Software Licensing – Don’t Think “Software Asset”, Think “License Entitlement”

It's probably heresy among many to suggest that we don't think of a software license as an asset. Anyone with SAM in their title responsible for managing compliance in their company is probably cringing at this thought. Why even suggest that software isn't an asset? Purchased software fits the definition of an asset as it's used within most organizations, and it's a well accepted perspective within the software industry.

It's not about "wordsmithing", but about how the words we use shape the way we think. And in some cases, the way we think, may limit possibilities and have unintended consequences.

It's certainly not wrong to think of software as an asset, but it is more powerful to think of software as a right-to-use, or an entitlement that entitles usage rights in the form of a software license. It is these usage rights that provide the value that will be licensed (and not just "tracked") and monetized. It's not the installed instance of a software image on a machine that provides value, but it's the effective usage of the software through its entire lifecycle that provides value and benefit. Instead of thinking of software as a physical device, like say a pencil, software should be viewed as a service that provides continuous value over its lifecycle. The value it provides can depend upon the entitlement of the software license, in essence the "who, what, when, where, and why" – who is using the software, what part of the software is being used, when it's being used, where it's being used, for what purpose it's being used. Certainly, trade-offs need to be made to simplify the purchase experience and not make every buying decision all about who, what, when, where, and why.

Companies that purchase a software license and think about its financial benefit to a business process or business task, and not just something to be tracked for purposes of "inventory management", realize that different license models can be applied to provide value that is a closer match to what the business needs. For example, a license model that enables the usage of extra software for peak periods during the year, or, enables easy access to more software in a portfolio for a particular business process will yield better business results.

The same applies to companies that provide software licenses, or "provision access". ISV's (and high-tech device manufacturers) use traditional ERP systems (that are built upon the premise of delivering physical goods), often fall short when they are trying to provide an entitlement to use a software license. The systems don't track the software entitlement over the lifecycle, and, awkward physical delivery processes don't lend themselves to tracking the deployment of software license rights. As a result, an entitlement that allows users to upgrade, and update their software over time, is typically not tracked well. In addition, traditional ERP systems don't track customers or end-users very well. As a result, you will see ISVs with a lot of manual processes. This is why the most productive ISVs are using an entitlement management system, and not just an ERP system to run their business.

If you want to make a small change in the way you think which can be leveraged into larger benefits, start to think "license entitlement" and not "software asset".

Categories: Entitlement Management, General

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