Power behind software: License management unlocks the value of embedded software in high-tech devices

There is no question manufacturers face tremendous pressure to contain costs while innovating and delivering successful products to market. For device manufacturers—particularly those in high-tech sectors such as telecom, test & measurement, medical device, and industrial automation—the ability to flexibly configure products based on embedded software is a compelling option that meets both sides of the “Do more with less” challenge.

From a cost perspective, configuring embedded software reduces inventory burden and allows field upgrades. Product innovation also is accelerated, as a small number of device SKUs can be customized to address a wider range of customer needs and deliver revenue more quickly.

While the high-tech device industry is focusing more attention on how it manages, communicates, and tracks customers’ software usage, some approaches will not be effective for the long term. Often companies first try to add licensing and entitlement information to an ERP or CRM system, but find scaling and updating on a timely basis is a challenge.

A dedicated software entitlement/license management solution will eliminate costly manual processes by making it easy to oversee entitlements, flexibly license products, deliver software electronically, and monitor compliance.

Entitlement management also yields these benefits:

• Measurable, accurate information;

• Increased visibility into channel sales;

• Reduced potential for product failure; and

• More opportunity to try new business models without substantial risk.

Simplified by software

Device manufacturers across a range of industries can capitalize on the opportunity to streamline and improve their manufacturing processes by effectively using software licensing to configure different sets of capabilities or capacity on a smaller set of standard hardware platforms.

Case-in-point is HVAC controls and instruments maker Siemens Building Technologies , which faces enormous complexity in manufacturing and inventory management. In fact, one of the company’s top hardware platforms has 12 hardware variations and 40 firmware variations, creating 480 SKUs for a single product line.

It’s one reason why Siemens chose to simplify the number of models and customize products based on software, which enhances manufacturing processes and provides better service by making upgrades remotely.

“In the U.S., the challenging economy has had a big impact on the construction industry, which directly affects us,” says Duane Keenan, manager of integrated solutions for Siemens Building Technologies. “Before, to change capability in a deployed unit, we had to physically remove the old unit and put in a new one. Now that can be remotely enabled.”

By selecting a licensing and entitlement solution specifically designed for high-tech device manufacturers, Siemens Building Technologies reduced the number of physical models from hundreds of SKUs to just a few. And cycle times were cut from weeks to days since systems can now be customized in the field.

Faster velocity and greater flexibility have created a strong competitive advantage, and simplified the license fulfillment process. Siemens initiated a simple three-step process to create licenses on-demand, integrating directly with its SAP order-entry system. This is in sharp contrast to the two week-plus turnaround time that previous ordering and manufacturing processes required.

“Our inventory costs have dropped,” says Keenan. “It’s not just the physical components themselves—it’s the time required to manage everything.”

Merchandise returns also decreased.

“Due to the high number of variations within each of three major project lines, the previous ordering process—due to the number of hardware variations—lent itself to making specification errors that resulted in returned merchandise that had to be restocked,” Keenan explains.

Other device manufacturers in the telecom, networking, and medical industries are looking for ways to simplify manufacturing and supply chain management through software. A tailored approach to licensing, pricing, and packaging models around embedded software reduces manufacturing costs and streamlines the supply chain by decreasing the number of unique physical devices while ensuring they are meeting individual customer needs and an ongoing upgrade path.

About the author :Roger Bottum is a senior vice president for Acresso , a provider of electronic licensing services and software asset management technologies to business software markets.

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