"Pay As You Grow" Electronic Licensing

Executive Summary

Businesses today are operating in a marketplace of uncertainty. Most are still reeling from the economic downturn. And most are unsure about just how strong the recovery is likely to be—or whether it will actually sustain itself over the long term.

In this kind of market, corporate decision-makers are not likely to make large capital investments. Market uncertainty and volatility simply makes such investments too risky. Plus, many have depleted their capital resources to survive that downturn and/or no longer have access to their traditional sources of capital.

Technology vendors therefore need new strategies for growing revenue, marketshare and profits that are appropriate for today’s investment-shy customers.

One strategy currently gaining momentum to address this marketplace uncertainty is to offer a “Pay As You Grow,” business and license model which is often used by telecom and networking vendors. Under a “Pay As You Grow” model, vendors can permit customers to make relatively small initial investments in capacity and/or functionality—and then expand that investment incrementally only if and when the business need arises. This insulates the customer against the downside risk of over-investing, while providing the vendor with both present and potential future sales.

Vendors can face a variety of challenges when it comes to actually implementing “Pay As You Grow” business models. These challenges can include:

  • Ability to control and monetize the activation of additional capacity and features.
  • Simplifying activation, de-activation and allocation in order to control costs, ensure scalability and quickly respond to customer requests. Understanding resource and device usage to avoid misunderstandings with customers through clear, accurate billing.

Flexera Software provides a uniquely practical, effective and proven solution for overcoming these challenges. With FlexNet Producer Suite for Intelligent Device Manufacturers, technology vendors can readily activate, de-activate, and re-allocate capacity and features anywhere, any time. They can also provide their customers and channel partners with the ability to self-manage their devices with a 24/7 self-service web portal and accurately document these activities to support account management and customer service requirements.

By adopting the Flexera Software solution as a strategic enabler of “Pay As You Grow” business and license models, vendors can quickly capture current sales opportunities and differentiate themselves from their less flexible competitors. Just as important, they can ensure their participation in any future market upturn regardless of its timing or magnitude.

The “Pay As You Grow” Opportunity

“Pay As You Grow” business and software licensing models are extremely attractive to technology customers and vendors. For customers, “Pay As You Grow” enables acquisition of vital capabilities without inordinate upfront capital outlays.

For example:

  • A financial services customer can acquire two ports of on-site voice/data network switching capacity for a new branch office—and then dynamically activate more ports if and when it is actually necessary to expand the branch.
  • A university campus can pilot a digital signage system with rudimentary features and then add more sophisticated capabilities once it sees results from its initial deployment.
  • A media hosting service provider can allocate live streaming capacity to a music industry client for an event in Chicago one day and then seamlessly re-allocate that capacity to a sporting event in Atlanta the next day.

This ability to dynamically align expenditures with real business need is especially attractive to customers in today’s uncertain times, since financial decision-makers are leery about risking allocation of capital without being sure of subsequent returns. Also, many customers are concerned about other potential demands on their financial reserves— such as healthcare insurance premiums—so they want to hold as much cash in reserve as possible.

The “Pay As You Grow” model is also attractive to vendors, because it makes it easier to close more deals right away with today’s spend-wary customers. At the same time, this model also helps ensure that the vendor will get additional future business from the customer without the cost and risk of a separate new sales cycle. If customers have to buy a whole new device when upgrading from four ports to eight ports, there is a strong likelihood that they will delay the project and/or take the opportunity to see what other products are on the market. If they are able to just activate additional capacity, they probably won’t bother shopping around—as long as they are at least reasonably happy with what they already have.

The “Pay As You Grow” Challenge

Most technology vendors are not fully tooled up to deliver “Pay As You Grow” solutions to their customers. Or, if they have started to implement a “Pay As You Grow” delivery model, they have encountered a variety of challenges. Three primary challenges they face include:

  1. Ability to control and monetize the dynamic activation of additional capacity and features
    Vendors are rightfully concerned about installing devices that offer customers capacity and features in excess of what they are paying for. So vendors have to have a high degree of confidence that they are protected against any intentional or unintentional activation of any additional capacity and features by their customers in violation of the terms of sale.
  2. Simplifying activation, de-activation and allocation in order to control costs, ensure scalability and quickly respond to customer requests
    For “Pay As You Grow” to work in the real world, vendors must be able to readily activate, de-activate and re-allocate capacity and features as necessary— ideally via remote management. If they have to send someone on-site or engage in complex remote provisioning tasks, it will drive up their costs, limit the scalability of the model, and cause delayed responses to customer requests. Those delays can be especially problematic if they adversely impact the customer’s ability to do business.
  3. Understanding resource and device usage to avoid misunderstandings with customers
    Since customer invoicing under a “Pay As You Grow” model is contingent upon capacity and feature activation, vendors need to be able to account for the current and past states of installed equipment. This accounting must be sufficiently accurate to withstand customer scrutiny and disputes that may arise as a growing number of devices in the field are modified a number of times over the course of device ownership

It is important to note that vendors will typically want to overcome these challenges without having to re-engineer their existing product lines. Such re-engineering can consume development and production resources that are already constrained. Re-engineering of existing products can also unacceptably delay execution of “Pay As You Grow” models—resulting in the loss of both immediate sales opportunities and future incremental income.

Vendors therefore need to quickly and effectively overcome the above challenges in order to realize the revenue growth, competitive advantages, and brand differentiation that can result from the successful implementation of a practical, operationally efficient “Pay As You Grow” business model.

Enabling Technology for “Pay As You Grow” Business and Software Licensing Models

Flexera Software’s FlexNet Producer Suite for Intelligent Device Manufacturers is a comprehensive, end-to-end solution for software licensing, entitlement management and device lifecycle management which is an enabling technology for implementing and managing “Pay As You Grow” business models, as well as hundreds of other business and licensing models.

  • Embedded Software Licensing – allows manufacturers to capture customers at different price points, yet reduce the number of models and variants needed to meet customer needs while keeping costs in check with flexible configuration of capabilities and capacity
  • Entitlement Management – offers a single, holistic view and portal for customers and channel partners to self-manage software licenses and entitlements, capabilities and capacities embedded on devices as well as standalone software applications – enabling manufacturers to reduce manufacturing costs and complexities while improving customer and channel experience.
  • Device Lifecycle Management – automates device lifecycle processes for customers and channel partners including device activation, volume activation of license servers, re-balancing capabilities and capacity across devices and locations, de-activations, upgrades, returns and moves.

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