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                     Five Best Practices for Streamlining
                     Electronic Licensing Operations
Five Best Pract ices For Streamlining Electronic Licensing Operat ions




    Five Best Practices for Streamlining
    Electronic Licensing Operations
    Executive Summary                                                        Introduction
    The last five years have witnessed a dramatic adoption of                Software publishers who implement electronic licensing
    electronic licensing among software publishers. Publishers               to price, package and protect their products still face the
    claim that this is one of the easiest ways to accelerate                 challenge of how to create seamless licensing processes—for
    a product’s revenue growth. Electronic licensing enables                 themselves, their channel partners and their customers.
    software publishers to flexibly price and package their
    applications in any way that their customers want to buy                 Most publishers already have some combination of ERP and
    their products. At the same time, electronic licensing prevents          CRM systems handling processes related to quotes, orders,
    revenue loss from unauthorized software use. Electronic                  contracts, customer data and customer support.
    licensing is becoming a standard part of most software
    applications, not unlike software installers.                            However, license and entitlement management processes are
                                                                             different for publishers using electronic licensing and are
    While the benefits of electronic licensing are overwhelmingly            not typically handled well by today’s ERP/CRM applications,
    positive, publishers transitioning to electronic licensing are           leaving publishers to build homegrown applications as
    often caught off-guard by the morass of manual processes                 a consequence.
    they end up using to manage their licensing operations.
    Inefficient, time-consuming manual processes have a                      More often than not, publishers underestimate the time
    negative impact on costs as well as customer satisfaction.               and cost required to create efficient and end-user-friendly
    A not-so-obvious reality of electronic licensing is that once            processes for managing licenses and entitlements using their
    licenses are issued by a publisher, they take on a life of their         own internal resources. The following scenario occurs all
    own. Therefore, it is critical for publishers to proactively             too often when publishers begin transitioning to electronic
    define operational processes for electronic licensing and                licensing using homegrown approaches:
    streamline them up front.
                                                                             	  software publisher launched a new product with
                                                                               A
    This paper begins by outlining the business processes                      electronic licensing. The product consisted of six
    that make up the license lifecycle, which helps us identify                components (a design time tool, a run time server
    potential operational blindspots publishers must take care                 component and four applications) that were turned “on”
    to avoid. Next, we introduce the five best practices for                   or “off” based on the license. A major customer, ABC
    streamlining the license lifecycle, which Flexera Software                 Company, purchased the product with all six components,
    developed after working with hundreds of publishers to                     along with Gold level support. The customer was instructed
    implement effective electronic licensing. Based on that                    to install six license files, one for each component. When
    experience, we provide a framework for the “build versus                   the customer installed the product along with the license
    buy” decision for an operational application that automates                files, they found that only five of six components were
    the licensing lifecycle. The paper concludes with a brief                  activated. When ABC Company emailed tech support,
    description of how Nokia successfully anticipated and                      they received a second license file that activated the
    addressed operational issues prior to launching electronic                 missing component as well as one of the others. In
    licensing in their products.                                               addition to being totally different from each other, the
                                                                               initial and corrected license files also indicated different
                                                                               support levels, though the customer knew that they had
                                                                               ordered Gold level support.

2                                                                                Flexera Software: FlexNet Operat ions White Paper Series
Five Best Pract ices For Streamlining Electronic Licensing Operat ions




Nine months later, when ABC Company contacted the                                     A Day in the Life of a License
publisher to upgrade their software, they received license                            While concepts such as “Product Lifecycle” and “Customer
files that authorized only five users—despite the fact                                Lifecycle” are well understood by publishers, surprisingly few
they had originally purchased licenses for 20 users. ABC                              publishers transitioning to electronic licensing realize that
Company also discovered that they were once again                                     licenses have a life of their own. A first step to streamlining
missing one component key altogether.                                                 electronic licensing operations is to recognize this lifecycle.
                                                                                      So what are we talking about?
ABC Company used the publisher’s product in a mission-
critical internal project with tight schedules. Given the                             Based on our experience helping publishers implement
recurring nightmares with license files, and their impact on                          electronic licensing over the past two decades, we have
internal schedules, ABC Company decided not to bother                                 identified seven processes that make up the license lifecycle
upgrading at all in the future.                                                       (refer to the glossary at the end of this document for an
                                                                                      explanation of terms), as shown in Figure 1:
Unfortunately, scenarios like this are common in the
                                                                                      	 1.  reate new product or package.
                                                                                           C
software industry and have significant negative impact on
                                                                                      	 2.  ntitle customers to the product (and maintenance or
                                                                                           E
profitability and customer satisfaction. Consider these facts:
                                                                                           support that goes with it) based on their orders in an
	 • Publishers lose 5-10 percent of their gross profits
     
                                                                                           ERP or CRM application.6
     because they are unable to flexibly price and package
                                                                                      	 3.  eliver and install product.
                                                                                           D
     their software due to operational issues.1
                                                                                      	 4.  ctivate license (may be demo/evaluation or
                                                                                           A
	 • Publishers spend on average between 1-2 percent2 of
     
                                                                                           production licenses).
     their gross revenues just on generating and fulfilling
     licenses from customer orders.                                                   	 5.  anage license and entitlement changes (e.g. return/
                                                                                           M
                                                                                           rehost licenses; transfer/merge/split entitlements).
	 • Publishers spend approximately $363 per support call
     
     related to licensing issues—most of these calls are                              	 6.  pdate maintenance-paying customers.
                                                                                           U
     avoidable. Supporting customers who are not entitled                             	 7.  psell or renew licenses.
                                                                                           U
     to receive support is another unnecessary and
     avoidable expense.
                                                                                                                                Packages
	 • Many publishers lose upgrade and renewal revenues
                                                                                                                         ate              Or
                                                                                                                    Cre                      de
                                                                                                                                               r/
     because they are not able to track their installed base
                                                                                                               ew




                                                                                                                                                    En
     usage at the granular level of product version4.




                                                                                                                                                       t
                                                                                                             en




                                                                                                                                                           it le
                                                                                                       l l/ R




	 • Publishers spend on average between 0.1 – 0.3 percent
     
                                                                                                     Upse




     of gross revenues adapting a homegrown application




                                                                                                                                                             Deliver/Install
     to support licensing and packaging changes.5                                                                            License
                                                                                                     Mainta




                                                                                                                            Lifecycle
These costs can easily add up to hundreds of thousands of
                                                                                                           i




dollars a year for a reasonably sized publisher. This paper
                                                                                                       n/ U




demonstrates that using a best-of-breed application to
                                                                                                          pd
                                                                                                             at




                                                                                                                                                       e
automate license management processes helps publishers                                                                                              at
                                                                                                                e




                                                                                                                    Ret                      t iv
                                                                                                                       urn/                Ac
maximize profits by:                                                                                                       Rehost
	 • Maximizing revenues through flexibly pricing and
     
     packaging software.                                                              Figure 1: License Cycle
	 • Minimizing license generation and fulfillment costs
                                                                                     Publishers and intelligent device manufacturers, to an even
	 • Reducing customer support calls pertaining to licensing
                                                                                     greater degree,7 selling through channel partners have the same
     and non-entitled users.                                                          lifecycle processes as above, except that they have to deal with
	 • Maximizing renewal and upgrade revenues by tracking
                                                                                     an additional layer of complexity introduced by the presence
     customer purchases.                                                              of an intermediary who may create orders and licenses as well.
	 • Minimizing IT costs for developing and maintaining a
                                                                                     In many cases, companies are supporting a model where the
     homegrown operational application.                                               end-user remains anonymous, i.e., the customer is owned by the
                                                                                      channel partner. In other cases, publishers want to know more
                                                                                      about end-users and register them prior to activating licenses,
                                                                                      even if they order through the channel.
1.  ource: McKinsey and Company, October 2003
   S
2.  ource: Flexera Software estimates based on customer surveys. Higher end of these figures typically apply to small publishers using manual processes to
   S
   generate electronic licenses.
3.  ource: “Technical Support Cost Ratios,” SoftLetter, The Association of Support Professionals, 2000. These figures are based on average support call costs for
   S
   software publishers. There is no evidence to suggest that licensing related support calls cost more or less than the average support call.
4.  n a related note, enterprise customers are demanding better approaches to ensure that they are able to be in compliance with their publisher agreements—
   O
   tracking the installed base is a necessary first step to provide the required capability.
5.  ource: Flexera Software estimate based on customer surveys.
   S
6.  ote that for a demo or evaluation license, no orders are typically required, though a customer entitlement still needs to be created.
   N
7.  e have found that intelligent device manufacturers (such as Nokia, Cisco) face these issues more often than software producers because of their more
   W
   widespread use of channels

Flexera Software: FlexNet Operat ions White Paper Series                                                                                                                       3
Five Best Pract ices For Streamlining Electronic Licensing Operat ions




    Mapping out the license lifecycle is the first step towards                              3. Enable self-service. Activating a license,
    automating licensing operations—the key to higher                                        providing temporary licenses on an
    customer satisfaction and lower operational costs.                                       emergency basis (e.g., when an end-user’s
                                                                                             machine becomes unusable) or moving
    The Zen of Streamlined Electronic Licensing Operations                   licenses from one machine to another (i.e., a re-host) are all
    What does it take to implement efficient operational                     examples of license lifecycle processes that can be manual
    processes for the license lifecycle outlined above? We have              and costly tasks for a publisher. Several nuances of these
    identified five best practices based on Flexera Software’s               business processes may also occur based on the licensing
    experience with publishers (see Figure 2):                               model such as partial fulfillments, partial returns and partial
                                                                             rehosts (see glossary for a description). Publishers that allow
                    1. Ensure change readiness. Publishers                   their end-users and channel partners to self-serve license
                    embarking on electronic licensing must                   lifecycle processes minimize operational costs, support calls
                    assume changes are inevitable, and in many               and associated costs. Given that over 50 percent of large
                    cases, should expect them on a continuous                and medium-sized companies manage over 40 software
    basis. An IDC survey revealed that:                                      contracts9, self-service also enables enterprises to mitigate
    	 • 60 percent of software vendors make licensing changes
                                                                            some of this “complexity crisis” by helping them track what
         every year, and                                                     they bought and stay in compliance.
    	 • 33 percent of software vendors that made licensing
         
         changes in a previous year, plan on making changes in                              4. Make licensing invisible. End-users should
         the following year.8                                                               not have to know about electronic licenses
    Most software publishers and intelligent device                                         at all—all they care about is how to order,
    manufacturers have to deal with the inevitability of mergers                            install and use the publisher’s product/
    or acquisitions. When these happen, an often overlooked                  manufacturer’s device, and get upgrades when they choose
    but critically important change is the impact to the licensing           to do so. Publishers and intelligent device manufacturers
    back office. Frequently new license key generators or new                should create an end-user experience that enables “hands
    licensing technologies must now be integrated into the                   free” activation requiring minimal user input. For example,
    existing back office, which may not be able to handle this.              when users install Adobe’s line of products, the only input
    As a result, large vendors over time can end up with                     required is the serial number on the CD (or a serial number
    several homegrown and third party license key generators                 they receive via email). The software is “turned on” without
    which drive up operational costs and result in a poor                    users being aware that they just received a software license
    customer experience.                                                     from Adobe.

    On an ongoing basis, changing business and licensing                                    5. Track license and entitlement histories.
    models often result in modifications to licensing processes                             As licenses get generated, publishers can
    and end-user-facing interfaces. For example, a publisher that                           accumulate a wealth of information about
    is introducing node-locked licensing for the first time would                           what customers actually installed at a more
    need to capture parameters of their end-user’s machines prior            granular level than an ERP or CRM application allows—and
    to generating a license, while in their prior license models,            more specifically, answer questions such as:
    such information may not have been required. Publishers                  	 •  hat products and versions does Customer ABC have?
                                                                                 W
    are, therefore, better served by operational applications                	 •  n an average, how long do customers wait before
                                                                                 O
    that anticipate such changes and can handle them cost-                       they activate our products?
    effectively. Put simply, publisher’s operational applications            	 •  hich customers have Product A, version 5.6?
                                                                                 W
    should be “change-ready”.                                                	 •  hich platforms have our customers purchased?
                                                                                 W
                                                                             	 •  hat entitlements does Company ABC have?
                                                                                 W
                    2. Avoid manual handoffs. For most publishers
                    an electronic license requires information from          		        a.  ow many licenses have they purchased versus
                                                                                          H
                    orders, such as the product or SKU number.                            what they have already installed?
                    Manual handoffs between a publisher’s order              		        b.  hich products have they purchased that are
                                                                                          W
                    management system (i.e., their ERP/CRM                                still current on support and maintenance?
    application) and the licensing operations application should             	 •  hat activations has Company ABC received in the
                                                                                 W
    be eliminated. Publishers must recognize that electronic                     last 12 months?
    licensing impacts several operational areas, including sales             	 •  hat license and entitlement changes has Company
                                                                                 W
    operations, order entry/fulfillment operations, customer                     ABC done in the last 12 months (e.g., what is their list
    support and IT. A solution that automates any part of the                    of license returns)?
    license lifecycle process will touch those areas as well.

    8.  Future of Software Licensing Study”, IDC, 2004
       “
    9.  Future of Software Licensing Study”, IDC, 2004
       “




4                                                                                 Flexera Software: FlexNet Operat ions White Paper Series
Five Best Pract ices For Streamlining Electronic Licensing Operat ions




          1. Ensure “change-readiness”
          ...to cost-effectively handle
          new packaging or pricing.


                                                                                                                         2. Avoid manual handoffs
                                                                       Packages
                                                                   ate                Or                                 ...with ERP/CRM systems.
                                                               Cre                      de
                                                                                          r/
     5. Track license 




                                                          ew




                                                                                               En
                                                                                                  t
                                                        en
     entitlement histories




                                                                                                     it le
                                                  l l/ R
     ...at a more granular level.


                                              Upse
                                                                    License




                                                                                                       Deliver/Install
                                                                   Lifecycle
                                              Mainta
                                                n/ Ui



                                                                                                                           3. Enable self-service
                                                   pd
                                                      at



                                                                                                te                         ...for end-users and channels.
                                                         e




                                                               Ret                       t   iva
                                                                  urn/                 Ac
                                                                      Rehost

                4. Make licensing invisible
                ...to end-users.

Figure 2: Five Best Practices

This information is a goldmine for publishers—as they                          		        -  The more we build out our homegrown app, the
                                                                                           “
plan upgrades and renewals, they can maximize those                                        more it is costing us to maintain it as changes
revenues. They can also avoid support calls and costs for                                  happen… changes to license models, upgrades
customers that did not pay to get support (i.e., “unentitled”                              to our ERP, changes to end-user-facing interfaces
customers). Customers benefit too, by knowing what they                                    we have 2 FTE (full time equivalents) focused on
have installed and staying in compliance with their contracts                              maintaining our in-house system…”
with publishers.                                                                           —Office equipment manufacturer with $200M
                                                                                              in gross revenues
To Build or Buy…That is the Question                                           	 • “Bad data, bad key” resulting from the poor integration
                                                                                   
The five best practices for operational excellence apply                           of the operational application with order management
whether publishers or intelligent device manufacturers build                       systems. This often causes manual processes and error-
their own operational application or buy one off-the-shelf.                        prone licenses, as the following anecdote highlights:
So which is better: building or buying an application for
licensing processes?                                                           		        -  Order entry person takes an order printout from
                                                                                           “
                                                                                           SAP, looks up a paper license configuration
Needless to say, software publishers and intelligent device                                document to find list of features for product
manufacturers are experts in software development. (As                                     and then enters feature list and machine serial
a result, many might suspect that building an application                                  number into the “License Editor” (homegrown
in-house to support electronic licensing operations will                                   application) to generate licenses…customers go
be easy.) However, the actual experience of publishers                                     through the entire installation process assuming
building homegrown applications for managing the license                                   the keys they received are correct. As they use
lifecycle indicates that there are several pitfalls they have                              the product, they find they are missing features or
encountered. These pitfalls frequently result from:                                        components they paid for because their licenses
	 • Underestimating changes to business and licensing
                                                                                          are incorrect…”
     models. Every time a publisher goes through a merger                                  —Large Medical Equipment Manufacturer
     or an acquisition, or wants to change their licensing,                    	 • Poor understanding of the license lifecycle. Once a
                                                                                   
     they need to overhaul their operational systems. Ideally,                     license is generated, it takes on a life of its own. The
     you would want that flexibility built in to gain potential                    lifecycle includes activities such as replacing lost
     new revenues from flexibly pricing and packaging your                         licenses, processing license returns or rehosts, merging
     software. As the IDC survey cited earlier points out,                         or splitting of entitlements and facilitating upgrades
     license and business model changes are constant in the                        and renewals. Most homegrown solutions fail to
     software industry—as more publishers are finding out,                         anticipate and manage these types of changes that
     these changes can be very costly to operationalize.                           typify licenses and entitlements.

Flexera Software: FlexNet Operat ions White Paper Series                                                                                                     5
Five Best Pract ices For Streamlining Electronic Licensing Operat ions




    Consider the examples below from large software                                 		           -  I struggle with four component keys with different
                                                                                                   “
    producers that have built and maintained their own                                             expiration dates located in four different places.
    operational applications:                                                                      Whenever I launch the product, a portion of the
    		         -  Customer license files are very large and
                 “                                                                                 product may not work because of an expired
                 continue to grow. We regenerate the entire                                        license…It is a real pain.”
                 license file each time a customer install-base                                    — ustomer of a leading enterprise software
                                                                                                       C
                 record is touched or changed in any way (i.e.,                                        publisher
                 new purchase, maintenance renewal, rehost,                         		           -  Thirty percent of customer support calls pertain
                                                                                                   “
                 upsell or update). Customers have no way to                                       to lost keys or customers that cannot find their
                 easily identify exactly what changed or what is                                   machine’s HOSTID”
                 the difference between the “before” and “after”                                   —Large server intelligent device manufacturer
                 license file. We have no easy way to assist the                    	 • nability to identify upsell and renewal opportunities.
                                                                                        I
                 customer here.”                                                        Because publishers cannot track installed base license
                 —Large publisher of Electronic Design                                  and entitlement histories, they lack the ability to
                    Automation software                                                 proactively identify upsell and renewal opportunities. As
    	 •  oorly designed customer experience. Most publishers
        P                                                                               it relates to support entitlements, poor tracking causes
        would not be in business if their products were as                              some customers to be denied support they are entitled to,
        poorly designed as their customer-facing licensing                              while other users may get support without paying for it.
        processes. Often, publishers make customers go                              		           -  By scanning the spreadsheets I use, I could catch
                                                                                                   “
        through multiple installations and keys with unintuitive                                   a few customers here and there who are not
        user inputs such as HOSTIDs. Such problems are                                             current on maintenance…But with 10-20 percent
        exacerbated for publishers that integrate products from                                    of 50,000 customers being “problem” customers,
        other publishers in an OEM relationship or acquired as                                     we require several thousand manual checks”
        part of a merger.                                                                          —Inside Sales Manager of an enterprise
                                                                                                      software publisher

     Pitfall: Homegrown           Best Practice:                   Operational Cost/              Empirical Cost/Benefit Data10 (where available)
     Approach                     3rd Party Application            Revenue Impact                 Homegrown Approach             3rd Party Application
     Underestimated license       Ensure “change ready”            Lost revenue due to            5–10% of gross profits         Maximize revenues with
      business model             applications                     inability to operationalize    lost                           flexible pricing and
     changes                                                       licensing and packaging                                       packaging
                                                                   changes
                                                                   IT costs to maintain           0.1–0.3% of gross              IT costs can be reduced
                                                                   operational application        revenues                       by more than 50%
                                                                                                                                 compared to homegrown.

     “Bad data, bad key”          Avoid manual handoffs            License generation            1%–2% of gross revenues        Can be reduced to zero
                                  between orders,                  fulfillment costs                                             depending on level of
                                  entitlements and licenses                                                                      self-service and ERP/CRM
                                                                                                                                 integration
     Poor understanding of        Ensure self-service for all      Support costs for license      $36/support call. Some         Can be reduced
     license Lifecycle            license lifecycle processes       entitlement changes          estimates claim over 30%       significantly via end user
                                                                                                  of support calls pertain       self service and “hands
     Poorly designed              Make licensing invisible
                                                                                                  to changes such as lost        free” activation
     customer experience          to end-users
                                                                                                  keys, rehosts, splits/
                                                                                                  merges etc.
     Inability to identify        Track license                   Upsell  renewal               Revenues lost because of       Proactive renewals and
     upsell and renewal           entitlement history              revenues                       poor tracking of installed     upgrades would likely
     opportunities                                                                                base                           increase renewal 
                                                                                                                                 upgrade revenues by
                                                                                                                                 5–10%
                                                                   Support cost avoidance         Example in year 1, customer    Can be reduced
                                                                   for unentitled users           bought 3 products, dropped     significantly by tracking
                                                                                                  support on 1 product in        of the installed base at
                                                                                                  year 2. If that product gets   the level of products and
                                                                                                  3 support calls/year, each     their versions.
                                                                                                  costing $500, then the
                                                                                                  publisher incurs $1500 in
                                                                                                  extra costs.
    Table 1: Summary comparison of homegrown vs. best-of-breed third party application
    10. Source: Flexera Software estimates based on customer surveys:
        
6       McKinsey  Co. SoftLetter.                                                         Flexera Software: FlexNet Operat ions White Paper Series
Five Best Pract ices For Streamlining Electronic Licensing Operat ions




                                                                                     Revenues
                                                                                    From New
                                                                                    Packages

                                                                                     Upsell 

                       Savings 
                       Revenues
                                                                                     Renewal        Bottom Line
                                                                                     Revenues       Impact


                                                                                       Cost
                                                                                      Savings


                                                     IT Costs                                       Reduced Costs

                                            Fulfillment Costs
                        Costs




                                           Customer Support
                                                         Costs
                                       (license  entitlement
                                                    changes)
                                                                                   Best of breed
                                                                 Homegrown          third party
                                                                                    application

Figure 3: Summary of cost savings and revenue increases from a best-of-breed license and entitlement management application

                                                                       	 -  Customers admit that there is no way that they can
                                                                           “
 Streamlining Electronic Licensing Operations at Nokia:                    be 100 percent compliant. Vendors estimate non-
 A Case Study                                                              compliance at 20 percent. This amounts to a $40B
                                                                           problem.”
 Nokia Business Systems is a division of Nokia that
 focuses on Internet infrastructure solutions. The division’s              —IDC
 products were the first to use electronic licensing in Nokia          Because of these pitfalls, in-house applications raise
 history. Because the division sells primarily through its             operational costs and often fail to track upsells and
 channel partners, it was critical to account for channel              renewals, resulting in lost revenues, as summarized in Table
 processes as part of streamlining licensing operations.               1 and Figure 3.

 Nokia has automated key license lifecycle processes                   Beyond these cost and revenue impacts, some other
 using Flexera Software’s FlexNet™ Operations:                         considerations when deciding whether to build or buy an
                                                                       operational application include:
 	 • End-user entitlements are created automatically from
                                                                      	 •  oes maintaining your own solution detract from your
                                                                           D
     their orders in the SAP system                                        core product development objectives?
 	 • Channel partners and end-users can self-serve
     
     evaluation and production licenses from the Nokia                 	 •  hat are the risks of not completing an in-house
                                                                           W
     portal. They can also manage license changes—                         solution on time? What is the effect on product
     upgrades, downgrades, transfers and version                           ship dates, customer satisfaction, IT budgets and—
     updates from the Web.                                                 ultimately—overall profitability?
 	 • Customer installed base records in Nokia’s Vantive
                                                                      	 • s the system able to provide business owners with all
                                                                           I
     CRM application are updated with their licensing                      the data they need to make better business decisions?
     histories to enable tracking of upgrade and renewal
     opportunities                                                     In addition to the financial benefits, buying a proven
                                                                       license and entitlement management solution from a trusted
 Summarizing Nokia’s transition to electronic licensing,               third party that incorporates the five best practices for
 Chandra Shekar, director business systems for Nokia,                  streamlining operations is the “safe” choice for publishers.
 says, “Thanks to the FlexNet platform, we’ve been able to
 create and enforce a license model that closely matches
                                                                       Conclusion
 how customers perceive the value of our products. Back
                                                                       To minimize the operational costs of electronic licensing,
 office systems and processes are also integrated into
                                                                       publishers and device manufacturers must create seamless
 the licensing lifecycle, enabling seamless, self-service-
                                                                       operational processes for license and entitlement
 based licensing operations.” Such “seamless, self-service-
 based licensing operations” allows Nokia to minimize                  management. They can best achieve this by selecting an
 operational costs while ensuring customer satisfaction.               application from a trusted vendor that adheres to the five best
                                                                       practices for streamlining electronic licensing operations.

Flexera Software: FlexNet Operat ions White Paper Series                                                                                             7
Five Best Pract ices For Streamlining Electronic Licensing Operat ions




    For More Information                                                     FlexNet Operations provides a single entitlement tracking
    FlexNet Operations, part of the FlexNet Suite, is a key                  system that enables producers to quickly create versatile
    component of Flexera Software’s Entitlement  Compliance                 product configurations, allows management of multiple
    Management Solution, enabling software producers and                     licensing technologies, provides a unified customer
    intelligent device manufacturers to increase revenues,reduce             experience, and facilitates prompt revenue recognition.
    support costs, and simplify customer relationships.


    Appendix
    Glossary of Terms


     Term                            Definition
     Entitlement                     What the customer bought. Can be of three types: Product, Maintenance (right to updates of
                                     software such as patches, updates under maintenance), Support (right to call tech support)
                                     Entitlements specify the product, the quantity and duration plus related entitlements (e.g.,
                                     product includes maintenance). Example, an entitlement might be for 10 copies of Product A,
                                     lasting for one year.
     Fulfillment                     Represents what the customer installed or redeemed against an entitlement.
     Activation                      Synonymous with fulfillment.
     HOSTID                          A unique identifier for an end-user's machine- can be one or a combination of IP address, MAC
                                     address, Disk Serial Number and so on.
     License                         A license file enforced by the application.
     Rehost                          The process of moving a fulfillment (partially or fully) from one machine to another. A rehost does
                                     not change the quantity of unredeemed entitlements. A repair is a full re-host.
     Renewal                         Resets the date on an expiring entitlement.
     Return                          The process of banking a fulfillment (partially or fully) with the publisher, resulting in an increase
                                     in the unredeemed entitlements. Similar in spirit to a product return allowed by a retail store.
     SKU                             Stock Keeping Unit. A number that uniquely identifies an orderable product in an ERP system.
     Update                          A free upgrade from Product A to Product B assuming the customer is current on maintenance.
     Upsell                          A paid upgrade from Product A to Product B.
     Entitlement Transfers/          Entitlement Transfers: Customer ABC bought 10 licenses for Product A, which is since used by
     Splits/Merges                   Department 1 of ABC. Customer ABC wants to transfer the licenses to Department 2 because
                                     Department 1 no longer needs them, which is the process of transferring the entitlement from
                                     Department 1 to 2. Entitlement Splits: Channel partner EFG bought 100 licenses to Product
                                     A. They wish to sell 45 licenses to Company 1, 20 licenses to Company 2 and 35 licenses to
                                     Company 3. They would have to split their original entitlement to accomplish this. Entitlement
                                     Merges: Customer ABC bought 10 licenses for Product A. Customer XYZ bought 15 licenses to
                                     Product A. Customer ABC merges with Customer XYZ. Customer XYZ would like to consolidate
                                     their 25 entitlements to A under its own name, representing a merge of entitlements.
     Partial Fulfillments            If an end customer buys 10 licenses from a publisher, partial fulfillment allows the end-user
                                     to fulfill these licenses in batches, up to the total number of licenses purchased. In addition to
                                     fulfilling individual licenses from the same order, vendors can allow partial license durations
                                     to be obtained from a single license. This feature allows an end user to check out a license for
                                     several days on one computer while other licenses are concurrently fulfilled on other computers.
                                     In effect, it enables a very secure form of license borrowing.
     Partial Returns and             These are situations where an end-user wants to move, for example, 10 out of 100 licenses from
     Rehosts                         one machine to another (partial rehost) or return 15 of 40 licenses for a credit from publisher for
                                     other products (partial returns).




8                                                                                  Flexera Software: FlexNet Operat ions White Paper Series
Five Best Pract ices For Streamlining Electronic Licensing Operat ions




About Flexera Software
Flexera Software is the leading provider of strategic
solutions for Application Usage Management; solutions
delivering continuous compliance, optimized usage and
maximized value to application producers and their
customers. Flexera Software is trusted by more than 80,000
customers that depend on our comprehensive solutions-
from installation and licensing, entitlement and compliance
management to application readiness and enterprise license
optimization - to strategically manage application usage
and achieve breakthrough results realized only through the
systems-level approach we provide. Flexera Software is a
privately-held company and an investment of private equity
firm Thoma Bravo, LLC. For more information, please go to:
www.flexerasoftware.com




Flexera Software: FlexNet Operat ions White Paper Series                                                                               9
Flexera Software, Inc.               Schaumburg                            United Kingdom (Europe,               Japan (Asia,                          For more office locations visit:
1000 East Woodfield Road,            (Global Headquarters):                Middle East Headquarters):            Pacific Headquarters):                www.flexerasoftware.com
Suite 400                            +1 800-809-5659                       +44 870-871-1111                      +81 3-4360-8291
Schaumburg, IL 60173 USA                                                   +44 870-873-6300

© 2011 Flexera Software, Inc. and/or InstallShield Co. Inc. All other brand and product names mentioned herein may be the trademarks and registered trademarks of their respective owners.
												 FNO_WP_Streamlining-Licensing_June11

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Five Best Practices for Streamlining Electronic Licensing Operations

  • 1. W H I T E PA P E R Five Best Practices for Streamlining Electronic Licensing Operations
  • 2. Five Best Pract ices For Streamlining Electronic Licensing Operat ions Five Best Practices for Streamlining Electronic Licensing Operations Executive Summary Introduction The last five years have witnessed a dramatic adoption of Software publishers who implement electronic licensing electronic licensing among software publishers. Publishers to price, package and protect their products still face the claim that this is one of the easiest ways to accelerate challenge of how to create seamless licensing processes—for a product’s revenue growth. Electronic licensing enables themselves, their channel partners and their customers. software publishers to flexibly price and package their applications in any way that their customers want to buy Most publishers already have some combination of ERP and their products. At the same time, electronic licensing prevents CRM systems handling processes related to quotes, orders, revenue loss from unauthorized software use. Electronic contracts, customer data and customer support. licensing is becoming a standard part of most software applications, not unlike software installers. However, license and entitlement management processes are different for publishers using electronic licensing and are While the benefits of electronic licensing are overwhelmingly not typically handled well by today’s ERP/CRM applications, positive, publishers transitioning to electronic licensing are leaving publishers to build homegrown applications as often caught off-guard by the morass of manual processes a consequence. they end up using to manage their licensing operations. Inefficient, time-consuming manual processes have a More often than not, publishers underestimate the time negative impact on costs as well as customer satisfaction. and cost required to create efficient and end-user-friendly A not-so-obvious reality of electronic licensing is that once processes for managing licenses and entitlements using their licenses are issued by a publisher, they take on a life of their own internal resources. The following scenario occurs all own. Therefore, it is critical for publishers to proactively too often when publishers begin transitioning to electronic define operational processes for electronic licensing and licensing using homegrown approaches: streamline them up front. software publisher launched a new product with A This paper begins by outlining the business processes electronic licensing. The product consisted of six that make up the license lifecycle, which helps us identify components (a design time tool, a run time server potential operational blindspots publishers must take care component and four applications) that were turned “on” to avoid. Next, we introduce the five best practices for or “off” based on the license. A major customer, ABC streamlining the license lifecycle, which Flexera Software Company, purchased the product with all six components, developed after working with hundreds of publishers to along with Gold level support. The customer was instructed implement effective electronic licensing. Based on that to install six license files, one for each component. When experience, we provide a framework for the “build versus the customer installed the product along with the license buy” decision for an operational application that automates files, they found that only five of six components were the licensing lifecycle. The paper concludes with a brief activated. When ABC Company emailed tech support, description of how Nokia successfully anticipated and they received a second license file that activated the addressed operational issues prior to launching electronic missing component as well as one of the others. In licensing in their products. addition to being totally different from each other, the initial and corrected license files also indicated different support levels, though the customer knew that they had ordered Gold level support. 2 Flexera Software: FlexNet Operat ions White Paper Series
  • 3. Five Best Pract ices For Streamlining Electronic Licensing Operat ions Nine months later, when ABC Company contacted the A Day in the Life of a License publisher to upgrade their software, they received license While concepts such as “Product Lifecycle” and “Customer files that authorized only five users—despite the fact Lifecycle” are well understood by publishers, surprisingly few they had originally purchased licenses for 20 users. ABC publishers transitioning to electronic licensing realize that Company also discovered that they were once again licenses have a life of their own. A first step to streamlining missing one component key altogether. electronic licensing operations is to recognize this lifecycle. So what are we talking about? ABC Company used the publisher’s product in a mission- critical internal project with tight schedules. Given the Based on our experience helping publishers implement recurring nightmares with license files, and their impact on electronic licensing over the past two decades, we have internal schedules, ABC Company decided not to bother identified seven processes that make up the license lifecycle upgrading at all in the future. (refer to the glossary at the end of this document for an explanation of terms), as shown in Figure 1: Unfortunately, scenarios like this are common in the 1. reate new product or package. C software industry and have significant negative impact on 2. ntitle customers to the product (and maintenance or E profitability and customer satisfaction. Consider these facts: support that goes with it) based on their orders in an • Publishers lose 5-10 percent of their gross profits ERP or CRM application.6 because they are unable to flexibly price and package 3. eliver and install product. D their software due to operational issues.1 4. ctivate license (may be demo/evaluation or A • Publishers spend on average between 1-2 percent2 of production licenses). their gross revenues just on generating and fulfilling licenses from customer orders. 5. anage license and entitlement changes (e.g. return/ M rehost licenses; transfer/merge/split entitlements). • Publishers spend approximately $363 per support call related to licensing issues—most of these calls are 6. pdate maintenance-paying customers. U avoidable. Supporting customers who are not entitled 7. psell or renew licenses. U to receive support is another unnecessary and avoidable expense. Packages • Many publishers lose upgrade and renewal revenues ate Or Cre de r/ because they are not able to track their installed base ew En usage at the granular level of product version4. t en it le l l/ R • Publishers spend on average between 0.1 – 0.3 percent Upse of gross revenues adapting a homegrown application Deliver/Install to support licensing and packaging changes.5 License Mainta Lifecycle These costs can easily add up to hundreds of thousands of i dollars a year for a reasonably sized publisher. This paper n/ U demonstrates that using a best-of-breed application to pd at e automate license management processes helps publishers at e Ret t iv urn/ Ac maximize profits by: Rehost • Maximizing revenues through flexibly pricing and packaging software. Figure 1: License Cycle • Minimizing license generation and fulfillment costs Publishers and intelligent device manufacturers, to an even • Reducing customer support calls pertaining to licensing greater degree,7 selling through channel partners have the same and non-entitled users. lifecycle processes as above, except that they have to deal with • Maximizing renewal and upgrade revenues by tracking an additional layer of complexity introduced by the presence customer purchases. of an intermediary who may create orders and licenses as well. • Minimizing IT costs for developing and maintaining a In many cases, companies are supporting a model where the homegrown operational application. end-user remains anonymous, i.e., the customer is owned by the channel partner. In other cases, publishers want to know more about end-users and register them prior to activating licenses, even if they order through the channel. 1. ource: McKinsey and Company, October 2003 S 2. ource: Flexera Software estimates based on customer surveys. Higher end of these figures typically apply to small publishers using manual processes to S generate electronic licenses. 3. ource: “Technical Support Cost Ratios,” SoftLetter, The Association of Support Professionals, 2000. These figures are based on average support call costs for S software publishers. There is no evidence to suggest that licensing related support calls cost more or less than the average support call. 4. n a related note, enterprise customers are demanding better approaches to ensure that they are able to be in compliance with their publisher agreements— O tracking the installed base is a necessary first step to provide the required capability. 5. ource: Flexera Software estimate based on customer surveys. S 6. ote that for a demo or evaluation license, no orders are typically required, though a customer entitlement still needs to be created. N 7. e have found that intelligent device manufacturers (such as Nokia, Cisco) face these issues more often than software producers because of their more W widespread use of channels Flexera Software: FlexNet Operat ions White Paper Series 3
  • 4. Five Best Pract ices For Streamlining Electronic Licensing Operat ions Mapping out the license lifecycle is the first step towards 3. Enable self-service. Activating a license, automating licensing operations—the key to higher providing temporary licenses on an customer satisfaction and lower operational costs. emergency basis (e.g., when an end-user’s machine becomes unusable) or moving The Zen of Streamlined Electronic Licensing Operations licenses from one machine to another (i.e., a re-host) are all What does it take to implement efficient operational examples of license lifecycle processes that can be manual processes for the license lifecycle outlined above? We have and costly tasks for a publisher. Several nuances of these identified five best practices based on Flexera Software’s business processes may also occur based on the licensing experience with publishers (see Figure 2): model such as partial fulfillments, partial returns and partial rehosts (see glossary for a description). Publishers that allow 1. Ensure change readiness. Publishers their end-users and channel partners to self-serve license embarking on electronic licensing must lifecycle processes minimize operational costs, support calls assume changes are inevitable, and in many and associated costs. Given that over 50 percent of large cases, should expect them on a continuous and medium-sized companies manage over 40 software basis. An IDC survey revealed that: contracts9, self-service also enables enterprises to mitigate • 60 percent of software vendors make licensing changes some of this “complexity crisis” by helping them track what every year, and they bought and stay in compliance. • 33 percent of software vendors that made licensing changes in a previous year, plan on making changes in 4. Make licensing invisible. End-users should the following year.8 not have to know about electronic licenses Most software publishers and intelligent device at all—all they care about is how to order, manufacturers have to deal with the inevitability of mergers install and use the publisher’s product/ or acquisitions. When these happen, an often overlooked manufacturer’s device, and get upgrades when they choose but critically important change is the impact to the licensing to do so. Publishers and intelligent device manufacturers back office. Frequently new license key generators or new should create an end-user experience that enables “hands licensing technologies must now be integrated into the free” activation requiring minimal user input. For example, existing back office, which may not be able to handle this. when users install Adobe’s line of products, the only input As a result, large vendors over time can end up with required is the serial number on the CD (or a serial number several homegrown and third party license key generators they receive via email). The software is “turned on” without which drive up operational costs and result in a poor users being aware that they just received a software license customer experience. from Adobe. On an ongoing basis, changing business and licensing 5. Track license and entitlement histories. models often result in modifications to licensing processes As licenses get generated, publishers can and end-user-facing interfaces. For example, a publisher that accumulate a wealth of information about is introducing node-locked licensing for the first time would what customers actually installed at a more need to capture parameters of their end-user’s machines prior granular level than an ERP or CRM application allows—and to generating a license, while in their prior license models, more specifically, answer questions such as: such information may not have been required. Publishers • hat products and versions does Customer ABC have? W are, therefore, better served by operational applications • n an average, how long do customers wait before O that anticipate such changes and can handle them cost- they activate our products? effectively. Put simply, publisher’s operational applications • hich customers have Product A, version 5.6? W should be “change-ready”. • hich platforms have our customers purchased? W • hat entitlements does Company ABC have? W 2. Avoid manual handoffs. For most publishers an electronic license requires information from a. ow many licenses have they purchased versus H orders, such as the product or SKU number. what they have already installed? Manual handoffs between a publisher’s order b. hich products have they purchased that are W management system (i.e., their ERP/CRM still current on support and maintenance? application) and the licensing operations application should • hat activations has Company ABC received in the W be eliminated. Publishers must recognize that electronic last 12 months? licensing impacts several operational areas, including sales • hat license and entitlement changes has Company W operations, order entry/fulfillment operations, customer ABC done in the last 12 months (e.g., what is their list support and IT. A solution that automates any part of the of license returns)? license lifecycle process will touch those areas as well. 8. Future of Software Licensing Study”, IDC, 2004 “ 9. Future of Software Licensing Study”, IDC, 2004 “ 4 Flexera Software: FlexNet Operat ions White Paper Series
  • 5. Five Best Pract ices For Streamlining Electronic Licensing Operat ions 1. Ensure “change-readiness” ...to cost-effectively handle new packaging or pricing. 2. Avoid manual handoffs Packages ate Or ...with ERP/CRM systems. Cre de r/ 5. Track license ew En t en entitlement histories it le l l/ R ...at a more granular level. Upse License Deliver/Install Lifecycle Mainta n/ Ui 3. Enable self-service pd at te ...for end-users and channels. e Ret t iva urn/ Ac Rehost 4. Make licensing invisible ...to end-users. Figure 2: Five Best Practices This information is a goldmine for publishers—as they - The more we build out our homegrown app, the “ plan upgrades and renewals, they can maximize those more it is costing us to maintain it as changes revenues. They can also avoid support calls and costs for happen… changes to license models, upgrades customers that did not pay to get support (i.e., “unentitled” to our ERP, changes to end-user-facing interfaces customers). Customers benefit too, by knowing what they we have 2 FTE (full time equivalents) focused on have installed and staying in compliance with their contracts maintaining our in-house system…” with publishers. —Office equipment manufacturer with $200M in gross revenues To Build or Buy…That is the Question • “Bad data, bad key” resulting from the poor integration The five best practices for operational excellence apply of the operational application with order management whether publishers or intelligent device manufacturers build systems. This often causes manual processes and error- their own operational application or buy one off-the-shelf. prone licenses, as the following anecdote highlights: So which is better: building or buying an application for licensing processes? - Order entry person takes an order printout from “ SAP, looks up a paper license configuration Needless to say, software publishers and intelligent device document to find list of features for product manufacturers are experts in software development. (As and then enters feature list and machine serial a result, many might suspect that building an application number into the “License Editor” (homegrown in-house to support electronic licensing operations will application) to generate licenses…customers go be easy.) However, the actual experience of publishers through the entire installation process assuming building homegrown applications for managing the license the keys they received are correct. As they use lifecycle indicates that there are several pitfalls they have the product, they find they are missing features or encountered. These pitfalls frequently result from: components they paid for because their licenses • Underestimating changes to business and licensing are incorrect…” models. Every time a publisher goes through a merger —Large Medical Equipment Manufacturer or an acquisition, or wants to change their licensing, • Poor understanding of the license lifecycle. Once a they need to overhaul their operational systems. Ideally, license is generated, it takes on a life of its own. The you would want that flexibility built in to gain potential lifecycle includes activities such as replacing lost new revenues from flexibly pricing and packaging your licenses, processing license returns or rehosts, merging software. As the IDC survey cited earlier points out, or splitting of entitlements and facilitating upgrades license and business model changes are constant in the and renewals. Most homegrown solutions fail to software industry—as more publishers are finding out, anticipate and manage these types of changes that these changes can be very costly to operationalize. typify licenses and entitlements. Flexera Software: FlexNet Operat ions White Paper Series 5
  • 6. Five Best Pract ices For Streamlining Electronic Licensing Operat ions Consider the examples below from large software - I struggle with four component keys with different “ producers that have built and maintained their own expiration dates located in four different places. operational applications: Whenever I launch the product, a portion of the - Customer license files are very large and “ product may not work because of an expired continue to grow. We regenerate the entire license…It is a real pain.” license file each time a customer install-base — ustomer of a leading enterprise software C record is touched or changed in any way (i.e., publisher new purchase, maintenance renewal, rehost, - Thirty percent of customer support calls pertain “ upsell or update). Customers have no way to to lost keys or customers that cannot find their easily identify exactly what changed or what is machine’s HOSTID” the difference between the “before” and “after” —Large server intelligent device manufacturer license file. We have no easy way to assist the • nability to identify upsell and renewal opportunities. I customer here.” Because publishers cannot track installed base license —Large publisher of Electronic Design and entitlement histories, they lack the ability to Automation software proactively identify upsell and renewal opportunities. As • oorly designed customer experience. Most publishers P it relates to support entitlements, poor tracking causes would not be in business if their products were as some customers to be denied support they are entitled to, poorly designed as their customer-facing licensing while other users may get support without paying for it. processes. Often, publishers make customers go - By scanning the spreadsheets I use, I could catch “ through multiple installations and keys with unintuitive a few customers here and there who are not user inputs such as HOSTIDs. Such problems are current on maintenance…But with 10-20 percent exacerbated for publishers that integrate products from of 50,000 customers being “problem” customers, other publishers in an OEM relationship or acquired as we require several thousand manual checks” part of a merger. —Inside Sales Manager of an enterprise software publisher Pitfall: Homegrown Best Practice: Operational Cost/ Empirical Cost/Benefit Data10 (where available) Approach 3rd Party Application Revenue Impact Homegrown Approach 3rd Party Application Underestimated license Ensure “change ready” Lost revenue due to 5–10% of gross profits Maximize revenues with business model applications inability to operationalize lost flexible pricing and changes licensing and packaging packaging changes IT costs to maintain 0.1–0.3% of gross IT costs can be reduced operational application revenues by more than 50% compared to homegrown. “Bad data, bad key” Avoid manual handoffs License generation 1%–2% of gross revenues Can be reduced to zero between orders, fulfillment costs depending on level of entitlements and licenses self-service and ERP/CRM integration Poor understanding of Ensure self-service for all Support costs for license $36/support call. Some Can be reduced license Lifecycle license lifecycle processes entitlement changes estimates claim over 30% significantly via end user of support calls pertain self service and “hands Poorly designed Make licensing invisible to changes such as lost free” activation customer experience to end-users keys, rehosts, splits/ merges etc. Inability to identify Track license Upsell renewal Revenues lost because of Proactive renewals and upsell and renewal entitlement history revenues poor tracking of installed upgrades would likely opportunities base increase renewal upgrade revenues by 5–10% Support cost avoidance Example in year 1, customer Can be reduced for unentitled users bought 3 products, dropped significantly by tracking support on 1 product in of the installed base at year 2. If that product gets the level of products and 3 support calls/year, each their versions. costing $500, then the publisher incurs $1500 in extra costs. Table 1: Summary comparison of homegrown vs. best-of-breed third party application 10. Source: Flexera Software estimates based on customer surveys: 6 McKinsey Co. SoftLetter. Flexera Software: FlexNet Operat ions White Paper Series
  • 7. Five Best Pract ices For Streamlining Electronic Licensing Operat ions Revenues From New Packages Upsell Savings Revenues Renewal Bottom Line Revenues Impact Cost Savings IT Costs Reduced Costs Fulfillment Costs Costs Customer Support Costs (license entitlement changes) Best of breed Homegrown third party application Figure 3: Summary of cost savings and revenue increases from a best-of-breed license and entitlement management application - Customers admit that there is no way that they can “ Streamlining Electronic Licensing Operations at Nokia: be 100 percent compliant. Vendors estimate non- A Case Study compliance at 20 percent. This amounts to a $40B problem.” Nokia Business Systems is a division of Nokia that focuses on Internet infrastructure solutions. The division’s —IDC products were the first to use electronic licensing in Nokia Because of these pitfalls, in-house applications raise history. Because the division sells primarily through its operational costs and often fail to track upsells and channel partners, it was critical to account for channel renewals, resulting in lost revenues, as summarized in Table processes as part of streamlining licensing operations. 1 and Figure 3. Nokia has automated key license lifecycle processes Beyond these cost and revenue impacts, some other using Flexera Software’s FlexNet™ Operations: considerations when deciding whether to build or buy an operational application include: • End-user entitlements are created automatically from • oes maintaining your own solution detract from your D their orders in the SAP system core product development objectives? • Channel partners and end-users can self-serve evaluation and production licenses from the Nokia • hat are the risks of not completing an in-house W portal. They can also manage license changes— solution on time? What is the effect on product upgrades, downgrades, transfers and version ship dates, customer satisfaction, IT budgets and— updates from the Web. ultimately—overall profitability? • Customer installed base records in Nokia’s Vantive • s the system able to provide business owners with all I CRM application are updated with their licensing the data they need to make better business decisions? histories to enable tracking of upgrade and renewal opportunities In addition to the financial benefits, buying a proven license and entitlement management solution from a trusted Summarizing Nokia’s transition to electronic licensing, third party that incorporates the five best practices for Chandra Shekar, director business systems for Nokia, streamlining operations is the “safe” choice for publishers. says, “Thanks to the FlexNet platform, we’ve been able to create and enforce a license model that closely matches Conclusion how customers perceive the value of our products. Back To minimize the operational costs of electronic licensing, office systems and processes are also integrated into publishers and device manufacturers must create seamless the licensing lifecycle, enabling seamless, self-service- operational processes for license and entitlement based licensing operations.” Such “seamless, self-service- based licensing operations” allows Nokia to minimize management. They can best achieve this by selecting an operational costs while ensuring customer satisfaction. application from a trusted vendor that adheres to the five best practices for streamlining electronic licensing operations. Flexera Software: FlexNet Operat ions White Paper Series 7
  • 8. Five Best Pract ices For Streamlining Electronic Licensing Operat ions For More Information FlexNet Operations provides a single entitlement tracking FlexNet Operations, part of the FlexNet Suite, is a key system that enables producers to quickly create versatile component of Flexera Software’s Entitlement Compliance product configurations, allows management of multiple Management Solution, enabling software producers and licensing technologies, provides a unified customer intelligent device manufacturers to increase revenues,reduce experience, and facilitates prompt revenue recognition. support costs, and simplify customer relationships. Appendix Glossary of Terms Term Definition Entitlement What the customer bought. Can be of three types: Product, Maintenance (right to updates of software such as patches, updates under maintenance), Support (right to call tech support) Entitlements specify the product, the quantity and duration plus related entitlements (e.g., product includes maintenance). Example, an entitlement might be for 10 copies of Product A, lasting for one year. Fulfillment Represents what the customer installed or redeemed against an entitlement. Activation Synonymous with fulfillment. HOSTID A unique identifier for an end-user's machine- can be one or a combination of IP address, MAC address, Disk Serial Number and so on. License A license file enforced by the application. Rehost The process of moving a fulfillment (partially or fully) from one machine to another. A rehost does not change the quantity of unredeemed entitlements. A repair is a full re-host. Renewal Resets the date on an expiring entitlement. Return The process of banking a fulfillment (partially or fully) with the publisher, resulting in an increase in the unredeemed entitlements. Similar in spirit to a product return allowed by a retail store. SKU Stock Keeping Unit. A number that uniquely identifies an orderable product in an ERP system. Update A free upgrade from Product A to Product B assuming the customer is current on maintenance. Upsell A paid upgrade from Product A to Product B. Entitlement Transfers/ Entitlement Transfers: Customer ABC bought 10 licenses for Product A, which is since used by Splits/Merges Department 1 of ABC. Customer ABC wants to transfer the licenses to Department 2 because Department 1 no longer needs them, which is the process of transferring the entitlement from Department 1 to 2. Entitlement Splits: Channel partner EFG bought 100 licenses to Product A. They wish to sell 45 licenses to Company 1, 20 licenses to Company 2 and 35 licenses to Company 3. They would have to split their original entitlement to accomplish this. Entitlement Merges: Customer ABC bought 10 licenses for Product A. Customer XYZ bought 15 licenses to Product A. Customer ABC merges with Customer XYZ. Customer XYZ would like to consolidate their 25 entitlements to A under its own name, representing a merge of entitlements. Partial Fulfillments If an end customer buys 10 licenses from a publisher, partial fulfillment allows the end-user to fulfill these licenses in batches, up to the total number of licenses purchased. In addition to fulfilling individual licenses from the same order, vendors can allow partial license durations to be obtained from a single license. This feature allows an end user to check out a license for several days on one computer while other licenses are concurrently fulfilled on other computers. In effect, it enables a very secure form of license borrowing. Partial Returns and These are situations where an end-user wants to move, for example, 10 out of 100 licenses from Rehosts one machine to another (partial rehost) or return 15 of 40 licenses for a credit from publisher for other products (partial returns). 8 Flexera Software: FlexNet Operat ions White Paper Series
  • 9. Five Best Pract ices For Streamlining Electronic Licensing Operat ions About Flexera Software Flexera Software is the leading provider of strategic solutions for Application Usage Management; solutions delivering continuous compliance, optimized usage and maximized value to application producers and their customers. Flexera Software is trusted by more than 80,000 customers that depend on our comprehensive solutions- from installation and licensing, entitlement and compliance management to application readiness and enterprise license optimization - to strategically manage application usage and achieve breakthrough results realized only through the systems-level approach we provide. Flexera Software is a privately-held company and an investment of private equity firm Thoma Bravo, LLC. For more information, please go to: www.flexerasoftware.com Flexera Software: FlexNet Operat ions White Paper Series 9
  • 10. Flexera Software, Inc. Schaumburg United Kingdom (Europe, Japan (Asia, For more office locations visit: 1000 East Woodfield Road, (Global Headquarters): Middle East Headquarters): Pacific Headquarters): www.flexerasoftware.com Suite 400 +1 800-809-5659 +44 870-871-1111 +81 3-4360-8291 Schaumburg, IL 60173 USA +44 870-873-6300 © 2011 Flexera Software, Inc. and/or InstallShield Co. Inc. All other brand and product names mentioned herein may be the trademarks and registered trademarks of their respective owners. FNO_WP_Streamlining-Licensing_June11