How are enterprise customers using your software?
Getting a clear understanding of how customers use your products is vitally important for software suppliers. Product managers are best equipped to deliver valuable products if they have clear knowledge about this. Data-driven insights, available from entitlement management (EM) systems, are essential for optimizing product road mapping, packaging, provisioning, and pricing decisions, all with the aim of delivering the best customer experience possible. All of these contribute to achieving strategic goals, such as facilitating shifts in monetization and deployment models, streamlining the quote-to-cash (Q2C or QTC) process, and ultimately accelerating growth and increasing recurring revenue.
Key to these efforts: aligning price (the expense for the customer) and value (the perceived utility) of your product. But this proves to be tricky without understanding of who your users are. "Lack of insights into user personas and their priorities" and "disparate systems that make it difficult to achieve single customer view" are among the top hurdles, as reported in the Revenera Monetization Monitor: Software Monetization Models and Strategies 2022. A comprehensive approach to entitlement management can help provide the insights that contribute to improved operational efficiencies.
Role of entitlement management
A software entitlement is the right to use a digital product, whether software, hardware, or IoT devices. An entitlement management system provides the software supplier and the product manager with insights into a wide range of essentials. It can:
- Maintain product data, fulfill orders, monitor license compliance, and deliver the right software applications to the right users. In the case of IoT devices, for examples, it shows, without ambiguity, what software goes to which devices, and which devices a customer is entitled to use.
- Provide access to varied products and services, including: software, hardware and IoT devices, various -as-a-Service products, and servitization (anything-as-a-service, XaaS). Entitlement support can be at the feature level or across multiple bundled offerings to minimize entitlement complexity.
- Support a wide range of monetization models (including perpetual, locked to a device, user‐based, subscription, usage, outcome, concurrent, or metered), reinforce the accuracy of monetization initiatives through effective fulfilment, and aid revenue recognition.
- Sync with the licensing system to illustrate usage behaviors, including license and product consumption (including across deployments, such as cloud, on-premises, SaaS, and embedded in devices), license compliance (and potential overuse or misuse that may contribute to revenue leakage), and use notifications about consumption vs. entitled quantities.
- Enforce the contract, including who may use the product, the device to which a license may be delivered, the parameters of the associated monetization model, warranty information, support, and other factors.
Technology companies are increasingly finding it valuable to improve their entitlement management initiatives. In the IDC PlanScape: Future of Digital Innovation -- Managing Customer Entitlements Efficiently, Mark Thomason, research director, digital business models and monetization, at IDC, highlighted the challenges of doing so: "While the job of EM seems simple, many companies experience inefficiencies and automation gaps that limit business model innovation, provisioning errors, and especially their ability to use EM data for customer 360 initiatives to drive insights and smarter automation." But a closer look at the applicability of entitlement management shows why it is valuable for product managers across the full sales cycle.
The value of understanding who and how
Entitlement management facilitates digging deeper into questions that help illustrate who is using software and how. Clarity into this helps product managers deliver products with staying power. Especially as the move to software-as-a-service (SaaS) deployments grows and as subscription monetization models become more popular, understanding customers’ preferences and usage behaviors is increasingly important to the overall customer relationship. Customers are most likely to continue their relationship with you if they find value from your product.
Knowing who is -- or isn’t -- using their entitlements is essential. Understanding why this is happening, aided by a 360 view of the customer, provides the product manager an opportunity to correct an underlying issue, whether it is occurring due to overuse, a customer or account being better suited to a different consumption model, a different license position, or a variety of other factors. Visibility into unauthorized usage and potential revenue leakage is also important, as it provides a path to revenue recovery and for creating new sales channels.
Entitlement management is also important because it can be automated to help retain customers and minimize customer churn, ultimately driving the critical metric of annual recurring revenue (ARR). Data-driven predictions about how customers are using their entitlements can help improve customer retention, illustrate where a shift in monetization models may be fitting for your product, grow ARR, and improve the overall company valuation.
Entitlement and usage data may also be integrated elsewhere in the business. For example, integrating entitlement data into larger analytics and business intelligence (BI) processes or with business platforms (e.g., your CRM or ERP), can help support and provide efficiencies across the entire QTC process.
Facilitating product management decisions
An effective entitlement management program can provide a single source of truth that helps streamline license delivery, mitigating the friction that’s common with multiple systems of record. It can also provide insights about customer usage, adoption of, and engagement you’re your products, aiding product managers with decisions for each phase of the product lifecycle.
When evaluating whether to build or buy an entitlement management solution, technology companies should consider a comprehensive set of desired features. Automating entitlement management for any current and potential future products can deliver operational efficiencies. DIY approaches may come with opportunity costs, particularly if staff don’t have previous experience in this area or due to the risk of possible exposure to security vulnerabilities. As is always the case with developers’ time, consider how developers may aid the process of creating an entitlement management system or the initiative might pull time and resources away from product innovation.
Knowing whether a customer is happy with your product is essential for having an accurate grasp on how likely a renewal is. Ideally, product managers have clarity into customer satisfaction well before renewal time. Knowing who is actually using their entitlements to your products is a must.
Victor DeMarines is the Vice President of Software Monetization Product Management at Revenera. Vic joined Revenera via the acquisition of Revulytics and was a founding member of the team since 2006. He is now responsible for leading the Software Monetization product management team. Prior to Revenera, Vic held senior product management positions at RSA Security (now part of EMC) where he drove product strategy for the company’s strong authentication, Smart Card, and enterprise Single Sign-On client products. He has also held senior product roles at Authentica where he was instrumental in defining product strategy for the company’s enterprise rights management and secure email solutions, and at AXENT Technologies and Progress Software.