The Software Company Back Office: A House of Cards
Back-office software technologies are an integral part of the back-bone that supports business. However, when the “enterprise” using enterprise resource planning (ERP) software happens to be a software company, back-office systems fall short of providing critical flexible support. Manual workarounds for processes such as recognizing subscription license revenue, reconciling entitlements, and dealing with a contract paper trail have been nearly good enough in the past, but fixing operations is a key requirement for many software companies.
Does the back office within software companies matter? Just ask the customer who is still waiting for the correct activation code months after their PO was processed. Or, the prospect who just wants to know how much it costs and what they need, but keeps getting different answers from everyone that he asks. Or, the partner who isn’t able to fulfill customer orders or answer customer questions because the licensing portal rarely reflects the proper entitlements. The back office also matters a lot to the product manager who can’t respond to competitive pressures (or create a new opportunity) with a new licensing approach because the back office can’t support it and won’t be able to do so for months.
Software licensing operations impacts the daily business of a software company as well as its partners, customers, and even shareholders. Poor practices and technologies can reduce business agility, create manual work, increase the likelihood for error, and compromise the company’s relationship with its partners and customers. Most software companies’ back offices show plenty of room for improvement.
Part of the challenge is that there are many stakeholders but no clear owner. Product management, engineering, customer support, legal, sales — all of these teams are impacted by licensing and entitlement management, but most can work around poor processes and technologies to meet their KPIs even if they are less efficient or effective than they otherwise could be. Foundational business issues, such as the lack of a top-down operational strategy, can exacerbate the dysfunction. Better technology won’t make such dysfunction go away.
The good news is that small improvements can have a big impact. To start addressing back-office dysfunction, software companies should:
- Determine ownership and provide appropriate resources and recognition
- Develop a philosophy for functions such as compliance enforcement
- Get buy-in from management and include establishing a clear connection between operations and revenue — whether gained or lost
- Build a common technological framework
- Plan for ongoing change
The problems caused by poor back-office support contribute to the challenges —such as new market entrants with more flexible models —that traditional software businesses face in responding to competitive pressures. Just like back pains, poor back-office issues impact every move a software company makes. You can ignore these issues in the short term, but failing to address them can end up being debilitating in the long run.