Here’s a case study I recently encountered that discusses how an IT shop approached and handled a sporadic licensing issue with some of its warehouse software.
- A manufacturing company occasionally exceeds their 50 user limit for warehouse scanning software. The spikes are sporadic.
- Obtaining new licenses was cost-prohibitive and not in the budget
- The company looked at various solutions. They eventually worked with and contracted with the vendor to rent additional licenses at a lower cost for a limited time period. The vendor obtained additional revenue while the company was able to stay within their budget.
- Not every software company will allow you to “rent” additional licenses, but the rental model will work in certain cases if the vendor is open to thinking outside of their usual pricing model.
A manufacturing company has 50 user licenses for a popular warehouse scanning software package.
Due to the nature of the business, their license usage occasionally spikes over 50 users, usually for the same 1-3 month period each year, during the company’s busy season.
Usage had surpassed the 50-user license limit several times already this year; anyone attempting to use the software after 50 licensed users are already signed on is kicked out and unable to use the package. The spikes are sporadic and infrequent, without any pattern except that they only occurred during busy season.
Outside the busy season, the 50 user license is rarely breached. This was discovered by going through the software’s peak usage log.
Additional licenses are very expensive (in excess of $1000 each) and are only sold in packs of 25. The customer doesn’t have budget money to purchase an extra 25 licenses. They only need about five licenses to handle the overflow during the busy season.
The goals in this situation were the following:
- Provide enough licenses to handle busy season spikes in demand
- Keep acquisition costs low with only a modest increase in budget (less than $5,000)
The obvious options for solving this problem were:
- Keep things the way they were, with occasional denial of usage
- Purchase a pack of 25 additional licenses, for around $25,000-$30,000
Neither option satisfied the company’s goals. There wasn’t enough budget to justify buying additional licenses, and randomly denying access to users was frowned upon. The management needed consistent access to the software as needed, to prevent the production process from slowing down.
Management encouraged the team to get creative and find another solution. During a brainstorming session, someone asked whether it was possible to see if the vendor was willing to make any accomodations to help the company handle their overflow situation. Perhaps they could buy a smaller pack of licenses or find another solution.
The company decided its best option was to go back to the vendor. If the vendor wasn’t cooperative, then they would decide whether or not to invest in additional options.
The solution: vendor cooperation works
The company went to the vendor, and asked for advice on how to handle the issue. The vendor was cooperative and offered to provide a temporary license increase for an amount equal to about 20% of the purchase price (which is about what vendors usually charge for yearly maintenance of software).
This was a solution both parties could live with. The manufacturing company was able to expense the temp licenses rather than having to procure capital for new licenses (a painful process). The vendor was able to tap additional revenue from its customer and provide additional goodwill by solving the customer’s problem.
The vendor offered to implement the solution by providing a temporary license key for 60 licenses to the user for the offer period. When the temp key ran out, the user would re-enter their usual permanent license key for 50 users to return the system to its normal licensing.
Lessons learned: A New Option to Lease Software Licenses
Collaboration between the manufacturing company and the software vendor provided a new option for satisfying short-term customer needs: renting license keys for a specified time frame. The key was that both parties expanded their options past the usual buy or no-buy permanent licensing solution. By working with each other to create a third option of renting software rather than buying, both parties came out ahead and realized additional benefits.
Note that this option won’t work with every software provider. But the lesson here is that it is possible for both vendors and customers to work together to create new offerings, rather than stay with the status quo. Some variation of this technique may be effective with a number of software vendors, regardless of their stated policies.
This case study was sponsored by Hertvik Business Services.
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