10 Reasons Why Software Vendors Need a Third-Party Licensing Package

by Chris Preimesberger

Commercial licensing management systems always will feature more functionality, more associated best practices and more industry case studies from which to learn. This provides product agility, which means the capability to proactively or reactively change product packaging, license models and pricing to meet market conditions.

Commercial packages are typically ready to go and don’t suffer from endless internal cycles to define and refine requirements for systems and processes most companies don’t fully understand. Reduction in implementation from six to 12 months for an entire IT or product development team is not uncommon.

Customers who internally develop these systems tend to base their entitlement management solution around a classic ERP implementation. ERP systems are effective for managing finances and for facilitating the development of physical entities but are usually not built to support the unique needs of the software or intelligent device markets. On the other hand, licensing and entitlement management packages provide effective support for the “product lifecycle”—the morphing of software products over time due to upgrades, updates, moves, transfers, end-of-life, M&A, etc.

Companies don’t want to use their best product and IT development resources to invest in the development of licensing and entitlement management solutions. Companies want to use their top talent to focus to develop market leading products in areas of core competency, and not to innovate in licensing or entitlement management.

Companies that buy these packages tend to standardize on that solution across their range of product offerings and business processes, lowering operational and development costs via “reusable” and standard components and eliminating manual processes.

Over time, resources once applied to the development of a homegrown system tend to move on to other projects, and it becomes increasingly difficult to find resources to manage change to a licensing and entitlement management solution that are required to remain competitive in the market. As a result, solutions cannot grow to meet the needs of an evolving market.

Commercial packages have a breadth of usage reporting and compliance management facilities that bring value to enterprises in the form of more effective asset management, charge back, workflow analysis, and the capability to control access to users on an as-needed basis. These facilities are rarely, if ever, available with an internally developed system.

Using a package like this, software publishers can tune enterprise level agreements for their largest customers based upon a mutually agreed usage and pricing formula (typically tuned to the need of each customer). It’s not uncommon for many software publishers to obtain 50 percent or more of their revenue from a handful of accounts who have special, non-standard enterprise-agreements.

The services organizations of entitlement and license management companies have extensive industry experience with many customers in different markets (with many different business processes and back-office systems) and understand which license and pricing models are more effective in different customer segments, and how to most efficiently deploy those models in an operationally efficient way.

Ultimately, there is a large investment that is going to be made over time in an entitlement and license management system. This investment affects all aspects of the organization and the capability to “get it right” across so many stakeholders is difficult and not typically within the realm of most companies.