Software Operations’ Profit Potential

Interviews

July 14, 2008
Volume 5, issue 1

Software Operations' Profit Potential - Transcript

Transcript of interview with Macrovision FLEXnet Publisher Product Manager Mitesh Pancholy and Abby Domini

MIKE VIZARD: Hello, and welcome to another edition of the Premium Queuecast. This is your host, Mike Vizard, and this edition is sponsored by Macrovision, the global leader in software license management. Joining me today is Mitesh Pancholy, Product Manager for Macrovision, and Abby Domini, also with Macrovision. We're going to talk about license management today. Welcome to the show, folks.

MITESH PANCHOLY: Hey, Mike.

ABBY DOMINI: Thank you.

MV: I guess we should get started by just defining what is the scope of the challenge exactly, from a developer's perspective, at least, when we're talking about license management, and what is the definition of license management? So why don't we just start right there?

MP: Well, Mike, software licensing essentially is managing access to your products from the perspective of a software producer; however, many of the things that we'll talk about today not only apply to the software producer, but also to producers of hardwares that have specific configurations that they embed on to the software itself on their hardware or the hardware pieces themselves. So I'd like to focus more on licensing products, rather than just licensing software.

MV: Sure. So what is the definition of that, exactly?

MP: Basically it's making sure two challenges are met. First is managing access to your products for customers that have entitled or have paid for your products, and then dealing with a lot of the challenges that spring out of being able to entitle your customers, so a lot of the operations challenges in the back office.

AD: Yeah, Mike. There are many issues that people face, and when people approach a software licensing program, they often think about how do I get code into my product that's going to allow me to turn access off and on, or create levels of access for the users. But what they often don't think about is that those kinds of rules also ripple all the way into their CRM system, their ERP system, and to their support network and really every piece of their supporting infrastructure throughout their company. And a successful licensing implementation means thinking through both that back office piece, as well as that front end, technical, get-it-into-the-product piece of the issue.

MV: So how do I tackle that issue? A lot of people, I guess, would roll their own, but you guys have a packaged way of doing that, and so what are the benefits and tradeoffs of using a packaged application versus say me trying to be an intrepid soul and roll in my own approach?

MP: I see. So I think what you're really asking is even though let's say you had core competency in developing software, is developing and managing license and platform, you know, something else that you want to develop by the core competency, and if you don't, and if you get a third party licensing program in, what are some of the benefits. So I think typically the benefits can be camped into two specific areas. One is licensing that adds revenue to your bottom line, and the other is the licensing and back office processes that can be made efficient to reduce the cost in having licensing programming and enabling your customers to have licenses where and when they want, so that way your business doesn't stop depending on the times that you're not officially in the office.

MV: How do I actually make it a profit center? Because you mentioned profits inside of your question there, and I guess it comes to mind that as a developer I may not see licensing management as a profit tool as much as I think of it maybe as a chore.

MP: I see. The way you can turn licensing into a profit center rather than a chore I think is very easy: first of all, by converting the would be pirates to customers. Licensing in itself is very similar to having a lock on a door, in that it thwarts the thieves from coming inside, but doesn't discourage the people who have the keys, the licenses, to go ahead and use your product.

A bigger benefit also is the ability to feature clip. Now, allow me to just quickly illustrate what feature clipping means. If you have a single product line that you're pushing as a software producer, you can enable FLEX LM, which is one of the products that Macrovision makes, to go ahead and clip out specific features, depending on the license models you have, such that with a single binary of a product, you can create a pro version or a mid tier market version or an introductory or a trial version, so that way you can address all of these different markets with a single binary.

Another benefit of adding licensing to your bottom line basically are renewals and upgrade tracking from operations. With our software, you can basically see who is going to be expiring at the end of let's say March 31st, 2007, and thus target-market your sales efforts towards those individuals and then basically be able to add a lot of flexible license models so that way you can go ahead and attack different markets and segments very effectively. So those are some of the benefits associated with a licensing program. And then with those benefits, also, besides adding money to your bottom line, there are also a lot of cost reductions that go into play.

AD: I think there are some really interesting things on the cost reduction side that people don't always stop and quantify when they think about software licensing. But if people at software or software and hardware companies were to start to poll their support center and assess how many calls they received on a weekly basis related to access to their product, licensing, re-hosting, moving software from one machine to another that requires a re-licensing basically, we've had our customers tell us in some cases they have up to 25 percent of their support calls in a month generated from licensing-related issues.

And when you look at today's cost for answering the phone, it can be over $100 a call. When you think about a well-implemented licensing solution that has a Web user portal so that customers can go in and do things like re-hosting themselves, finding their license key themselves, something that really makes it a hands-free process for customers, or if they have to do something, makes it a self-service process, can be a huge support cost saver.

It also saves time on the back office processing of entitlement, so if you have a big order that comes through and comes into one system, it moves into an ERP system and then has to go manually, people go out and say, "Okay, they've bought these line items. Now we have to entitle them with this number of license codes, and then we have to go out and e-mail them all these license keys individually," it can be a manual time-consuming process with lots of opportunities for errors as people change the keys and the keystrokes as they enter them.

By having one continuous system that is linked into your ERP and CRM system, you really eliminate all of those manual processes and opportunities for confusion or mistyped numbers and things like that.

MP: Definitely. And I'd like to follow that up, as well, and say the ability to allow your end user to self-service is a very significant cost reduction and a market differentiator for yourself because now you'll be able to supply your customers in a time zone that's not necessarily the same as the one that you're doing business in. For example, if I'm doing business in Santa Clara, I want to be able to make sure that my customers in Asia or in Europe are able to license their software when their business is up and running so they don't have to wait for my support team to get up and running for them to start licensing my software appropriately, especially if they've paid for it and they're not able to access it.

So besides that, there are also significant savings and development time that can be had by implementing a licensing program. For example, I spoke about the feature clipping aspect earlier. If you take a look at that from a development perspective, you'll see that essentially our engineering team will be building a single binary, rather than four to five to n different products that are targeted towards n different markets.

And that I think really harkens back to the statement that although the developing of software may be a core competency, do you really want to take on the challenge of developing and managing a licensing platform? Maybe, maybe not. And if you go ahead and implement a successful licensing program, there are some significant benefits that come along with it.

MV: You mentioned both Asia and Europe, and that brings up an interesting point. Just about everybody I talk to is trying to figure out how to go global on some level, and if I have to roll my own licensing system for a global environment, isn't that 10 levels of complexity more than just trying to do it inside the U.S.?

MP: It depends on who you ask. [Laughter] Yes, you're very right that going global from just having a U.S. focus is a significant leap, and a number of different things within the enterprise or within the enterprise of software production need to be made ready in order for you to do that, the least of which is software licensing. And actually it turns into a much bigger behemoth.

For example, in certain Asian countries, if you were to license your software to the end user through let's say a reseller, the reseller is expected to make sure that the software has been registered, the appropriate keys have been registered with the software producer, and all of that package is delivered as a single entity to the end user because of the cultural customs.

Now, how do you make sure that your software licensing is able to handle that such that a reseller can log into a portal and then grab a license key and register their end user before they deliver the software and license key together? Well, you can either build it yourself, or you can have a third party, like Macrovision, go ahead and implement it for you. Also related challenges, which are pretty significant, are language-specific licensing. For example, if you had your licenses expressed in language that is really not UTF-8 or just plain old English on the European side, as well as data conventions or monetary considerations that you need to take into play.

So if you go ahead and roll your own for Asia and Europe, you're essentially going to be solving the problem first for the U.S., then Asia and Europe. And I think as a software producer, you're going further and further away from your core competency and trying to develop solutions to problems that third parties have developed already and that are tried-and-true in the field. And I think that's one of the benefits of switching to a licensing program.

MV: You mentioned consistency, I guess, and I want to go down that point a little bit further because most of the resellers I know carry multiple applications, and the whole software license renewal process is kind of critical to them because it's how they up-sell their customer on not just that application, but new systems that go with the applications. Is there value in the fact that my license renewal management system is similar to other application vendors, like this management system that might be using Macrovision and therefore I'm creating some kind of common look and feel and experience across an ecosystem that people don't really initially value, but to the end user, it's a value and to that reseller it's certainly a value?

MP: Oh, definitely, because this way the end user works through a number of different systems without realizing they've ever left the reseller's portal, such that they can go ahead and initially start requesting license from the reseller and the reseller can then start establishing a relationship with the end user. And then using the portal that is supplied by the FLEXnet Licensing Operations Module, they can start figuring out which of their customers are going to be expiring or renewing or are candidates for an upgrade in the next month or two months, and then go ahead and target-market them appropriately, such that when these end users come in and apply for their entitlements or contact the renewal reseller's website in order to get an upgrade, they have a consistent end user experience.

AD: I think that in many enterprise software companies, it's actually even more basic than that, in that many enterprise software companies because they've grown over time, they've acquired companies, things like that, they actually find that they don't have a good source of the data for who is due for renewal, what products they have, things like that, kind of a baseline. And by having a complete software licensing and operations solution that one of the things that they find is that it provides them with that centralized point of all data that relates to who has what and when they owe more money, basically.

They have found that to be extremely valuable. We had one customer who said that their renewals increased by 30 percent just because by having a base of one location where all the data resided, they were able to go in and take a look at who was due and start addressing that as an opportunity to make their year as opposed to miss their year. So we've also seen people with really sort of that baseline problem that licensing and operations can solve for them.

MV: Which brings us to an interesting point. There's a lot of consternation among people about piracy. I've often wondered, is piracy something that happens deliberately -- which, you know, I'm sure it does -- but how much of so-called piracy is just people are out of license or they're at a lapse in their license because the process involved in renewal was too difficult, wasn't consistent enough, and so that leads to an explosion of the problem that might be more contained if we had a more rational approach.

AD: I think obviously there's definitely both. There's the accidental pirate, and then, you know, even in a big enterprise there's the IT person who's really trying to get a deployment of software out and starts to have issues with the licenses and it's 2 o'clock in the morning, and he's deploying software and he says, "If I can copy license codes, or if I can get around the licensing, I'm just going to do it to get my deployment out, and we'll true up with the software vendor another day." And that other day may never come.

And really, part of the point of implementing licensing is to help the people who are essentially honest stay honest. I mean, definitely you want to protect it against the true hackers, but you want to try and keep honest customers honest. And there's also a kind of flexibility within the licensing to allow for things like an overdraft protection or the ability to borrow licenses so that when those kinds of things happen the door isn't locked and you can never get back in: There is that ability to, "Hey, we're going to go over this week because we're doing a big rollout, and we're going to call you tomorrow and say, `Oops! We're issuing another PO for those other four licenses.'"

And so licensing, I think some people think of it as being, you know, "My customers are going to be mad. They're going to have this terrible experience. They're not going to be able to get the things done that they need to get done. Who cares if they steal a couple licenses? They paid for the first 200 seats" kind of thing.

But licensing can really be done in a measured way, so that you're offering the flexibility that your customers need and that you want to give them, but also protecting your revenue and ensuring that you're getting paid for all of your software that's being used.

MP: Definitely. And also you're making sure that you're a resource to your customer in a time of need: for example, the ability to ship out emergency licenses in case it hits 2 o'clock in the morning and the IT administrator just has frankly run out of all licenses and wants to be able to get an emergency license. How will they do that if you had a roll-your-own approach, right? Whereas with a third party licensing system, it's possible that you can log onto a portal and quickly request an emergency license that can be turned around fast, so that way at the end of the day you are actually a resource that the software publisher and your end users will be able to appreciate.

MV: You both mentioned during the course of the conversation portals and CRM systems and back end accounting systems. When some developers hear that, they maybe go, "Wow! That's a lot of integration work." So how easy is it for people to do that through your system? What are the actual connectors, and how much time does it take to deploy?

MP: There are extensive lists of connectors in our ability to work with CRM systems that are enterprise-wide: basically, systems such as SAP and a number of others. And depending on the size and complexity of the software producer is how long it will take us to implement. Typically, I wouldn't say that we're a high level integration, something like a very complex CRM system; however, there is some level of integration and I think process work involved in order to get a licensing program implemented correctly.

MV: So are there best practices that you guys have come up with that you give to your customers that says, "Here's the things you should be thinking about."

MP: Most definitely. During our engagement cycle and I think our Professional Services Department, also known as the Global Consulting Service, will be more than happy to walk you through the process of getting up and running quickly on the licensing program. That involves a discovery phase, as well as a requirements phase that clearly lays out what will need to be done from the software producer's perspective in terms of changes or process engineering in order for them to get quickly up and running on licensing.

MV: So if you both had to come up with some best advice for the listeners in this space, what would it be? Mitesh, two things that you think people should wrap their minds around, and then, Abby, we'll jump over to you with the same question.

MP: Right. I think the two things would be lower the cost of -- actually the two things would be add dollars to your bottom line by solving the challenges related to licensing, and save cost related to the operations of these licenses by making these operations more efficient.

AD: I think, since Mitesh has talked about kind of the high level why should you do it, I think my advice would be on the bringing this project together side, which is these are projects that do touch many different groups in an organization, so I think one of the things that we're realized is that it's important to talk to all kinds of different people when you approach a project like this. It's not just a development project; it's also product management needs to be involved, and your IT organization needs to be involved, your finance group may need to be involved, support definitely needs to be there, and to get everyone involved up front, bring them all together, educate the whole group on why this thing is going to really revitalize your business, and then go at it together as a team. That I think is sort of one of the keys to a successful implementation.

And I think that the prize that I see that many of our customers really find when they've completed one is that they find that they can really quickly bring new products to market and primarily using that feature clipping approach, that they're rapidly able to go after market segments to customize their products as they need to, to attack a new niche. And that ability to be fast really is a huge benefit for them in the competitive marketplace that everyone's facing today.

MV: I guess I would ask just one more simple question, but where can I find out more information about this, and how exactly should people get started?

MP: Macrovision is the number one provider for license management and operations, and I think the best way to get started is to go to www.macrovision.com. Abby, would you like to spell that?

AD: [Laughs] M-A-C-R-O-V-I-S-I-O-N. I think it's -- Macrovision is self-explanatory. And the product line that covers -- there's multiple products on the website, but the product line that covers software licensing and operations is called FLEXnet Publisher. And also for people who are interested in this issue of whether they should build or buy their own, there's a white paper written by IDC that is posted for download from the FLEXnet Publisher Web pages. That's certainly an interesting read and profile from customers who did decide to buy versus build and so can provide some insight into why they did that.

MV: I'd like to thank Mitesh and Abby for being on the show. This has been another Premium Edition of the Queuecast, sponsored by Macrovision, the global leader in software license management. And we wish you all the best of luck in your future endeavors.

MP: Thank you, Mike.

AD: Thanks, Mike.

Originally published in Queue vol. 5, no. 1—
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