Empowering Resellers to Help Themselves

Categorieën: Licensing

Selling consulting-intensive and complex software in one‘s own region is already a challenge – doing so globally is nearly impossible for small and medium-sized software vendors on their own. The solution to this challenge is local dealers who speak the customer‘s language, know and understand local requirements and conditions, and refine the software with add-ons. This article looks at the handling of creation, delivery, and billing of licenses to local dealers.

On this topic, we can speak not only from our customers‘ experience but also from our very own experience at Wibu-Systems. We sell our CodeMeter licenses to our subsidiaries and partners worldwide, and they in turn sell them to software vendors in their regions. Like many software vendors, we also rely on subscription models, which we will discuss in detail, especially regarding billing.

Production “In Stock“

One possible strategy is to produce licenses in advance and store them at the dealer‘s location. This strategy has a major advantage: You have the same workflows as with hardware products. You produce, store, and ship them to customers and dealers. The dealer can decide which items to order and whether to store them in an intermediate warehouse if necessary. Another advantage is that the production of your licenses is done by your production; this sounds logical and is quite old-fashioned.

From my experience, the disadvantages outweigh the advantages. First, every dealer understands why they pay for hardware upon receipt, with the rare cases of consignment goods excepted. However, with software, everyone expects it to be billed only upon sale to the user. Second, the start of the warranty, maintenance, or subscription period is completely unclear at the time of production and requires an additional feedback channel. And the third disadvantage is the combinatorics with complex licenses. Which combination of licenses do you stock? Or do you prefer to produce individual licenses for each function? The risk of not having what you need in stock is as high as the risk of catching unsellable dead stock.

Production “On Order“

The alternative is obvious. The dealer orders the license in a configuration they want. This order is recorded in your ERP system and triggers the production of the individual license.

The advantages are clear: billing upon order, no “ wrong“ licenses in stock, analogous processes to individually configured hardware, and warranty, maintenance, or subscription periods are already determined at the time of production.

However, there is a significant disadvantage: Depending on your processes and time zone delays, it can take several hours to days from order receipt through order recording and production to delivery.

Point System

I would not want to withhold the option of a point system from you. The customer or dealer buys a number of points from you. Functions in the software have corresponding values.

You produce the points and put them in stock. The dealer stocks up on them. When configuring the software, the dealer transfers the points to the customer.

Personally, I am not a fan of such a solution, as it mainly loses transparency about which feature was sold how often. Also, subscription and maintenance contracts are difficult to depict. Providing proof of the warranty period becomes more complicated. Support processes like “lost points“ increase complexity manifold. Of course, all of this can be implemented with CodeMeter, and there are successful project use cases. But let‘s first look at a fourth alternative before you make a final decision.

Creation “On Demand“

From my point of view, the most modern and flexible solution is to give your dealers the ability to generate licenses on demand. This is also the solution we at Wibu-Systems have implemented for our own licenses; of course, using CodeMeter, CodeMeter License Central, and CodeMeter License Portal.

The dealer creates the license in CodeMeter License Portal, which then creates it in the background in CodeMeter License Central. In our own use, our dealer adds you as a customer in the Portal and automatically assigns the license to you.

Adding customers in the Portal is optional for the entire process, but it simplifies many processes for the vendor, the dealer, and the customer. Moreover, as a vendor, you receive information about which customer is using your software. In our information sheet on CodeMeter products and GDPR, you will find the legal basis for collecting this data, such as minimal data collection, legitimate interest, or the possibility of deletion.

This scenario combines the advantages of all the above methods: Licenses are flexible, precisely timed, and immediately available. Billing occurs only after creation. Periods, e.g., for subscriptions, are automatically and correctly captured without special processes.

Of course, you may wonder what the disadvantages of this approach are. Let‘s look at two aspects: rights and billing.

Rights for the Dealer

You give your dealers the right to create licenses themselves. Through CodeMeter License Portal, you can define for each dealer individually which licenses or license configurations the dealer can create themselves. You can also specify value ranges for individual parameters, e.g., the minimum and maximum duration of a subscription. While the dealer can create licenses, you can see in which CmContainer the license was activated and use all options of CodeMeter License Central, such as recall or blacklisting, in case of unauthorized use.

As a bonus option, a point system for the permission to create licenses is possible. Then you only give your dealer the permission to create a certain number or value of licenses. Unlike the “Point System“ option, where the points were delivered to the dealer, these points only exist in CodeMeter License Portal and are exchanged for real licenses on demand. Thus, transparency about the sold licenses remains. This point system can be implemented according to your individual wishes and requirements by our Professional Services Team together with you.

Billing Licenses

The second aspect is billing. When the dealer creates the license, this information first lands in CodeMeter License Portal rather than in your ERP system. We need a new process to transfer these billing data from CodeMeter License Portal to the ERP system.

Here, too, a point system could make the additional process unnecessary. You sell points to the dealer and bill them via the ERP system. The points are produced and delivered to the Portal. There, the dealer can exchange the points for the desired licenses.

But what about subscriptions? And here the disadvantage of a separate process becomes a great advantage. I have often experienced in projects that ERP systems do not support subscriptions or that extensive adjustments, configurations, and additional modules are required.

CodeMeter License Portal creates a billing report for all licenses generated in the billing month and all subscriptions valid in the billing month. The billing can be done as an individual invoice per customer or license, but also as a collective invoice for the dealer. In the case of a collective invoice, the ERP system only creates the collective invoice, and the Portal serves as individual proof for the collective invoice. This is, for example, the process we at Wibu-Systems have implemented with our subsidiaries and partners. You can of course design the process differently for each dealer and also for customers if you like.

When billing subscriptions, you can configure the calculation of pro-rata subscriptions: Billing can be done on a daily basis or with a cut-off rule.

An interesting aspect especially for German software vendors is the accounting distinction. There, subscriptions are not accounted for at the time of purchase but over the service period. Subscriptions must in this case be spread over the fiscal years, which is usually the calendar year, or even on the individual months. Therefore, many German providers align the duration of subscriptions with the calendar year. In international business, however, it is more common to align the subscription with the purchase date. And exactly this accounting-compliant allocation of the subscription to the service periods is automatically taken over by the reporting of CodeMeter License Portal.