Blog Entry

Nov 4
2011 

Building Your License Enforcement Business Case

This is a multi-part blog where we’ll look at the business case around a license enforcement system from many different angles.  This article will begin the discussion surrounding the initial business case for initiating a license enforcement project. Follow-on blogs will focus on measuring the return on the investment of a licensing system after implementation.

Questions you will need to answer

Your business case will need to answer the following questions.  Rest assured your executive team will ask the questions so you best be able to answer them.

  • Why are we doing this?
  • What is the anticipated impact on my sales teams?
  • What are my customers going to think?
  • What is this project really going to cost?
  • What can we expect to get out of this project and where?
  • Is this worth it?
  • Can we afford to do nothing?

Why are we doing this?

Most companies take on license enforcement projects with the primary goal of protecting their revenue stream or driving new revenue. There are certainly other drivers but the almighty dollar is by far the leading reason companies go down this path.

Consider this:

  • A recent KPMG study found that 34% of companies surveyed reported software revenue losses of 20% or more due to non-compliance.
  • The audit team for a  division of a top 10 software publisher found that their customers were out of license compliance across software versions 100% of the time. This means every customer they looked at had users running newer versions of the products than their support agreements reflected.

Be a bit careful with this one in your business case. It is a stretch to think every software publisher can immediately increase software licenses by 20% simply by introducing license enforcement.  But the facts are the facts… and the fact is that its common for ISV’s customers to have more users than software licenses without the right tools that keep them from getting themselves in an unfavorable position.

Resist the urge to have your business case target a 20% recovery number out of the gate.  Consider the 20% the opportunity on the table. While it’s possible to recover a healthy portion of it, you should ask yourself what is a reasonable number to recover as your license enforcement system is probably not going to be designed to be 100% air tight.

What is the anticipated impact on my sales teams?

Your business case needs to cover the impact of the license enforcement on various stakeholders.  Your sales reps can be seriously affected if the project is not rolled out carefully.  Therefore, make sure you cover this angle.

Sales teams typically have two reactions to the notion of introducing license enforcement.  There is the camp of “hell yeah, this will keep my honest customers honest and the cash register ringing” and “oh no, I don’t want my customers to have any barrier to adoption and I actually want them to find themselves using more licenses than they purchased”.   And of course many of them want things both ways.

Consider this:

  • In 2009, a company with license enforcement polled their sales reps and found that 96% of them believed they would not be able to achieve their quarterly revenue targets without the license enforcement system.
  • Of the 96% of sales reps with a positive outlook on license enforcement, the average protection factor was 20%.  This means 96% of that company’s sales reps thought their customers would order 20% fewer licenses if it was not protected. (There is that 20% number again).

Those two statements alone speak volumes to me.  As we know, sales teams are coin-operated and tend to embrace practically any method that they feel will help them hit their number.  License enforcement is no exception.  However there are  few other things to take into account.

  • You may have sales reps that don’t want any to add any friction that will prevent their customers from getting up and running quickly. This is a completely valid concern that needs to be heard and addressed by the product manager designing your licensing customer experience. Your business can’t afford to have customers struggle out of the gate.  A good customer licensing experience is most definitely achievable with the right level of attention to detail in the design of the workflows.
  • You may have sales reps with sensitive accounts where the rep believes license enforcement could be a problem. These tend to be larger accounts where the enterprise needs more flexibility or accounts that have unique licensing arrangements.  These are usually one-off situations that you can handle with creative one-off solutions using your licensing framework.
  • After nearly 20 years working for ISV’s before to SafeNet, I never had a situation where my team could not satisfy my customers’ special license enforcement needs. It’s strictly a matter of being able and willing to work with your sales teams and customers.

In my next blog we’ll look at the impact to the customer base when introducing license enforcement and practices that have helped make that transition smooth.