So this is one of the more interesting problems that Software Development Companies are faced with. While this should be obvious to anyone in business, it is amazing how few pay attention to it. Imaging how difficult it is to predict your revenue stream when you have customers that are NOT REQUIRED to pay in order to use your software. But why should they? Your own policies actually gave them permission to NOT pay you (e.g. via the grant of a “perpetual” license…) Here is a situation that ACTUALLY happened!

Below is a screen capture of an excerpt from the EULA (End User License Agreement) of a publicly traded Software Company. Notice the highlighted language and the “power” that it grants the customer/end-user making the purchase.

Now, why would this even be offered to a customer?!? The likely answer is that the company did one of two things:

1 – Offered similar Terms and Conditions based on what their existing competitors were doing with their customers and within the industry.
2 – They standardized the Terms and Conditions based on large customer purchases of their tools that forced this type of language to exist (easier to change the standard document, than issue separate agreements to separate customers).

There will always be other conditions which would have lead to these types of Terms and Conditions to be in place (idiocy comes to mind), but these two are likely the reasons given our experience with customers.
The Obvious Problem, and the Expense of your Revenue Stream!
The biggest problem with software companies using terms like this with their customers is very straight forward – they do not have control (over anything). The Software Company has effectively eliminated their ability to predict their revenue stream and increased their costs to preserve it by giving Customers/End-Users control over their use of the Software. Here is an example of the amount of time, resources and expense required to capture a maintenance renewal (this is an ACTUAL accounting):

Target Maintenance Renewal: $350.00
Target Date for Renewal: March 30, 2009
Method of Capture: Internal Sales Representative (using Telephone/e-mail to get Credit Card or P.O. #)

The Process: (notice it starts over 2-MONTHS before it is due)
January 6, 2009 – Call to Customer – Left 1 VM about Intent for Renewal coming up in March.
January 8, 2009 – Call to Customer – Left 1 VM about Intent for Renewal coming up in March.
January 9, 2009 – Call to Customer – Left 1 VM about Intent for Renewal coming up in March.
January 13, 2009 – Call to Customer – Left 1 VM about Intent for Renewal coming up in March.
January 14, 2009 – Call to Customer – Left 1 VM about Intent for Renewal coming up in March.
January 16, 2009 – Call to Customer – Left 1 VM about Intent for Renewal coming up in March.
January 20, 2009 – Call to Customer – Left 1 VM about Intent for Renewal coming up in March.
January 22, 2009 – Call to Customer – Left 1 VM about Intent for Renewal coming up in March.
January 23, 2009 – Call to Customer – Customer said to stop calling until the Renewal is Due.
The Month of the Renewal
March 10, 2009 – Call to Customer – Left 1 VM about Intent for Renewal at end of March.
March 13, 2009 – Call to Customer – Left 1 VM about Intent for Renewal at end of March.
March 16, 2009 – Call to Customer – Left 1 VM about Intent for Renewal at end of March.
March 17, 2009 – Call to Customer – Left 1 VM about Intent for Renewal at end of March.
March 19, 2009 – Call to Customer – Left 1 VM about Intent for Renewal at end of March.
March 20, 2009 – Call to Customer – Customer (very upset) sent an e-mail outlining the following.

,
Thanks for the warning about the update.

We have downloaded all of the latest versions and tested them to our satisfaction. All seems to be in good working order (love the new installer you guys did).

Since everything appears to be in good order, we do not see a need to renew maintenance at this time as we can continue operate without it on the latest version(s) of your tools without any issue.

If you had not bugged the heck out of me in January about a trivial renewal, or recently this month March… We might have just upgraded in the normal course of renewals.

SO HOW MUCH DID THIS ACTUALLY COST THE COMPANY FOR A $350 ORDER THEY DID NOT GET!?!? Answer: At LEAST $350 in time and phone calls to contact the customer.

What if Ntiro-LM Hosted Licensing were used?
If Nitro-LM was used for the registration and licensing of the software, the Software Company would have been kept informed about what their clients were doing with their software. Nitro-LM can track the usage behaviors of the end-users, automatically monitoring and reporting when things are occurring and more importantly when they are not. This is CRITICAL information that your company needs to understand where you are putting your time and effort into capturing revenue. Without the knowledge of where to put your resources (e.g. sales and marketing) to continue to maintain your revenue stream – you will FAIL!

But simply introducing Nitro-LM into the equation does not guarantee success. It will however help to stop the leaking of money from your organization. In order to stop the leak completely, a change in business approach with your customers would likely need to be carefully evaluated – specifically not granting “perpetual” licenses. But no one thinks of actually implementing the obvious.

The bottom line is that simple changes to how things are done in the company can have a HUGE impact in the company’s bottom line. Imagine NOT trying to call ALL customers, but ONLY those who needed attention (those who are not using your product on a regular basis). How do you know this? Nitro-LM can tell you.