Pay-Per-Use : Metering Software Usage Today

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Pay-Per-Use Metering Software UsageTodays
Licensing Alternative
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Motivation

• Today's software customers need flexible options
  for access to technology
• even more so during the current economic
  crisis!

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Motivation (cont.)

• for users
• balancing productivity and efficiency
• long term needs are not always known when making
  initial purchases
• mid-year requirements can frequently only be
  satisfied with operating budgets
• in 2009, capital budgets have been greatly
  reduced or eliminated
• for vendors
• competition requires licensing innovation to
  enhance customer relationships and increase
  market share
• users needs are vendors opportunities

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Benefits
Pay-Per-Use (PPU) licensing provides significant
benefits to all parties

• For the Customer
• improved productivity by reduction or elimination
  of denials
• ability to assess actual usage requirements
  without making significant upfront purchases
• ability to access software with operating budgets
  instead of capital budgets

• For the Vendor
• enhanced relationship with customer
• short term rental revenue
• increased software usage, ultimately leading to
  increased perpetual and longer term license sales

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Fundamentals of PPU

• vendors provide non-owned copies of software to
  users
• use of all software (owned and rented) is
  recorded in usage logfiles
• once per billing cycle the logfile is sent to the
  vendor for analysis
• an invoice is prepared based on actual usage of
  non-owned software

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Fundamentals of PPU (cont.)

• technology consumers are charged for the amount
  of time they used non-owned copies of software
• on site availability of rented software ensures
  no lag between detection of need and use of
  software

Standard Concurrent Use Chart
Owned License Limit
Times of Non-owned License Use
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Technical Considerations Logfile Existence

• is logging turned on?
• ensure proper customer site configuration
• overwriting or deletion of logfiles
• overwrite or append on restart
• encourage proper file management policies

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Technical Considerations Logfile Integrity

• ASCII versus binary
• ASCII can be edited
• binary is secure - but is it available, and at a
  reasonable cost?
• basic ASCII limits customer base
• ASCII can be verified by using security digests
  (and thereby extending the customer base)
• completeness of data
• license sharing
• detailed session matching

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Technical Considerations Logfile Access

• automated or manual
• firewall and phone-home issues
• privacy concerns
• anonymizer may be required
• multiple vendors data in a single file
• extractor may be required

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Business Considerations Rental Mode Decision 1

• basic time units for rentals(seconds, minutes,
  hours, days, weeks, months, years)

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Business Considerations Rental Mode Decision 2

• elapsed time or calendar periods
• is a day midnight-to-midnight or is it an
  arbitrary 24 hour period from the start of first
  rental

Is this a 1 day rental, or 2?
Wed
Tues
Mon
Time
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Business Considerations Rental Mode Decision 3

• single period or multiple period rentals
• typically, smaller time units are single period
  and longer time periods are multiple period

Is this a 1 unit rental, or 2?
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Business Considerations Rental Mode Decision 4

• simple or combination rental modes
• rate capping (i.e. hourly_capped_monthly)
• volume discounting

Rental total climbs with usage
Until it hits the cap
It then resets at the next period
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Business Considerations Rental Mode Decision 5

• minimum session length
• ensures that license checkouts for which no
  business value could be realized are ignored

Should these sessions be considered?
Or not
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Business Considerations Rental Mode Decision 6

• minimum overlap period
• minimum period of time for a rental, shorter
  periods are forgiven

Should there be a charge for this period?
Or not
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Business Considerations Rental Mode Decision 7

• pricing
• typically defined as a percentage of either
  perpetual license or annual license fees
• optional components
• access fee
• billing period minimum
• set pricing to create the desired winwin
  scenario
• provide reasonable cost access for minor use
  on-demand
• price such that high use encourages perpetual
  license purchase(or pre-paid rental options)

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Business Considerations Rental Mode Decision 8

• applying rentals to future purchases
• what percentage, if any, of rentals can be
  applied as a discount to perpetual license
  purchases

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Terms in a PPU Agreement - Summary

• period and rate
• is the software rented by the second, hour, day,
  week, month or year
• what is the base rate per unit
• is the rate capped to an amount at which point
  the rental period changes
• is there a minimum rental fee per billing cycle
  regardless of use
• transfer of logfile by customer to vendor
• how soon after billing period ends must file be
  sent
• how is a lost or corrupted file dealt with
• is there a penalty for late transfer of the file
• other terms
• can a portion of the rental fees be applied to
  perpetual license purchases
• minimum usage session length (shorter sessions
  are ignored)
• minimum rental period length (shorter periods are
  ignored)

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License Tracker Support for PPU

• License Tracker processes the usage logfiles
  generated by license managers
• the financial analytics used for PPU support are
  enabled by License Trackers support files
• license model
• budget model
• user model
• License Tracker does all rental cost calculations
• facilitating invoicing for vendors
• enabling cost monitoring for users

License Model
Budget Model
User Model
Logfiles
Session Database
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The License Model Defining PPU Financial Terms

• the License Model contains the information that
  defines the financial terms of the PPU
  arrangement, including
• of owned copies
• purchase cost per copy
• maintenance cost per copy(used in determining
  total cost to the customer for using the software
  in each period)
• rental mode(base rental period and capped rental
  period if any)
• cost per period
• minimum session length
• minimum rental period length (to be added in ver
  3.3)

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Currently Supported Rental Modes

• multiple period modes
• ANNUAL if use of a metered license occurs then
  it is deemed to rented for the entire calendar
  year and is then available for other rental
  periods
• MONTHLY if use of a metered license occurs then
  it is deemed to rented for the entire calendar
  month and is then available for other rental
  periods
• single period modes
• HOURLY each rental period is rounded up to the
  next full hour and charged
• SECONDS each rental period is rounded to the
  next full second and charged
• capped modes
• HR_CAP_MON each rental period is rounded up to
  the next full hour charges for each rental
  license are summed and capped at the monthly rate
• SEC_CAP_MON each rental period is rounded up to
  the next full second charges for each rental
  license are summed and capped at the monthly rate

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Planned Rental Modes

• version 3.3
• SEC_MIN_HOUR rental periods are rounded up to
  the next full second and charged, minimum rental
  for any period is 1 hour

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The Budget Model Pay-Per-Use Cost Monitoring

• the Budget Model lets users specify their
  budgeted rental expenditures on a monthly basis
• PPU Summary chart provides a breakdown of monthly
  and cumulative actual costs, allowing a
  comparison to budget

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The User Model Revenue / Cost Sharing

• the User Model lets users associate various
  business grouping with the userIDs as found in
  the logfiles
• ISVs can require customers provide them with a
  minimal User Model containing userID and Location
• this can then be used to determine revenue
  sharing between offices for a customer globally
  accessed license server
• the same mechanism, the User Model, can be used
  by enterprise customers to perform cost splitting
• the internal User Model would be more extensive
  including contact information and potentially
  multiple business groupings for each userID

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Final Thoughts

• pay-per-use can be used effectively for many
  reasons
• providing users with extra licenses for peak
  demand periods
• providing SMBs and consultants with occasional
  access to expensive tools
• providing technology access through operating
  budgets when capitals budgets have either been
  reduced, eliminated or used up
• determining user needs for a new technology
• pay-per-use terms and conditions can be extremely
  imaginative, but
• do not make them overly complicated or they will
  be rejected
• ensure terms can be readily monitored and
  calculated by available tools or invoice
  calculation costs may exceed PPU revenue
• ensure customers have access to tools for
  monitoring PPU costs on an ongoing basis to
  ensure there is not a surprise bill at
  invoicing time
• pay-per-use can and should result in a winwin
  situation for ISVs and their customers

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• You can only optimize -what you understand
• and you can only understand -what you track!

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