10 reasons to buy a purpose built software monetization solution

1. WHITEPAPER
10 Reasons to Buy a Purpose-built
Software Monetization Solution
by Cris Wendt
Principal Strategy Consultant, Flexera Software

2. Flexera Software: FlexNet Producer Suite White Paper Series2
Introduction
The ROI and benefits of buying a commercial off-the-shelf (COTS)
software monetization solution versus building one in-house
will vary from customer to customer, based upon business needs
and market conditions. Historically, many application producers
attempted to build their own systems, when at some point they
realized that it was a losing proposition. The in-house solution
was inflexible, did not scale, and required too many resources
that should be applied in other areas of core-competency.
Ultimately, they decided that a COTS solution was best.
While the value proposition and exact ROI for buying a COTS
software monetization solution will differ for each customer,
the areas below can be used to develop the business case
for buying a COTS solution rather than building one or,
for abandoning an existing solution for one that is
commercially available:
1. Future-Proofing for Market Advantage
Commercial solutions will ALWAYS have more functionality, more
associated best practices, and more industry use cases, allowing
you to design a solution that will meet your needs today and into
the future. A COTS solution provides product agility, the ability
to proactively or reactively change product packaging, license
models, and pricing to meet market conditions.
Companies that need to offer new license models frequently,
and who build competitive differentiation with licensing and
pricing models rely on COTS offerings. This includes market
segments that have traditionally had small markets, high-priced
software, and a wide portfolio of products, including: Electronic
Design (Magma Design Automation), Mechanical Design
(AutoDesk), Software Development (Borland), and Oil & Gas
Exploration Halliburton).
In addtition, enterprise software companies (ERP, CRM, storage
management, etc.) are feeling some of the market pressures
that had traditionally been limited to the solution vertical
segments. As markets become more saturated, and more and
more enterprizes move towards virtualization and SaaS, and
software compliance becomes more critical, even enterprise
software companies are looking at new ways to “future proof”
their business.
Benefit Characterization: Increased revenue and/or decreased
discounts from 2 – 10 percent can occur with improved
monetization models, product packaging, improved compliance,
and more rapid deployment of new products to market.
2. Faster Time-to-Benefit
Commercial solutions are typically ready-to-go, and have many
associated best-practices and implementation use cases for
a variety of processes, license models, and customer-facing
facilities associated with software monetization. The deployment
of a COTS solution doesn’t suffer from endless internal cycles to
define and refine requirements for systems and processes most
companies don’t fully understand.
Benefit Characterization: Reduction in implementation from 6 –
12 months for an entire IT or product development team is not
uncommon. Secondary benefits can be the release of a new
product dependent upon the availability of a new license or
entitlement management system.
3. Solution Tuned to the Unique Needs of the
Software Business
Customers who internally develop 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, COTS software
monetization solutions 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.
Customers with internally-developed systems tend to lose track
of their customer entitlements over the lifecycle of the product,
resulting in lost renewal or upgrade revenue, manual processes,
and ultimately, customer dissatisfaction.

3. 10 Reasons for a COTS Licensing & Entitlement Management Solution
3Flexera Software: FlexNet Producer Suite White Paper Series
Benefit Characterization: Over time, companies can spend from
1-2 percent of total revenues on manual processes associated
with improperly working systems. In addition, maintenance
renewal rates can be as low as 55-60 percent with poor visibility
into customer entitlements, as opposed to a more typical 85-90
percent renewal rate.
4. Core Competency Focus for Internal Resources
Companies don’t want to use their best product and IT
development resources investing in the development of licensing
and entitlement management solutions. Companies want to use
their top talent to focus on the development of market-leading
products in areas of core competency, and not to innovate in
software monetization solutions.
Benefit Characterization: The benefit is more difficult to quantify,
but is typically related to delays in new product releases from
6 – 12 months as critical resources can’t be applied to a new
product development.
5. Business Scalability / Accelerated Benefits for M&A
Activity: Companies that buy COTS solutions 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. Companies that build solutions
tend to continually expand their license and entitlement
management requirements as they acquire new companies,
never standardizing on a single approach, as each approach
is tuned to a particular software title. Costs become excessive
through multiple systems and extensive manual process across
several organizations.
More importantly, the lack of a standard software monetization
platform limits the capacity for companies to create meaningful
“solutions” across companies that are acquired, and increases
the probability that financial numbers are missed in a particular
financial period due to inefficient operational processes.
Benefit Characterization: Over time, companies can spend from
1-2 percent of total revenues on manual processes associated
with improperly working systems (also described above) In
addition, a company’s market position can be eroded if they
cannot assimilate acquired products into solutions or
bundles, leading to an additional 10-15 percent discount for
some products.
6. Lifecycle Productivity of the Solution
Over time, resources once applied to the development of a
homegrown licensing and entitlement management tend to move
on to other projects, and it becomes increasingly difficult to
find resources to manage changes to a software monetization
solution that is required to remain competitive in the market. As
a result, solutions cannot grow to meet the needs of an evolving
market, typically leading to higher internal support costs, and
possibly affecting the product side with increased discounts and
erosion of market position as companies can’t easily adjust to
what the market needs.
Benefit Characterization: Over time, companies can spend from
1-2 percent of total revenues on manual processes associated
with improperly working systems (also described above). In
addition, unexpected enhancements to existing systems may
need to be delayed.
7. Customer Satisfaction
COTS software monetization solutions have a breadth of
usage reporting and compliance management capabilities that
bring value to customers in the form of more effective license
management, chargeback, workflow analysis, and the ability to
control access to users on an as-needed basis. These capabilities
are rarely, if ever available with an internally developed system.
COTS solutions also have out-of-the-box customer-facing
portals to enable 24 x 7 self-service to perform a number of
administrative and compliance tasks.
Benefit Characterization: It’s difficult to track the impact of a
poor customer experience to revenue. But “making it easy for my
customer to do business with my” is a phrase we hear often as
a mandate from the executive team, clearly indicating that
there is an important link between customer satisfaction and
overall revenue.
8. Increased Revenue from Enterprise Agreements
COTS software monetization solutions provide usage reporting
capabilities to enable software producers to 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 producers
to obtain 50 percent or more of their revenue from a handful of
accounts who have special, non-standard enterprise agreements.
The inability to gather accurate usage information often results
in software producers missing the opportunity to gather upside
revenue that is built into the agreement because there is a lack
of factual information. More importantly, the availability of
these capabilities enable software producers to pro-actively
construct enterprise-level agreements that make it easier for their
largest customers to consume large amounts of software, thus
creating a competitive advantage with their largest customers.
Benefit Characterization: It’s not unusual for some companies to
obtain an increase 2-5 percent of overall revenue by constructing
more effective agreements with their large companies.

4. 10 Reasons for a COTS Licensing & Entitlement Management Solution
Flexera Software: FlexNet Producer Suite White Paper Series4
9. Industry & Best Practice Expertise
The services organizations of COTS software monetization
companies have extensive industry experience with many
customers in different markets (with many different business
processes and back-office systems) and often understand what
license and pricing models are more effective in different
customer segments, and, how to most efficiently deploy those
models in an operationally efficient way. COTS providers can
provide valuable input on a variety of software monetization
best practices in the areas of maintenance, product pricing,
product structure and packaging optimization, product lifecycle
management, channel models, business processes and high-
availability systems that tend to drain companies of valuable
resources because they all tend to fall into a few common traps.
Benefit: The availability of services for a COTS solution is
part and parcel of all the benefits listed above, including the
characterization of an individual business benefits profile.
10. Risk Reduction
Ultimately, there is a large investment that is going to be made
over time in a software monetization solution. 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. Most COTS
software monetization providers, such as Flexera Software have
successful records of achieving results. Why not partner with a
proven partner?
Benefit: The successful deployment of your project.
About Flexera Software
Flexera Software helps application producers and enterprises
increase application usage and the value they derive from their
software. Our next-generation software licensing, compliance
and installation solutions are essential to ensure continuous
licensing compliance, optimized software investments and to
future-proof businesses against the risks and costs of constantly
changing technology. Over 80,000 customers turn to Flexera
Software as a trusted and neutral source for the knowledge and
expertise we have gained as the marketplace leader for over 25
years and for the automation and intelligence designed into our
products. For more information, please go to:
www.flexerasoftware.com
For more on software licensing and entitlement
management trends, visit our blog at:
http://blogs.flexerasoftware.com/

5. Flexera Software LLC
(Global Headquarters):
+1 800-809-5659
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Middle East Headquarters):
+44 870-871-1111
+44 870-873-6300
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www.flexerasoftware.com
Copyright © 2015 Flexera Software LLC. All other brand and product names mentioned herein may be the trademarks and registered trademarks of their respective owners.
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