By Michael Costa
Most software publishers have an opportunity to significantly increase revenue, reduce operational costs and improve customer satisfaction by using electronic software licensing to reduce software overuse. We’ve seen publishers achieve 10-50% more revenue, reduce development and support costs by 20-40% and dramatically increase customer satisfaction at the same time.
- Incremental revenue is achieved by preventing unintentional overuse, monetizing periodic overuse, and tracking actual software use.
- Operation costs are reduced by eliminating the need to audit customers, eliminating the cost associated with developing piecemeal internal license management systems and reducing a large volume of your customer support calls associated with licensing problems.
- Customer satisfaction is improved by providing them with a self-serve license management system that’s easy to use, track & manage.
There are, however, a few challenges associated with the two primary approaches commonly used to manage software license – contract-based and internally developed software license management systems. With contract-based, manual approaches, customers have to interpret a variety of license agreements and rigorously manage & track which users get which software licenses – making sure that all software use is compliant. This approach practically assures unintentional overuse since the sheer number of variables that need to be managed is daunting. With internally developed software license management systems, in order to address the range of functional requirements, the time and cost required to develop, maintain and continuously enhance the license management system is usually either very high, or you’re only delivering a small fraction of the capabilities required to both optimize revenue attainment and satisfy your customers. Either way, internally-developed license management systems are rarely feasible from an economic perspective.
When you try to optimize software license compliance using only contractual licensing terms, you run the risk of incurring lower revenue due to intentional and unintentional overuse. Intentional overuse occurs when software users knowingly and willfully overuse your software products. This is commonly referred to as piracy. Unintentional overuse occurs when users unknowingly overuse your software products – usually because they are not aware of the licensing terms and/or don’t know how many others are using your product elsewhere in their company. Of the two overuse types, most of the unintentional overuse is recoverable whereas most of the intentional overuse is not recoverable. From the customer perspective, the reason why unintentional overuse exists is because license rights are very complex to manage day-to-day. Most companies purchase software from 10 or more suppliers – with a wide variety of licensing terms. As such, distributing, tracking and continuously accounting for all of that software among many employees is usually very difficult and expensive – even for the most diligent of customers.
On the other hand, when you try to optimize software license compliance using an internally developed license management software solution, you incur an ongoing expense that will probably grow substantially over time and is likely to be a major support burden. In order to address the variety of software license models that customers demand, your homegrown software license management systems will have to support a variety of license models, including node-locked, named user, subscription, term, token-based, and a wide variety of usage-based licensing models including trust-but-verify. And, in order to support the compute environments that customers require, your homegrown license management system will have to support desktop, server, virtual machine, cloud & mobile device computing.
Customers will want your software licensing to work seamlessly in internet-connected environments as well as occasionally connected and completely disconnected computing environments. And, they’ll want all of that provided to them on a 24/7/365 self-service basis – without having to call you for routine software license management tasks. Also, because your customers will require that you continuously innovate or at least keep up with the software license models available from your competitors, you will have to continuously enhance your internally developed license management system. Finally, when you do periodically enhance your internally developed license management system, you’ll have to do it in such a way that you don’t disrupt licensing in your legacy products and minimize inhibiting sales & product use with new releases. From the customer perspective, you’ll have to make sure that your software license management system is seamless and easy to use – otherwise, if you’re like most, 50%+ of your customer support calls will be attributed to problems with licensing – significantly undermining customer satisfaction.
Maximizing software revenues is a function of ensuring customers are compliant with your license agreements throughout the software lifecycle. Preventing unlicensed use of your products can be difficult given the range of deployment models and reality of selling digital goods in current operating environments.
The BSA Global Software Piracy Study found that over half the world’s personal computer users, 57%, admitted they pirated software. Unlicensed use rates for business applications can reach into the 90% range in some geographies.
Combining software licensing with entitlement management helps software producers and intelligent device manufacturers increase software license revenue and limit unlicensed use by ensuring that software is only used under the terms of customer’s license agreement and contract. Doing so ensures that you can track what rights customers have so the correct license keys can be generated. The license enforcement technology allows software developers to divide applications into features or bundle them together into suites that require a license check before they can be used.