Managing Software Entitlements and Billing: How Usage Data Supports Streamlined Processes

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Read more about author Victor DeMarines.

At some point in your life, you’ve probably joined a gym. In doing so, you had to decide what type of membership was right for your fitness goals and at the right price point for your budget. Maybe it was an all-access pass, billed monthly or annually, with unlimited use of the facility, including the weight machines, tennis courts, pool, and even fitness classes or pickleball lessons. Or maybe you bought a more limited membership, such as pay-as-you-go access, or unlimited access to some features (such as the weights), but with a limited number of passes to premium features (such as one entry to the pool per week).

This tangible example of access rights also demonstrates what software buyers evaluate when they’re considering which entitlements (aka “use rights”) to purchase. Software companies must be aware of buyers’ considerations and use patterns, then package and sell their offerings in all the ways that meet customers’ needs. Ultimately the goal is to keep them engaged with the product, maintaining a positive and ongoing customer relationship. Doing so means that suppliers must rely on usage data and ensure that it’s used efficiently by entitlement and billing management systems.

The Role of Usage Data

The success of a software business relies in large part on the ability to streamline operations and drive an efficient quote-to-cash (Q2C) process. Clear data-driven insights into usage are essential. Siloed efforts, cumbersome manual processes, and gaps in functionality can become impediments. Instead, ensuring that your billing management and entitlement management systems access the same usage data can help streamline operations.

Accurate product usage data provides insights that can drive informed decisions about your products including their features, how they are marketed and monetized, piracy/overuse/misuse, and customer churn risk. For example, if the gym means to capture usage around time of day, duration, and even use of certain equipment, they leverage this to define different subscription types and provide better price to value. Similarly, by delivering clarity into how users engage with your software, usage data allows a software supplier to proactively optimize their products to meet customers’ needs and to offer the deployment and monetization models best suited to how products are used.

Entitlement Management

Does everyone at the company need unlimited access to all the features of your software? Or is access time-based, such as for a particular project? Or do some users need access to your entire suite, while others need limited access to particular features? The answers will vary based on actual or intended usage, also determining which entitlements are most appropriate for users.

Entitlement management refers to the way in which users’ access to software, devices, systems and content is administered. Entitlement management solutions provide software producers (along with their channel partners and their end customers) control over who has access to specific resources. Just as a membership card might allow a gym user into the facility and to go to the weight room, entitlement management is what allows someone to log in to a software product and access the specific features to which they have access.

Billing Management

Software suppliers must not only provide the access to software that their customers need. They must accurately track users’ access, enforce limits, and monitor usage trends. This data is necessary in order to bill customers correctly. It also allows the suppliers to employ usage analytics to evaluate how entitlements can be optimized – both to best meet their customers’ goals and to optimize their own revenue streams.

Billing management is what helps businesses organize billing processes (billing, invoicing, and payment collections). While often handled separately from entitlement management, billing overlaps with entitlement management. If, for example, a user pays based on metered usage or on consumption, the billing system must have accurate usage data in order to bill correctly. If a software user pays for a subscription, paying monthly or annually, the billing system must have accurate usage data regarding when the term is expiring and when the license should be billed for renewal.

The Value of Centralization

Entitlement management and billing management can overlap in functionality. If not evaluated together, initiatives can be disjointed and wasteful. Instead, centralized entitlement management – which provides a consolidated view into customer use rights, usage data, and transaction lifecycles – aids in optimizing workflows. A centralized approach can support innovation and improve ROI, all while ensuring that customers are able to buy and pay for software the way they want.

Multiple factors drive the need for optimizing how entitlement and billing are handled. Software businesses are looking to improve how they monetize their user rights offerings, all while streamlining operations and the Q2C process. Additionally, as hybrid monetization and deployment models become increasingly popular, suppliers must be able not only to deliver perpetual or subscription monetization, but monetize temporary access, metered access, consumption/usage-based access, and/or outcome or value-based access.

Both suppliers and customers gain predictability through insights from usage data. Effective data management means that:

  • Suppliers can measure churn or retention risk, gain clear insights into sales analytics, prevent revenue leakage identify monetization strategies for growth (such as cross-sells, upsells, and renewals), and align the price of their products with the value (as perceived by customers) in order to secure the recurring revenue that’s only possible with strong customer relationships.
  • Customers gain through visibility into data about their usage: who is using their entitlements, what they’re using, and the value that they’re getting out of their investment in a particular application or suite of applications.

Sharing product usage data can help illustrate entitlements and feature adoption to make sure that customers optimize the value they receive from their investment in your software. Just as you likely considered which gym membership was most appropriate for your unique needs, your software customers are evaluating which configuration best meets their needs. Make sure that your entitlement and billing operations are supported by the usage data to meet your customers’ needs and those of your business.