Integrating Software Licensing into the Back Office. Putting You in the Driver s Seat
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- Ashlie George
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1 Integrating Software Licensing into the Back Office Putting You in the Driver s Seat
2 INTRODUCTION Back office and licensing are two terms which have always seemed to be far too easy to bundle together. Most software publishers will use these terms collectively when discussing plans to realize licensing completeness, or even excellence. The problem is, as soon as vendors start to look into what this actually means, let alone what is required to execute the plans, the conclusion is typically to defer the aforementioned excellence until next year. In licensing software, it is not so much the technical issues, but rather the implications on business processes that creates the greatest challenge for software vendors. Quite often, when vendors look to integrate licensing into their applications, it is not so much the technical challenge, but rather the implications it can have on business processes, which presents the greatest challenge. The purpose of this document is to provide a level of reassurance that integrating licensing into the back office is something which can be accomplished in a methodical and streamlined fashion. It is structured in a way that provokes some useful thought on the subject: Road Blocks Ahead What problems do you face by not integrating? Green Light to Accelerate How can your business benefit from integrating? Roadmap to Success You are ready to move from point A to point B; what should you consider in formulating plans to integrate licensing into the back office environment? Topics include: Analysis of the architecture of your existing system Planning ahead Integration into CRM Product activation Reporting and auditing Multiple license technologies Scalability factors Options for the development of the project The document closes with a recap of the benefits and summary of the topics covered. 2
3 ROAD BLOCKS AHEAD The challenges you face by not integrating Consider the following case: The challenges you face by not integrating are costly, tedious and time-consuming. You have a team, or even a call-center, responsible for product activation. These are employees who spend a good portion of their day going through order forms (which they usually receive on faxed paper) and translating them into batches of generated license keys. For this, they will be checking the quantities of products ordered, sorting through the lists of requested modules in bundled software packages, and they will enter this information into license generator tools. The resulting licenses will then need to be sent out to customers, and is normally the preferred choice. This cumbersome and time-consuming process exists exclusively in order to allow your customers to make use of your software applications. You might even add the further complexities of issuing demo or subscription time-based licenses into the mix for good measure. To some, this scenario may sound quite ridiculous in this day and age. To others, it may be all too familiar. The reality is that variants of this situation exist today in many software companies. Parts of the scenario may be properly integrated into the business processes. Other areas may be automated and streamlined, but somewhere in the chain there are one or more points where the above case shines through and causes problems. The consequences of not integrating license management are significant: Increased operating costs Manual processes result in increased operating costs. The impact of this overhead alone can limit the commercial success of a company. Lack of flexibility in software pricing models In order to simplify the process as much as possible, vendors may be limiting the range of pricing models they can provide, and therefore not have the flexibility in selling their software that they would like. Inefficient channel management Many vendors sell their software through partner channels. The complexities of managing your reseller and distribution channels result in software vendors being either too restrictive or just the opposite. Either way, the use of license management in this scenario presents a challenge in effectively managing your distributors. Manual entry = human error Reading orders from one source, and then manually entering them into another will always carry a higher risk of mistakes being made. Customers may receive incorrect licenses requiring them to repeat their requests. Aside from the issues with customer satisfaction, this brings additional but unnecessary overhead to the process. 3
4 Reduced response time Today, electronic licensing is the norm. The ability for customers to obtain software applications and their associated licenses electronically means they can evaluate or update software packages almost instantly. A manual license fulfillment process usually results in customers having to wait to receive their rights to use an application. In many ways, this defeats the main purpose of electronic licensing. These are just some of the main issues that will often put vendors into a weaker position when compared to competitors. This is especially true if the competitors do have a more seamless union between license fulfillment and their operating environments. When compared to competitors, vendors who have not integrated licensing with their back office systems are thrown into a vulnerable position. GREEN LIGHT TO ACCELERATE The benefits you reap from back office integration Now consider a new case: A prospective customer logs into an area of your company s website to register for a demo of your application. They download the trial version which runs for 30 days. Once the 30 days are up, they return to your website (using a login that they were provided with when they registered initially) and go to a shop page where they can choose a number of add-on modules, quantities, etc. After they have made their choices, they are requested to submit payment details to complete the transaction. They then return to their new landing page and can see a list of all the modules they have purchased along with associated details. A click of a button starts a behind the scenes exchange of information, and within a fraction of a second, the new customer has received the necessary authorizations to use your software. And all this took place at 2 am, since your new customer is based on the other side of the world. Eliminating the human component of the integration process allows you to sell your software 24 hours a day, 7 days a week. To some, this is considered licensing excellence. But others will insist that a degree of human dialogue be maintained with customers, especially during critical evaluation phases. But there are aspects in the above scenario that offer significant benefit to most business models. If the above prospect never returned after registering for the evaluation, an alert can be generated within the CRM system to remind the relevant Sales person to make a follow-up call. Or, customers are walked though the evaluation and commercial stages, but are then offered with their own self-service activation options when it comes to performing the real-time installation. Key benefits of integrated license management include: Sell the software around the clock If you eliminate the human part of the process, customers can download and activate your products at any time of day. If you have an 4
5 international market, then the ability to offer products 24 hours a day, 7 days a week will notably contribute to your company s success. Keep your sales organization in the loop Your sales force and marketing team will have all the intelligence they need for software usage for current and prospective customers from their CRM system. This includes knowledge about who has activated demo applications, and whose subscription licenses are due for renewal. Reduce, if not eliminate the operating expense Usually, your most costly resource is your staff. By eliminating the need for a team of staff spending their days activating products, you are freeing up a significant chunk of expenses and resources. It is clear that a cohesive binding between licenses and back office systems can result in increased profitability. Free up responsibilities of valued staff Often, the aforementioned staff will perform additional roles, which can be completely unrelated to product activation. Product activation may have initially been a secondary or even temporary responsibility, but now takes up the majority of their working days. Sell with increased versatility The automated handling of licensing provides scope to be more creative in the way your software is licensed, and therefore sold. This opens up more possibilities in how the software is evaluated or deployed. Whether you are affected by all of the above, or just parts of it, it is clear that a cohesive binding between licenses and back office systems can result in increased profitability. This can come in the form of reduced operating expenses, increased top lines revenues or both. Ultimately licensing is a means to gain a greater measure of control and understanding over your products. Effective back office integration helps provide information that can leverage your licensing technology into a powerful and profitable asset. The next section describes how to start transitioning towards a more integrated back office system. ROADMAP TO SUCCESS Factors to consider during the transition process The focus of this section is to help provide a roadmap in moving from point A to point B when it comes to licensing integration. The initial part examines what you have today and highlights areas of improvement. We will consider what integration with the CRM really means, and what benefits can be obtained from it. We conclude with a discussion on product activation, reporting, coping with multiple license technologies and scalability. Finally, we will review ideas on handling the actual integration work. Planning, Planning and more Planning As with most things, the most critical part of this is the planning. The first aspect of the planning stage should be an analysis of what your setup looks like today. 5
6 The perfect system in place already Some vendors have a mature, working and reliable system in place. Perhaps a customer activation website already exists, and the back office is already properly integrated with the software fulfillment process. Figure 1 Overview of a properly integrated back office environment This is certainly a desirable scenario, but it is also the rarest case. Typically, licensing data is maintained independent of the back office system and information synchronization between the two takes place either manually or via some rudimentary home-grown process. The method of communication will depend on the technology in place already. Often considered the legacy approach, one of the most common approaches is where the license generation routines are accessed programmatically. API functions are called from within the CRM s interface into the license generator. However, the emergence of SOA technologies such as Web Services will normally allow for a more seamless integration, particularly if the back end is heterogeneous in nature. The fragmented system Many systems today have little in place to allow for proper back office management of licenses and entitlements. Separate systems may utilize their own independent data sources, often requiring careful synchronization between one system and another. In this case, it is usually preferable for the licensing system to have its own interface for each of the other relevant systems to interact with it. It essentially acts as a hub for the rest of the environment, and allows whatever data is relevant to flow from one system to the other. 6
7 Figure 2 Overview of a fragmented system The license generation process can either utilize its own data source to handle information, such as customer-to-product mapping, audit data, etc., or it can directly access the relevant parts of the data from other systems. The preferred approach depends on many factors. Separate data sources for each system provide an element of redundancy. A temporary loss of one data source has less impact when the databases are separated. Shared data means that synchronization requirements are far smaller, and this is more significant advantage when the various data formats are different. What are you looking to get out of this? Another major factor to consider is your output goals. There is a multitude of requirements that can be addressed, and some of the most popular ones are discussed here. Ultimately, integrating into the CRM means connecting the relevant licensing data to the applications supporting the business operations. Integration into the CRM There can be many ways to interpret what Integrating into the CRM truly means. Ultimately, it is about connecting the relevant licensing data to the applications used to support the operations of the business. Simply, it may mean that license information is pulled into the CRM from an independent licensing system. It could also mean that the CRM is the trigger for certain licensing activity. Every role within the corporation that is involved in licensing in some way can have their own tailored method of interaction with the licensing processes. We touched briefly on how alerts can be flagged up to notify individuals when certain actions are required. However, that is only a small part of what can be accomplished by connecting the licensing to the CRM. 7
8 Sales representatives can receive notification from within the CRM when a call needs to be made to a prospective customer who downloaded an evaluation license. Account Managers can receive automatic reminders when subscription licenses are nearing their renewal dates, or when customers are getting close to reaching some pre-arranged activation allowance. Support personnel can receive special license generation privileges and have access to the complete license fulfillment records in order to help customers requiring assistance with license related problems. Order entry teams would be able to automatically trigger the license fulfillment process when they submit orders into the system. Finance and auditing teams can receive complete access to data covering the licenses that have been issued to each customer. Figure 3 Interaction between the CRM roles and the license generation process Ultimately, the technology in place would dictate the how the interaction between the CRM system and the license system would be implemented. 8
9 Customer Activation Options Coupling the licensing to the back office can give you many options in terms of how software applications can be activated. We already described the web-based scenario above. This can be extended further to an entirely automated exchange of licensing data across the Internet between your products and your activation server. Such automated mechanisms are widely employed today by companies such as Microsoft. Another simpler, yet still effective approach includes utilizing forms sent to a recipient server. The server would process the automatically and then send a return containing the relevant license information back to the customer. Reporting and Auditing Normally, the ability to audit the licensing activity is not an option, but a requirement. The ability to audit licensing activities is not an option; it s a requirement. All licensing activity logs should be committed to one or more databases. The ability to access this data in a meaningful way is extremely valuable from a business intelligence point of view. Some of the benefits include: Financial teams are able to use license fulfillment reports since they are directly linked to software sales, and therefore, to revenue. Account Managers are able to retrieve reports on product activation history, subscriptions, etc. Support personnel can easily retrieve the full licensing history for given customers. Senior managers can obtain a reliable view of the success of specific products, and break this down to geographic regions and timelines, for strategic planning purposes. Multiple License Technologies Many vendors have a mix of license technologies in place for different products. Some product lines may use a licensing technology provided by a third party. Other product lines may use a completely different technology provided by another third party. There may also be product lines which use in-house developed (home-grown) licensing technologies. Ultimately, licensing should be per product, not per licensing technology. The interface into the product licensing, albeit from an external or internal perspective, should be mostly agnostic on the actual licensing technology. This would mean having a licensing wrapper or middle-layer in between the underlying technologies and the back-end. The middle-layer would be responsible for ensuring which licensing technology to connect to, depending on the product that the license is being requested for. 9
10 Figure 4 Licensing middle layer translating product request to license requests Scalability The scalability of the system is also a big factor from a planning perspective. Ultimately, you need to consider the load in which the system will be placed under. For example, in the scenario of automatic license activation, how many simultaneous connections to the license generator are likely? In other words, how many customers might be activating licenses simultaneously? There are many factors and options to consider in the transition phase. Luckily, this means you have ultimate control over the integration process. If it is likely that multiple requests for licenses will be made simultaneously, the previously described mechanism may be the best solution in a smaller scale deployment. This is due to the inherent queuing mechanism you would receive with this type of system. Customers would generally be more comfortable in waiting for a return , rather than watching an hour glass mouse pointer while the application waits for its turn in the activation queue. In order to support multiple real-time activations simultaneously, one would need to have multiple activation servers, typically in a loadbalanced, high availability cluster. This will always be a balance between initial (and runtime) costs versus the quality of service provided to customers. Staged Approach or All-In-One? Once the initial outline is in place, the next factor to take into account is whether this process will be performed in stages, or as a single move. Most vendors prefer the staged approach, where the overall migration is divided into separate projects. The goal here is to develop each stage so that the transition to the next stage happens naturally, with minimal impact on the daily operations of the business. This includes reducing the risk of time lost due to redesign or rolling back. 10
11 An example of a first stage may be work on the data warehousing. Will the license information be stored into a common database with the CRM? Does more than one database exist already? Normally, the correct handling of data records is essential. The licensing activity is typically connected to multiple sources of essential data, including customer records, product tables, and activity logs. Latter stages may include enhanced activation options, such as the automated web-activation scenario previously described. The Development Work Quite simply, there are two simple choices to consider here. Will the integration work be performed in-house, or will it be outsourced? By outsourcing integration, you free the burden on your company s resources and offload the responsibility to licensing experts. Naturally, the availability of in-house development resources often is the determining factor between the two. In this section, we will examine the advantages and disadvantages of both options. In-House Integration - Benefits The main benefits of the in-house developed system are from a management point of view. Less dependency on outside resources leads to better control over timelines and schedules. The changing nature of a business means that events may take place that may cause initial completion dates to change. Internally managed resources normally have more flexibility to cater to this. In the long term, there is less (if any) dependency on external support. - Disadvantages The obvious disadvantage here is the impact on resources. Companies often simply do not have the development bandwidth to perform such a project internally. It is usually not feasible to pull development resources away from product development cycles in order to work on the license fulfillment processes. Often a lack of in-house expertise in the relevant technologies means that a self-developed integration is not even considered. Outsourced Integration - Benefits By outsourcing the work, you are offloading the responsibility to professionals who consider this to be their core business. The result is that you will have access to the latest technologies and processes you may not otherwise be privy to. An outsourced resource will often bring expertise and ideas to the table that will allow the plans to be further refined and improved. 11
12 - Disadvantages Usually, the cost impact is the biggest hurdle with outsourcing. Commercial terms may not be ideal, and you may face hefty up-front fees. The funding for this usually needs to be available separately from a company s operational budget. An outside party may also not have as much flexibility with changes to the timelines, especially if required completion dates move forward. Often, there will also be an ongoing dependency on the third party from a maintenance and support perspective. SUMMARY The manual license fulfillment process that was initially examined remains a very familiar concept in many companies and will continue to be so for the foreseeable future. The disadvantages of maintaining a manual process have previously driven some companies to abandon software licensing altogether. Manual license fulfillment will always be costly, time-consuming, error-prone, and restrictive on sales models and channels. Aside from removing the disadvantages mentioned, back office integration of licensing opens up all the possibilities discussed in this paper. Software is capable of being evaluated and sold around the clock, with increased versatility. Company resources are freed and made available to better support the growth and success of the business. Relevant parties will always have access to the information they need, when they need it. Hopefully, this document has offered a level of comfort that integrating licensing into the back office environment is indeed something that can be achieved. The benefits that are returned are very real and longlasting. Integration of licensing through the back office reduces operational expenses and increases revenues, ultimately driving the growth of your business. About SafeNet, Inc. SafeNet is a global leader in information security. Founded more than 20 years ago, the company provides complete security utilizing its encryption technologies to protect communications, intellectual property and digital identities, and offers a full spectrum of products including hardware, software, and chips. UBS, Nokia, Fujitsu, Hitachi, Bank of America, Adobe, Cisco Systems, Microsoft, Samsung, Texas Instruments, the U.S. Departments of Defense and Homeland Security, the U.S. Internal Revenue Service and scores of other customers entrust their security needs to SafeNet. In 2007, SafeNet was taken private by Vector Capital. For more information about SafeNet s software licensing management solutions, please visit 12
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