Reduce Revenue Loss with “Trust but Verify”

You’ve reached an archived blog post that may be out of date. Please visit the blog homepage for the most current posts.

How Entitlement Management Capabilities Can Help Reduce Revenue Loss from Over-Use

Many application producers find themselves losing money by not being able to monetize over-use (their customers exceeding quantity or usage defined in the sales order/agreement). As they wrestle with getting visibility into how much of their software their customers are actually using they have some options to either prevent or track and report over-use:

  1. Trust but Verify
  2. Software Licensing Enforcement

In this article we’ll discuss the first option – trust but verify – as it’s a cost-effective and reliable option that can help producers accurately manage customer usage by leveraging entitlement data.

What is an “Entitlement”?

An entitlement is the information concerning the end user’s rights to use software, which is acquired from the application producer. The rights include who and how long users can use the software. Once the user acquires these rights, it is their choice to activate them, which generates a license to use the actual software. The rights and the activation are tracked by the entitlement management solution.  At a minimum, both the producer and end-customer need to know what product use rights the end-customer has. As the next logical step both need to have information on what end-customer has installed and how many copies they are using. Further sophistication in compliance reporting would leverage actual use data by the product feature level. Eventually, it all depends on how much detail, you, as a producer, want to present to your customers for verification against their software purchases.

Why Entitlements Matter

End customers expect more flexibility from application producers in their licensing implementation for staying compliant with the software use. This is because of the evolution of various deployment options such as cloud and virtual appliances, which cannot be easily licensed by tracking machine IDs. When you also consider the broad adoption of usage-based pricing, controlling software use via strict license enforcement does not meet today’s market demands. Moreover, implementing and managing licensing is complex for producers and restrictive (sometimes prohibitive) for end customers. Conventional licensing can be hard to implement and manage.

How Entitlements Matter

Based on the level of compliance reporting, the producer’s application captures each occurrence of actual use and reports back to the entitlement management back-office. The end customer will have the ability to slice and dice the data to the level that would help identify possible business reasons for the product use. If overages have occurred, the producer and end-customer can work together to devise a remedial plan. This strategy may also be used proactively to study the historical usage patterns by products, geographies or time-period. End-customers will be able to leverage this analysis to prepare for usage bursts due to seasonality or other factors. Producers can help by offering reasonable burst packages, if needed.

A key factor is that there is always a single source of truth for entitlement consumption that producers and end-customers have access to. Both parties can take collaborative measures entirely based on factual information. A mutually beneficial trust-based partnership is thus developed between producers and their customers.

-Sanjay

Additional resources: Watch this brief video to see how one customer was able to leverage entitlement management.