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“Pay As You Grow” Electronic LicensingExecutive SummaryBusinesses 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 init ial 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, effect ive and proven solut ion 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 t ime. 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 activit ies 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 opportunit ies and differentiate themselves from their less flexible competitors. Just as important, they can ensure their participation in any future market upturn regardless of its t iming or magnitude.

The “Pay As You Grow” Opportunity“Pay As You Grow” business and software licensing models are extremely attract ive to technology customers and vendors. For customers, “Pay As You Grow” enables acquisit ion of vital capabilit ies without inordinate upfront capital out lays. 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 act ivate 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 sophist icated capabilit ies once it sees results from its init ial 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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This ability to dynamically align expenditures with real business need is especially attract ive to customers in today’s uncertain t imes, since financial decision-makers are leery about risking allocat ion of capital without being sure of subsequent returns. Also, many customers are concerned about other potent ial 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 attract ive to vendors, because it makes it easier to close more deals right away with today’s spend-wary customers. At the same t ime, this model also helps ensure that the vendor will get addit ional 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 act ivate addit ional 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” ChallengeMost technology vendors are not fully tooled up to deliver “Pay As You Grow” solut ions 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 act ivat ion of addit ional 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 intent ional or unintent ional act ivat ion of any addit ional capacity and features by their customers in violat ion of the terms of sale.

2. Simplifying act ivat ion, de-act ivat ion and allocat ion 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 act ivate, de-act ivate 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 cont ingent upon capacity and feature act ivat ion, vendors need to be able to account for the current and past states of installed equipment. This accounting must be sufficient ly accurate to withstand customer scrut iny and disputes that may arise as a growing number of devices in the field are modified a number of t imes 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 exist ing product lines. Such re-engineering can consume development and product ion resources that are already constrained. Re-engineering of exist ing products can also unacceptably delay execut ion of “Pay As You Grow” models—result ing in the loss of both immediate sales opportunit ies and future incremental income.

Vendors therefore need to quickly and effect ively overcome the above challenges in order to realize the revenue growth, competit ive advantages, and brand different iat ion that can result from the successful implementat ion of a pract ical, operat ionally efficient “Pay As You Grow” business model.

Enabling Technology for “Pay As You Grow” Business and Software Licensing ModelsFlexera 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 configurat ion of capabilit ies and capacity.

• Ent it lement Management – offers a single, holist ic view and portal for customers and channel partners to self-manage software licenses and ent it lements, capabilit ies and capacit ies embedded on devices as well as standalone software applicat ions – enabling manufacturers to reduce manufacturing costs and complexit ies while improving customer and channel experience.

• Device Lifecycle Management – automates device lifecycle processes for customers and channel partners including device act ivat ion, volume act ivat ion of license servers, re-balancing capabilit ies and capacity across devices and locations, de-act ivat ions, upgrades, returns and moves.

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Flexera Software Solut ion Helps Manufacturers Overcome “Pay As Your Grow” ChallengesBy providing a complete set of secure command-and-control funct ions, Flexera Software’s solut ion 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 featuresWith Flexera Software solut ions, 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 applicat ions, from highly sensit ive military applicat ions and devices to low end consumer devices, providing a high level of assurance that customers and end users will not be able to ut ilize capacity and features for which they are not authorized.

Flexera Software solut ions can also be configured to allow customers to self-provision addit ional capacity and features in a way that confirms their acceptance of any applicable charges.

In addit ion, Flexera Software solut ions 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 act ivat ion, de-act ivat ion and allocat ionFlexera Software solut ions great ly 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 operat ing environments. Using an intuit ive 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 monetizat ion 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 crit ical applicat ions.

Flexera Software also integrates with other business systems to further streamline monetizat ion of “Pay As You Grow” deliverables. So, for example, when an order comes in via the ERP system, corresponding ent it lements are automatically created and ready for the customer to view or act ivate. Or re-allocat ions of capacity can automatically populate fields in a change management system.

High-credibility accounting for resource permissioningFlexera 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 addit ional capacity and usage-based business and

licensing models—from the simple addit ion of channels on a security system DVR to turnkey on-demand business systems provisioned on private clouds.

Device Ident ityDesired Capacity

License configurat ion

(License Response)

Init ial Capacity:60 SD channels20 HD channels

Increased Capacity:120 SD channels40 HD channels

Total Capacity:180 SD channels120 HD channels

Init ial C60 SD 20 HD

city:s

Total C180 SD120 HD

ity:elsels

Increas120 SD40 HD

DEVICE CAPACITY

Configure Capacity

Device Manufacturer End Customer

INTERN

ET

CustomerPortal

Ent it lementManagementBack-office

DeviceManagement

Console

CustomerEnt it lement

Server

A typical “Pay As You Grow” scenario enabled with Flexera Software solut ions

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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 validat ion—as well as for their own internal chargeback and cost allocat ion purposes.

While Flexera Software’s solutions are differentiated from both competing tools and internally developed mechanisms in many other ways, these three core capabilit ies 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 activit ies are fully and credibly documented.

Key Advantages in a Marketplace of UncertaintyIt is not easy to achieve profitable growth in a business environment characterized by uncertainty, aversion to risk, and hyper-caut ious spending. In such an environment, it is essent ial 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 object ives. And Flexera Software delivers specific advantages when it comes to execut ing on those models. These advantages include:

More near-term salesBy using Flexera Software solut ions to narrow delivered value down to any given customer’s cost tolerance, you can overcome price-based object ions and close more deals. This is crit ical for generat ing cash flow and clearing inventories in t imes of weak demand.

Greater lifet ime customer revenueWith the “Pay As You Grow” capabilit ies enabled by Flexera Software solut ions, you can simply act ivate and monetize the addit ional capacity and features your customers require over t ime—instead of having to repeatedly compete with other vendors (and possibly lose) every t ime your customer goes through an upgrade cycle.

Reduced cost of implementat ionFlexera Software solut ions 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 capabilit ies provided by these solut ions also help you minimize the ongoing cost of support ing “Pay As You Grow” models on a daily basis.

Faster t ime-to-marketResponding to current market condit ions with a viable “Pay As You Grow” model is crit ical. Flexera Software solut ions enable you to implement these models quickly enough to gain substant ive competit ive advantage over slower-moving competitors.

More reliable, robust and granular monetizat ionFlexera Software’s solut ions leverage our unmatched extensive expert ise and experience in electronic software licensing and digital rights management. This makes our solut ions significant ly more robust than mechanisms developed in-house or alternat ive third-party products.

Greater customer sat isfact ionThe 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 providerFlexera Software’s long history and impeccable reputation as a proven provider of electronic software licensing and entit lement management technologies brings differentiated expertise to your “Pay As You Grow” business and licensing init iatives. 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 solut ions that make it much easier to navigate this change quickly, efficient ly and reliably.

Any company seeking to successfully adapt to current market condit ions—while also gaining sustainable long-term competit ive advantages—should therefore strongly consider adding Flexera Software’s solut ions to its technology arsenal.

About Flexera SoftwareFlexera Software is the leading provider of strategic solut ions for Applicat ion Usage Management; solut ions delivering cont inuous compliance, optimized usage and maximized value to applicat ion producers and their customers. Flexera Software is trusted by more than 80,000 customers that depend on our comprehensive solut ions- from installat ion and licensing, ent it lement and compliance management to applicat ion readiness and software license optimization - to strategically manage applicat ion usage and achieve breakthrough results realized only through the systems-level approach we provide. For more information, please go to: www.flexerasoftware.com

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Flexera Software LLC1000 East Woodfield Road, Suite 400Schaumburg, IL 60173 USA

Schaumburg (Global Headquarters):+1 800-809-5659

United Kingdom (Europe, Middle East Headquarters):+44 870-871-1111+44 870-873-6300

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Copyright © 2013 Flexera Software LLC. All other brand and product names ment ioned herein may be the trademarks and registered trademarks of their respect ive owners. FPS_WP_PayAsYouGrow_Feb13