a similar set of tests with all of their in-store equipment, placed a call to order parts from the manufacturer, and then the wait for the parts to be received and installed at the service center.

What if… the system component (stereo amp) was able to communicate its status more effectively to the user, to the service center, and back to the manufacturer. Continuous, real-time communication might be an option, but let's just start with on demand communication controlled by the user.  Knowing for certain that it is was the stereo amp that failed would have saved multiple people testing time and allowed for the parts to be pre-ordered so they were available in days rather than weeks.  If the fix was software related, as is increasingly the case with many high-tech devices, the embedded software update could simply be pushed to the system component in the user's home.  If self-service with physical elements were necessary, the replacement parts or new unit could be sent to the user directly.  If a trip to the service center was still in order, it would be known to be required rather than guesswork, and could be timed more efficiently to coincide with the availability of the parts.

And think of the advantages of device lifecycle management for the manufacturer.  They would have additional information about system reliability, and configuration scenarios that produced the best (and worst) results.  They could proactively solve problems by sending software updates to only those customers who were under warranty or purchased maintenance programs and are entitled to receive software updates. They could increase revenue by notifying/promoting new applications or capabilities for their device which are available for an additional fee.  They could establish a more direct relationship with users.  They could have more satisfied customers.  

Where have you seen device lifecycle management handled well?

Why Is Software Licensing and Device Lifecycle Management Important to Medical Device Manufacturers?

In a recent article featured in Design Manufacturing Services, David Znidarsic, Vice President of Technology at Flexera Software, explores electronic software licensing management, a simple solution for medical technology manufacturers that can ensure regulatory compliance while delivering a host of additional benefits, including simplifying how companies bring their products to market and ensuring they can maximize their revenue.

Here’s a snippet of the article…

As healthcare facilities rely on an ever-growing population of medical devices controlled by FDA regulations, ensuring compliance becomes an increasingly complex challenge. At the same time, manufacturers have begun implementing more of their key features through software, turning these hardware providers into software companies that must confront issues related to software product lifecycles, version control, and software pricing. Meeting these challenges, however, should not require a massive administrative and operational effort.

The article goes on to talk about:

· The Changing Industry

· Electronic Software Licensing to the Rescue: Three specific benefits for medical equipment manufacturers

1. Compliance

2. Feature control

3. Multiple device identifier types

· Electronic Software Licensing in Action: Three Use Cases

1. Compliance

2. Capabilities

3. Generating Revenue

· Looking for an Electronic Software Licensing Solution

Read the entire article -- Managing Compliance and Software Lifecycles for Medical Device Manufacturers.

What other types of intelligent (embedded with software) devices do you think would benefit from software licensing and device lifecycle management?