Governance for Effective Software Licensing

As an extension to last week’s topic of software license policies, is the topic of licensing governance. “Licensing Governance” is the effective management alignment of all licensing (and perhaps pricing) activities across and ISV’s or device manufacturer’s organization structure.

Software licensing has a significant cross functional impact to any organization. What we see is that the deployment of effective software licensing can go awry if there is a misalignment among 3 core functions – commercial intent (what Marketing & Sales intended or wanted), product design (product structure and design), and IT systems and processes (the effective deployment of software through the sales channel.

Take for example, the deployment of a subscription license model for a company that has historically only sold perpetual licenses. This can be problematic if many elements of a business don’t align: if engineering doesn’t implement “time out” messages in the software, if the ERP Systems can’t adopt new revenue recognition systems, if the CRM systems can’t track expiring licenses, or if sales management doesn’t consider the effect of a new revenue model to sales compensation. The result of such misalignments can cause product failure, revenue leakage, high operational costs, and a poor customer experience.

These problems can be minimized and effectively managed by managing your software licensing infrastructure in a holistic manner by deploying a centrally managed, cross-functional team that is organized as a triad it its core. This triad is chiefly responsible for ensuring alignment among commercial intent, product design, and business systems & processes for current and future license models. This triad consists of the following business leaders:

  • The License Czar: This person is the overall “owner” of the business of licensing and is usually hired specifically for this role. This person will often have the title of “Director or Pricing & Licensing”, or “Licensing Director”. They often report into a Marketing or Finance Organization. This person is responsible for organizing a cross functional licensing team, owning the development and socialization of the license policies that we described last week, and, managing policy review processes. As if that isn’t enough, this person should be looking to the evolving market needs for licensing, and, be an effective internal politician.
  • License Architect: The License Architect is in development, and responsible for the development and deployment of core license technology and business policy that will be adopted by the products in a consistent fashion, as prescribed by the corporate policy. This person may be dedicated to license technology, or, to managing the deployment of a common services layer.
  • System Architect: This person(s) usually resides in the IT or Operations organization, and is responsible for the deployment of business processes and systems that enable for the effective deployment of software with license models prescribed in the policy document.

In addition to the triad of key personnel, there should be a cross-functional Licensing Team comprised of the individuals listed above, along with Order Management, Legal, Customer Support, Sales, and Sales Operations. The cross-functional team should be chiefly responsible for periodically reviewing new product releases, programs, and pricing decisions for their impact to the software license “supply chain”. But, such a cross-functional team provides other benefits:

  • They can provide feedback for any change to the business systems and processes to ensure that software license policies can be met and expanded
  • The team can provide guidance to the organization on what will work with the current infrastructure, what won’t work, and provide alternative solutions to meet the business requirements of the proposed change.
  • Members of the cross-functional team become champions within the organization and help to socialize polices, and, act as change agents.

Probably most important of all, this type of organization doesn’t just improve business results today, but they can provide guidance and expertise to ensure that your business is future-proofed to meet tomorrow’s needs.

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