WP Entitlement

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ENTITLEMENT MANAGEMENTExploring the Potential of Access Rights and Licensing


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ENTITLEMENTS: RECOGNIZING THE NEED

In the early days o computing, sotware was thought o by system vendors almost as

a necessary evil that made the hardware do something useul. It was oten thrown

in as an integral part o the system, with virtually no consideration given to its real

value or even the vendors ongoing rights in its own invention (unlike the hardware,

which was well-hedged by a number o patents).

As an independent-application sotware industry arose to solve specic problems or

dened groups o customers, it became clear that new methods o doing business

were needed. Because these vendors did not have a hardware revenue stream on

which to piggyback their products, they clearly needed some means to monetize the

sotware itsel. And, even though they might sell thousands or millions o exact

copies o their intellectual property, they clearly needed a way to protect their sizeable

investment in that IP.

The answer to both problems turned out to be the novel concept o entitlement. To

understand what an entitlement is, consider the dierence between buying a le

cabinet or the oce and buying, say, Microsot Excel.

When a customer buys a le cabinet, he literally owns it lock, stock and barrel, and may

use any and all eatures o that piece o urniture any way he wishes. He can ll it with

les, move it to another acility, disassemble it, use it as a model to make a similar-

looking cabinet (as long as he doesnt copy any patented eatures), or sell it. Once the

cabinet is paid or, the customers relationship with the supplier is basically nished.

However, when that customer purchases Excel, he doesnt own the code or logic o

Excel by any manner or means; what hes really paid or is a right to use that copy o

Excel, according to terms and conditions dened by Microsot and enshrined in a

license agreement. In act, what hes actually bought is an intangible entitlement. And,

unlike the cabinet case, this is clearly the beginning not the end o a lasting,

nuanced and interdependent relationship between the customer and his vendor.

Entitlements are limited rights to use a product, or specic eatures or capacities o a

product. Over time, theyve evolved rom their original orm (virtually unrestricted and

perpetual) to todays bewildering variety, where specic rights may be based on or

include:n The number o concurrent users o a sotware application

n The number (and serial numbers) o servers that can run a shared application

n The specic machine running a desktop application

n A specic period o time

n The capacity o the server on which an application runsn A specic set o product eatures

n The right to receive updates and/or support under a maintenance agreement

As sotware and rmware have become indispensable to more and more high-tech

appliances, vendors such as cell phone and handheld device makers, telecom switch-

gear manuacturers and myriad others who dont really think o themselves as

sotware publishers have increasingly ound it very benecial to adopt the entitle-

ment model o doing business. Among other benets, the approach enables the

vendor to:

Entitlements are limited

rights to use a product, or

specifc eatures or

capacities o a product.

Over time, theyve evolved

rom their original orm

(virtually unrestricted and

perpetual) to todaysbewildering variety...


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n maximize both revenue and airness by charging users or only what they use, and

or only as long as they use it;

n control manuacturing and distribution costs by shipping every customer the same

ull-eatured product, but then enable only those eatures a given user wishes to pay

or by simply emailing him/her the appropriate sotware key.

The Double-Edged Sword

As benecial as the entitlement regime has been or technology vendors and their

customers, it also brought with it a signicant inormation-management problem. The

vendor must now maintain records on all o the attributes that their entitlements are

based on, or every shipped product and installed customer, over thefull lifecycle o

that product and that customer. Once a vendor expands beyond a ew dozen product

SKUs and a ew thousand customers, the problem rapidly becomes unmanageable at

any reasonable cost structure without automation.

Further, customers and channel partners along with the vendors sales operations

sta need to have timely, online access to the entitlement database. Why? Consider

that every change involving a user on any o those attributes must minimally be

recorded, and may result in a dollar charge; and then consider the myriad o changesthat go on routinely in corporations, rom eature upgrades through acility moves, to

mergers and acquisitions. A vendors support sta would simply balloon uncontrolla-

bly, unless customers and channel partners are empowered to answer many o the

pre-event what-is and to record many o the change events.

ENTITLEMENT MANAGEMENT: FINDING A SOLUTION

Many a CFO has asked, Why cant we handle this problem within our enterprise

resource planning (ERP) system? Such systems are the backbone o most equipment

vendors operations; theyre adept at managing linear production operations, rom theacquisition o raw materials, through production and distribution, to invoicing and

accounts receivable. I this were all that were needed i.e., i the company simply

made le cabinets, as in our introductory example then an ERP would be enough.

The problem, o course, is that ERP systems were designed or the linear, one-and-done

fow o tangible products, and not or the complex, never-ending world o intangible

entitlements. They simply have no knowledge o, or support or, the most basic

entitlement concepts.

It is sometimes tempting or the in-house IT unction to oer to develop a custom

entitlement management solution, either rom scratch or by modiying the companyERP system. In most cases, this is a decision that will eventually come to be regretted,

or a number o reasons:

n typically, the complexity o entitlement management is greatly underestimated...

which means that so is the requisite development eort;

n upon completion, IT will then be saddled with a substantial maintenance job, and a

never-ending wish-list backlog as product managers dene new entitlement types;n i the choice was to enhance the installed ERP, then each uture ERP release may

occasion a mad scramble to keep the entitlements engine running.

It is sometimes tempting

or the in-house IT unctionto oer to develop a custom

entitlement management

solution, either rom

scratch or by modiying the

company ERP system.


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There are commercially-available, vendor-supported applications designed specically

or entitlement management. Outsourcing this unction prevents all o the disadvan-

tages o IT resource consumption, uncertain/late delivery o needed unctionality, and

possibly also the risk o the entitlement application going dark or some period

ollowing ERP upgrade releases. Outsourced sotware management extends existing

business systems like ERP and CRM by handling the specialized tasks o entitlement

management, while integrating with those enterprise applications to meet broader

operational/nancial needs.

Whether the choice becomes an internal or an outsourced, vendor-supported applica-

tion the eatures required remain the same. The specic nature o entitlement

management demands a specialized, purpose-built solution, designed around the

requirements o entitlement management.

The key characteristics o a successul entitlement management solution are:n Ability to manage all o the details related to entitlements (time, quantity, product/

eature, status, parties)

n Support or all o the potential transactions that can occur against an entitlement

(activations, expirations, renewals, splits, merges, moves, modications, ownershiptranser, etc.)

n Support or customer and channel partner sel-service (but with access limited to

only the inormation required or specic authorized transactions)

n Support or relationships between and across entitlements

Entitlement management not only maintains the rights to a particular product but

also acilitates in added revenue streams through turning on and o keys. The return

on investment includes lowered operating expenses, well-managed accounts and

improved customer service. Eective entitlement management protects your present

and uture investments by unlocking the ull potential to the established rights and

keys to the end-user.

www.moduslink.com

Australia China Czech Republic France Hungary Ireland Japan Korea Malaysia Mexico Netherlands Singapore Taiwan United States

ModusLink Open Channel

Solutions, Inc. and Poetic

ModusLink OCS is a leading provider

o entitlement and e-Business

management solutions and services,

including its agship Poetic

Licensing Management System.

ModusLink OCS works with industry-

leading sotware publishers, digital

content providers and OEMs to more

eectively manage volumes and

multichannel licensing programs,including ordering, ulfllment,

activation, registration services,

upgrades and proactive subscription

renewals.

PHONE:

781.407.3900EMAIL:

[email protected]

Visit www.moduslinkocs.comor more

inormation and product details.

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