Software Monetization Featured Article

Cisco's View on Software Monetization Transformation- It's Not Just About Licensing Anymore

February 22, 2016

Software licensing in the days when software was delivered via physical media, On-Premise, was rather simple compared to today. Fulfillment, as those of us of a certain age will remember, was about opening a box, popping a disk into our PC, registering with the vendor, and then you were up and running.  Onetime fee- for a lifetime!

Things have certainly changed.  Today we are always on, always connected and everything is software-centric.  Now “E”verything is on-demand, “as a services,” and on any device, anywhere. Increasingly the hardware products are shifting to see their value-add from the physical device we once paid for to the information they can generate and the actionable insights they can report.  This includes the ways in which such products are designed, manufactured, packaged, supported, updated and priced.  Increasingly the demand is without service interruption in this digital software world.

Of course when it comes licensing and entitlement management and thanks to the Cloud, The Internet of Things (IoT) , the explosion of personal devices used for business applications,  mobility, and virtualization-, everything about how software is created, delivered, protected, packaged, priced and consumed is being disrupted and transformed. This has placed enormous pressure on ISV’s and hardware manufacturers.  There are immense challenges for the companies that have legacy licensing systems, scalability for those that were developed in-house, and for mergers and acquisitions.  In addition, to gain a competitive advantage, there is a need to include visibility on how customers are using the product, getting to markets fast, enforcing compliance, and staying ahead of security threats to protect their intellectual property (IP). 

Keeping up with the accelerating pace of change and growth has become a real challenge as well as an opportunity to provide differentiated value.  Recently TMC has the unique opportunity to speak to Manoj Tharakan, Sr. Manager at Cisco (News - Alert) Systems to explore what Cisco has done to address these challenges in licensing and to get some insight on how they plan to move ahead.   

TMCnet:  Why did Cisco feel that addressing this transformation in licensing was so critical?

 Tharakan:   In the 1990's and 2000’s you had a single licensing back office which somehow masked the complexities of disparate licensing technologies to present a somewhat cohesive customer experience. But along came the cloud and with that came the need to be able to rapidly adapt to new business models.

The traditional supply chain model of software fulfillment was suddenly challenged with a new need for integrations with other systems like mediation, rating and billing in addition with your traditional ordering and supply chain fulfillment process.  The question became how do you tie your customers together across this disparate complicated back office system that needs to now support your traditional business while also making new business models available? It also requires organizational alignment internally and challenges traditional IT practices of waterfall based delivery.  We recognized the need to change and to have a strategy and the tools to accomplish our goal of a simplified, secure, agile and manageable licensing environment that should help us grow our businesses.  

TMCnet:  Was there anything that was a real trigger? 

Tharakan: There were several factors, including the explosion of license key entitlements. However, a big one has been the commoditization and virtualization of hardware. In fact, the first trends of SDN made us realize that the node-lock licensing we used for all of our products did not work. We had to come up with something different.  We started working on hybrid models, and came up with licensing in the cloud.  This appraoch has a lot of benefits, the primary one being checking with central authority as to whether the user is entitled. It is what we call “Smart Licensing”, i.e., leveraging a cloud-based entitlement management system from a centralized system. 

We also wanted an end-to-end view where we could look at an organizational level the entire software journey from proof of purchase, through activation and usage to end of life issues to tie everything together.  Interestingly, what started as licensing problem quickly became a customer organization identity management solution challenge. In fact, it made sense for us to build out a better way to manage our customer organizational relationships.

TMCnet:  Can you give us some insight into what was the tipping point that convinced Cisco it had to find a better way?   Who decided to change?

Tharakan:  There was no aha! moment. It was driven by a strong Cisco culture and our collaboration across the company to meet common objectives that are aligned with company success. Engineering and IT recognized they needed a stronger handshake and deeper collaboration if optimal monetization was to be achieved. And, from a business units perspective, this needed it done across all of our products. It also had to done with a plan in place as it involves such things as governance of processes for rollout.

Who owns the rollout? The line of business (LOB) does. They know the customers.  That said, obviously the implementation of the back office, the cloud, etc, is from an implementation standpoint is owned by IT.

TMCnet:  In terms of the integration process- which ones were deemed critical?  What were the steps you took to get things rolling?

Tharakan:  The first thing tackled was the need to build a proof of concept (PoC) that we could share with customers since the changes needed to be done in the context of their needs and not just Cisco’s.  Since we were looking at this as an evolution and not a revolution in dealing with customers, and also as a means for us to transition smoothly to a new operating environment as well, we got reconfirmation that not all customers were connected or even wanted to be since they view licensing information as not just mission critical but proprietary.  We needed to solve offline solutions as well. 

Plus, to minimize the potential that new processes and practices could have internally and externally the rollout of the cloud-based management solution is only on new products.  We have been very careful that change management is not underestimated.

For example, training is important. Customers need to be ready.  Product management teams need to be ready.  We are working with customers personally and have, training videos, webinars. These efforts will be a lot bigger when our high runner products are migrated to this new licensing model.

TMCnet:  Can you talk about the implementation process and how easy or difficult it was?

Tharakan:  We believe we have made this simple for the customer which was the goal.  At time of fulfillment for certain product lines.  We let customer choose with options being staying with the old or going with the new with anticipation that we will be in a hybrid scenario for quite some time. 

As more customers get their own organizations ready for this switch, this becomes valuable. With Smart Licensing, fulfillment is almost instantaneous and we are taking away the biggest pain point of eliminating the headaches associates with node-lock licenses.  In addition, customers can understand the biggest benefit of allowing them to have visibility into all of the assets they own, and management is no longer on customer side which frees up people to do other things.

In fact, it brings up the question, “Why wouldn’t I want to do this.”  The business case is actually compelling since there is a real tendency to underestimate administration costs and integration challenges.  

It should be noted that while we are all used to this type of simplicity in obtaining, activating, updating and getting alerts on the software we use personally, there real important differences between the B2B needs when it comes to software licensing and entitlement management and B2C.  It requires all of the parts of a greatly expanded ecosystem to work together. And, there always the complexities of who has access to and can use what capabilities. That said, expectations are that dealing with software should be easy for buyer and seller and B2B needs to not just catch up with the times, but be ready for whatever comes next.   

TMCnet:  Any final thoughts on challenges, opportunities and what comes next?

Tharakan:  There are few to think about.  When your company is moving to a cloud-based approach, particularly for something so core to business operations as licensing and entitlement management, do not underestimate the organizational challenges in terms of moving to a new way of doing business.  You need to be able to explain to all stakeholders the value proposition.  This means getting executive buy-in, and making sure everyone knows how different the organization will look and why reorganization of roles and responsibilities provide enormous benefits. 

Compliance is important. Revenue leakage is not an option, and knowing what customers have and how they are using it, is critical.  Visibility and control are important for sellers and buyers. The more tools we have the better.  After all, we are improving the customer relationship since they know what they have from us and what they are using and what they are not.  This information is valuable to us since it enables us to change everything from packaging to pricing to timing in order to better serve the customer and provide differentiated value in what are very competitive markets.   

This concept of “Smart Licensing” is something we at Cisco are looking at as a means for illuminating challenges with compliance for things like third-party systems.

Finally, while rolling this out at the moment is our biggest challenge, going forward the lessons we have already learned are worth mentioning. 

First, you need to listen long and hard to your customers, because making their lives easier and not yours is the objective. Yours is to put the complexity behind the curtain. 

Second, change management is key.  How organizations get adoptions is critical, and we need to move away from looking at things as being about the technology to focus on how to explain and deliver technologies that will be adopted.

Third, the reason adoption can take time is as noted gated heavily by corporate culture.  For example, customers now view licensing as a necessary evil.  We look at this as providing the ability for all involved to see that making the move to next generation software licensing and entitlement management solves two things.  They are “Help me know what I own!  Help me know what I am using! “

We need to have customers realize they are getting maximum value from us and that is why having visibility is so important and why having centralized cloud model is table stakes.  Having real-time information about what assets are being used, and tying all of the information form a robust cloud-based entitlement management system covering all entitlementsb-b licenses, hardware, software images, rights to service contractsvis how we all move ahead. 

All of this needs to be part of a holistic plan about business process transformation based on increasing operational efficiencies, mitigating risks and creating sustainable value by enhancing the customer experience.  This is a lot more than merely moving to the cloud, or moving software monetization to the cloud.  It is why the people part of this and setting expectation requires so much attention.

Edited by Stefania Viscusi