A Practical Guide to Achieving Profitable Growth with Innovative Business and License Models for Intelligent Device Manufacturers

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

2. “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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3. “Pay As You Grow” Electronic Licensing
3Flexera Software: FlexNet Producer Suite White Paper Series
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.

4. “Pay As You Grow” Electronic Licensing
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Flexera Software Solution Helps Manufacturers
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.
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.
Device IdentityDesired Capacity
License configuration
(License Response)
Initial Capacity:
60 SD channels
20 HD channels
Increased Capacity:
120 SD channels
40 HD channels
Total Capacity:
180 SD channels
120 HD channels
Initial C
60 SD
20 HD
city:
s
Total C
180 SD
120 HD
ity:
els
els
Increas
120 SD
40 HD
DEVICE CAPACITY
Configure Capacity
Device Manufacturer End Customer
INTERNET
Customer
Portal
Entitlement
Management
Back-office
Device
Management
Console
Customer
Entitlement
Server
A typical “Pay As You Grow” scenario enabled with Flexera Software solutions

5. “Pay As You Grow” Electronic Licensing
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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.
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.
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.
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 solutions-
from installation and licensing, entitlement and compliance
management to application readiness and software 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: www.flexerasoftware.com

6. Flexera Software LLC
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Suite 400
Schaumburg, IL 60173 USA
Schaumburg
(Global Headquarters):
+1 800-809-5659
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For more office locations visit:
www.flexerasoftware.com
Copyright © 2013 Flexera Software LLC. All other brand and product names mentioned herein may be the trademarks and registered trademarks of their respective owners.
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