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“Pay As You Grow” Electronic Licensing
A Practical Guide to Achieving Profitable Growth with Innovative Business and License Models for Intelligent Device Manufacturers

“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.
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“Pay As You Grow” Electronic Licensing

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.

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.

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.

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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“Pay As You Grow” Electronic Licensing

The FlexNet Producer Suite for Intelligent Device Manufacturers supports “Pay As You Grow” as well as additional capacity and usage-based business and licensing

models—from the simple addition of channels on a security system DVR to turnkey on-demand business systems provisioned on private clouds.

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A typical “Pay As You Grow” scenario enabled with Flexera Software solutions

Flexera Software Solution Helps Vendors Overcome “Pay As Your Grow” Challenges

By providing a complete set of secure command-and-control functions, Flexera Software’s solution enables technology vendors and service providers to overcome the three primary challenges associated with implementing “Pay As You Grow” business models: Flexible, granular control of capacity and features With Flexera Software solutions, vendors can structure “Pay As You Grow” models based on whatever capacity and feature packages make the most sense for their various target markets. Flexera Software’s proven technology is used in over 20,000 applications, from highly sensitive military applications and devices to low end consumer devices, providing a high level of assurance that customers and end users will not be able to utilize capacity and features for which they are not authorized. Flexera Software solutions can also be configured to allow customers to self-provision additional capacity and features in a way that confirms their acceptance of any applicable charges. In addition, Flexera Software solutions let vendors grant customers the ability to flexibly allocate capacity, features, licenses, and other resources across their virtualized and cloud environments based on their changing business needs. Streamlined activation, de-activation and allocation Flexera Software solutions greatly simplify the way vendors, service providers and/or customers change capacity and turn features on and off—as well as how they re-

allocate and/or replicate resources across their operating environments. Using an intuitive interface, vendors can remotely modify permissions for devices on customer premises both individually and in batch mode. Customers can also be provided with simple web-based screens that make it easy for them to modify permissions for both local and remote devices. Prompts, permissioning parameters, and other intelligence can be configured to further streamline monetization and prevent users from making problematic modifications to devices. For example, limits can be set on how capacity is re-allocated in virtualized environments so that some minimum amount of capacity is always retained for certain critical applications. Flexera Software also integrates with other business systems to further streamline monetization of “Pay As You Grow” deliverables. So, for example, when an order comes in via the ERP system, corresponding entitlements are automatically created and ready for the customer to view or activate. Or re-allocations of capacity can automatically populate fields in a change management system. High-credibility accounting for resource permissioning Flexera Software tracks and documents all modifications in resource and device usage—including dates, authorizations, and the specific changes made to capacity/feature access. Reports run against this documentation are obviously very useful for ensuring that all capacity and features are appropriately invoiced, as well as for discovering patterns and trends in activation that can be used to optimize marketing, sales, pricing and packaging strategies.


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“Pay As You Grow” Electronic Licensing

Resource and device usage histories can also be sent to customers or made available via online self-service account management for review and validation—as well as for their own internal chargeback and cost allocation purposes. While Flexera Software’s solutions are differentiated from both competing tools and internally developed mechanisms in many other ways, these three core capabilities are of primary importance when it comes to the practical, profitable enablement of “Pay As You Grow” business models. Flexera Software ensures that all value delivered to the customer is fully monetized, that “Pay As You Grow” processes are optimally streamlined, and that all resource and device usage activities are fully and credibly documented.

More reliable, robust and granular monetization Flexera Software’s solutions leverage our unmatched extensive expertise and experience in electronic software licensing and digital rights management. This makes our solutions significantly more robust than mechanisms developed in-house or alternative third-party products. Greater customer satisfaction The quality and completeness of Flexera Software’s solutions enhance the customer experience in multiple ways—from the speed and accuracy with which it allows your staff to respond to their change requests to the ease with which it allows them to re-allocate resources within their own data centers. Proven provider Flexera Software’s long history and impeccable reputation as a proven provider of electronic software licensing and entitlement management technologies brings differentiated expertise to your “Pay As You Grow” business and licensing initiatives. This expertise adds value across the execution of your “Pay As You Grow” strategy, including your go-to-market messaging and the resolution of billing issues with customers. “Pay As You Grow” represents a significant change in marketing, sales and customer relationship management. But it is a change that vendors must make if they are to survive and thrive in a marketplace of uncertainty. Flexera Software offers a complete set of solutions that make it much easier to navigate this change quickly, efficiently and reliably. Any company seeking to successfully adapt to current market conditions—while also gaining sustainable long-term competitive advantages—should therefore strongly consider adding Flexera Software’s solutions to its technology arsenal.

Key Advantages in a Marketplace of Uncertainty

It is not easy to achieve profitable growth in a business environment characterized by uncertainty, aversion to risk, and hyper-cautious spending. In such an environment, it is essential to be able to capitalize on every revenue opportunity—and to maximize margins. “Pay As You Grow” business and licensing models, properly executed, enable you to achieve these objectives. And Flexera Software delivers specific advantages when it comes to executing on those models. These advantages include: More near-term sales By using Flexera Software solutions to narrow delivered value down to any given customer’s cost tolerance, you can overcome price-based objections and close more deals. This is critical for generating cash flow and clearing inventories in times of weak demand. Greater lifetime customer revenue With the “Pay As You Grow” capabilities enabled by Flexera Software solutions, you can simply activate and monetize the additional capacity and features your customers require over time—instead of having to repeatedly compete with other vendors (and possibly lose) every time your customer goes through an upgrade cycle. Reduced cost of implementation Flexera Software solutions enable you to implement a full range of “Pay As You Grow” models without having to allocate your own limited resources to the development of secure permissioning mechanisms. The management capabilities provided by these solutions also help you minimize the ongoing cost of supporting “Pay As You Grow” models on a daily basis. Faster time-to-market Responding to current market conditions with a viable “Pay As You Grow” model is critical. Flexera Software solutions enable you to implement these models quickly enough to gain substantive competitive advantage over slower-moving competitors.

About Flexera Software

Flexera Software is the leading provider of strategic solutions for Application Usage Management; solutions delivering continuous compliance, optimized usage and maximized value to application producers and their customers. Flexera Software is trusted by more than 80,000 customers that depend on our comprehensive solutionsfrom installation and licensing, entitlement and compliance management to application readiness and enterprise license optimization - to strategically manage application usage and achieve breakthrough results realized only through the systems-level approach we provide. For more information, please go to:

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