I bet that made your ears perk up a bit, didn’t it?
Your CFO probably has the same type of reaction when the topic of revenue recognition rears its head. After all, it is one of the most critical elements in your business’ machinery.
Customers frequently ask me about the impact license enforcement and license key delivery can have on a company’s ability to recognize revenue. This indeed can be a touchy subject, so I should start by making a few foundational statements.
I will not suggest how your company should manage revenue recognition nor do I intend claim the revenue recognition practices are acceptable or VSOE compliant. Your company’s finance team should be the ultimate authority as to what is acceptable for your business. I encourage any business considering license enforcement to ensure your CFO is will deeply engaged in your license delivery processes.
I will, however, discuss a number of revenue recognition techniques and best practices that I have seen used by multiple successful companies with revenues over a half billion per year.
“It works, but it is old school”. That is how I’ve heard many business leaders describe their longstanding licensing implementations lately. So what is next for this space? As a long time software licensing business and implementation consultant I have the opportunity work with some of the industry’s leading minds in this area and can confidently say that I have seen the future of software license enforcement and it revolves around, you guessed it, the cloud.
Licensing is a unique experience for every organization, with distinctive business goals and custom business process. More often than not, the challenge to making licensing work is far from a technical problem; it is a business integration or project management problem. To be successful, software publishers need to adopt a top down approach: defining their software licensing vision and then fine-tuning their license enforcement and management processes and technologies. Consensus must be built, processes must be defined and technology must be aligned with these objectives. This is where I come in. With over 18 years of experience building, managing, and evolving some of the world’s most complex licensing ecosystems the least I can do is share some of what I have learned!
I don’t have many pet peeves in life. Okay, my kids will tell you I’m the typical dad who gets irritated when they leave the lights on in their rooms and monkey with the thermostat. But besides that, I roll with things pretty well.
Then comes perhaps my only work-related peeve: the misuse of the term “license”. I am sure it stems from my IBM days where teams of gifted lawyers spend oodles of cycles slicing, dicing, chopping and julienning seemingly simple concepts and produce software license agreements of Tolstoyian proportions.
Story time. Some time ago I worked with a software company who was mostly convinced switching software licensing technologies would be in their best interest. One problem though: their hesitation was not around cost (financial investment, development effort, support impact, external and internal impact) but instead revolved around the thought of to giving their customers “double entitlements”. The concern was that each customer would already hold a set of license keys that would run the current and prior versions of the software and would *then* be given an additional full set of keys for the new version sitting on new technology, thereby doubling the number of software licenses their customers could potentially run. Sidebar: switching licensing technologies does not automatically result in double entitlements.
I have spent the last couple of decades working for (not just with) major ISVs as the person responsible for “making it all work”. I was the guy the executive team tasked with putting a plan together that showed how we could protect our revenue stream, how we could give customers tools to keep themselves compliant, how we could get better insight into understanding our customers’ product deployment patterns, selecting the right licensing models and policies, selecting the right licensing technology and vendor… all while somehow engineering a good customer experience without upsetting the apple cart. Sound familiar?