Keep Your Customers Close and Your Channels Closer

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Keep Your Customers Close and Your Channels Closer: 5 Essential Strategies for Customer Intimacy and Channel Revenue Growth

Keep Your Customers Close and Your Channels Closer: 5 Essent ial Strategies for Customer Int imacy and Channel Revenue Growt h

2 Flexera Software: FlexNet Operat ions White Paper Series

Keep Your Customers Close and Your Channels Closer: 5 Essential Strategies for Customer Intimacy and Channel Revenue GrowthExecutive SummarySoftware producers and intelligent device manufacturers drive 40 percent to 67 percent of their revenues from their channel partners. Yet, channel processes are often cost ly and inefficient. Most vendors also complain about their lack of visibility into channel partners and end customers. Intelligent device manufacturers also lose 4 percent of gross profits to the “grey market”- sales by unauthorized brokers that undercut the vendor’s pricing. Both software producers and intelligent device manufacturers are beginning to evolve their revenue models. For example, many intelligent device manufacturers are developing ways for customers to field-upgrade their products, result ing in business models where

customers can flexibly adjust capacity or capability without having to swap out hardware. While these innovations provide a competit ive advantage against commodit izat ion, the role of channel partners will have to evolve in order for them to thrive.

In this whitepaper, we demonstrate how vendors and their channel partners can grow revenues by streamlining channel processes, plugging grey market revenue leaks and learning more about their customer base, while transforming their business models. Our research shows that vendors can grow revenues by 20 percent-30 percent through these approaches.

Figure 1: A realist ic and complex channel ecosystem

Component C

Product B

Product A

50 units

50 units100 units

10 units

40 units

40 units

40 units of A10 units of B

30 units of A 30 units of B

40 units

30 units

Product B

Product B Bundle (A + B)

Product A

Product A

Product A Product B

Product A(embeds Component C)

Ent it lements

Usage

Distributor D1 Distributor D2

ComponentSupplier

Reseller R1 Reseller R2

End Customer E1 End Customer E2

Business Unit B1 Business Unit B2

Manufactureror Software Producer


3Flexera Software: FlexNet Operat ions White Paper Series

Complexit ies of Channel EcosystemsThe channel ecosystem for software producers and intelligent device manufacturers is a complex network of company-to-company interact ions and hand-offs.

End customers use channel partners for a variety of reasons1 including their:

• Geography in many markets: channel partners are the only way customers can buy a vendor’s products as the vendor may have no sales coverage

• Technology expert ise

• High level of customer interact ion and service

• Understanding of end customer needs

• Exceptional technical support

• Fast turnaround and delivery

• Relat ionships with many vendors and complementary partners

• Reputat ion of vendors or brands they sell/recommend

• Aggressive pricing

The various flavors of channel partners (e.g., distributors, value added resellers, systems integrators–refer to the glossary for an overview of terms used in this art icle.) offer varying levels of value along the above dimensions.

In our experience, channel interact ions become complex based on the following factors:

Number of t iers between a vendor and their end customerThe number of intermediaries in the demand chain has a direct impact on how difficult it is to track your installed base as a vendor. For example, in Figure 1, we depict a realist ically complex demand chain consist ing of a vendor whose product is sold through two t iers: a distributor t ier and a value-added reseller (VAR) t ier. In this example, the VARs own the customer relat ionship. More often than not, vendors do not have any idea about who their end customer is.

“Vanilla” products versus highly configurable product bundlesA “vanilla” product applies to situations where all end customers receive the same product. In contrast, in Figure 1, some distributors carry one product while others carry a different product set (Product A versus Product B). Some resellers like Reseller R2 assemble a product bundle using Product A (from Distributor D1) and Product B (from Distributor D2). End customer E2 orders the bundle from the reseller. The experience for end customer E2 can be significantly more complex for the init ial purchase and ongoing activit ies than end customer E1. For example, E2 has to keep track and activate two products (if product activation is required) and if required, keep track and return the bundle to the reseller, when needed.

Make (Configure)-to-Order and Make-to-Stock inventory modelsMake (or Configure)-to-Order models are common for computers and networking equipment. In these scenarios, a final product is assembled using components. Some of these components may originate from the manufacturer; others might be sourced from upstream suppliers. As an example, a storage solut ion could be assembled by a manufacturer like HP using components from HP and interface cards from one or more compatible card manufacturers. In a Make (Configure)-to-Order model, the vendor does not build or assemble the product unt il an order is placed by a channel partner. Typically, as a result, the vendor knows who the end customer is, and the various channel touchpoints involved in the order.

Make-to-Stock models, where a finished product is placed with channels, are becoming increasingly rare in some high-tech markets. In a Make-to-Stock scenario, a product might spend months on a reseller shelf before being fulfilled to an end customer.

Many manufacturers are also overlaying postponement strategies on these inventory models. Postponement strategies refer to a manufacturing approach where product variations are pushed as close to the end customer as possible. As an example, a printer manufacturer might have a duplex printing capability (the ability to print on both sides of the paper). There are two ways to deliver this capability. First, a manufacturer could create two distinct products, one without duplex printing and one with it. Second, using a postponement approach, a manufacturer might build a single base product without duplex printing and offer duplex printing as an add-on option for channel partners and end customers. The postponement approach frees the manufacture from having to predict how many duplex-printing-capable printers might be sold; they can simply build the base product and let customers and channel partners order the duplex printing add-on as the need arises.

These models complicate many aspects of doing business in the channel ecosystem, including:

• Revenue recognit ion: many vendors cannot recognize revenue for units shipped to channel partners unt il those units are actually purchased and delivered to end customers

• Ent it lement splits, transfers and mergers: As an example, Distributor D1 in Figure 1 might purchase 100 units of Product Ac. They might then ship 40 units to Reseller R1 and 60 units to Reseller R2. Reseller R2 might in turn sell 30 units to End Customer E2. Keeping track of all these ownership changes can be a daunting task.

• Channels also require more physical deliveries of software and updates, which increases costs and reduces margins, in addit ion to impacting customer service.

1. Driving Channel Growth in the Global Market: Global State of the Market Research, Inst itute for Partner Educat ion & Development, April 2008



58%Less than 50

58% 22%51-100

15%101-500

5%More than 500

Percent Revenues from Channel Partners

Software Producers Intelligent Device Manufacturers

40%

67%

Size of the end customer organizat ion: consumer versus small, medium or large businessSelling into a large businesses poses challenges as these customers would like to manage their ent it lements. For example, in Figure 1, End Customer E2 might want to ship Product A from their bundle purchase (Product A + Product B) to Business Unit B1 and Product B to Business Unit B2. Again, allowing these types of ownership transfers and keeping track of them can be a huge challenge for channel partners, vendors and end customers.

Size of vendor organizat ionMany manufacturers are themselves large global organizations with a complex internal supply chain. A final product can contain components sourced from various business units and might go through several more touchpoints such as a regional distribut ion center (e.g., in Asia) to a country sales organization (e.g., the vendor’s Australian sales organization) and then to one or more levels of channel partners. Many complexit ies result, including keeping track of products and the components they contain for transfer pricing purposes, lower margins, pricing issues and lengthy fulfillment lead t imes.

Royalty Management and Usage of Embedded ComponentsVendors who embed software or hardware components from other vendors into their products have an added challenge of keeping track of the usage of these embedded components to allocate revenue splits. In Figure 1, Product A embeds a component from a component supplier. The business arrangement might call for the vendor to pay the component supplier 10 percent of their product revenues. In other cases, the component might be trialware (e.g., a 30-day trial to a piece of software on a laptop; the vendor sells the laptop in this example) and the component supplier might owe the vendor 10 percent of component revenues (e.g., as consumers convert trialware into a paid license) delivered by the vendor. Such royalty arrangements might result in one party or the other leaving money on the table. In the first example, the vendor owes royalty payments to the supplier for each unit of a final product sold, whether or not the royalty-bearing component is act ivated by a customer, clearly to the vendor’s disadvantage. In either case, both part ies would be keen to know the usage of components to accurately track revenue splits.

Figure 3: 42% of software producers use more than 50 channel partners

Figure 2: Average revenues from channel partners

Percent of Channel Revenues by Software Category

Consumer Applicat ions

System Software

Content Applicat ions

Security Software

CRM Applicat ions

All Software 40%

Salesforce.com $%

91%

77%

71%

58%

29%



Business Challenges: Software Producers, Intelligent Device Manufacturers and their Channel PartnersChannel partners, on average, account for 40 percent2 of revenues of software producers and 67 percent3 of revenues for intelligent device manufacturers. 42 percent of software producers use more than 50 channel partners (see Figures 2 and 3). While 52 percent of respondents (see Figure 4) would admit that channel partners will play an increasingly important role in growing revenues, many hurdles remain.4 Specifically:

Channel t iers are top-heavy with lots of underperforming partnersThe usual approach to growing channel revenues is to recruit more partners. But, the channel structure for many large software producers and intelligent device manufacturers is already top-heavy with non-performing channel partners. In part, this is the result of recent years of mergers and acquisit ions by vendors, with channel partners of acquired companies being tacked on to exist ing t iers. The symptoms of this lop-sided structure include (see Figure 4 for details):

• Lots of channel partners with very litt le revenue contribut ion

• Vendors reducing partner market ing funds

• Channel partners complaining that they get fewer leads from vendors

• Competit ion between channel partners of a given vendor

Inefficient and manual channel-facing processesBoth vendors and channel partners agree that channel-facing processes have a long way to go with respect to efficiency. Some of the symptoms of inefficiencies they report include (see Figure 4):

• Lack of or litt le communicat ions between vendors and channel partners with respect to leads, opportunit ies, product catalog and pricing changes, promotions and sales information “Due to order errors, duplicate efforts within the sales channels and the inability to track shipments in real-t ime, Seagate realized its need for a consistent process and a single system through which their distributors and OEMs worldwide would be able to quickly and accurately conduct business transact ions…”5 – P. Bose and R. Dey, Infosys

• Periodic sales reports are difficult to collect and aggregate

• Vendors want to cut channel costs while channel partners complain about declining margins

• Vendors are finding it difficult to manage internat ional partners

2. Worldwide and North America Software Channel 2008, IDC, August 20093. Posit ive Growth and New Market Perspect ive Paint Healthy Out look for Pervasive Technology Channel, Dan Neel, Everything Channel (www.channelweb.com),

May 20074. Software Channel Survey 2009, Avangate5. Channel Stewardship: Driving Profitable Revenue Growth in High-Tech with Mult i-Channel Management, P. Bose and R. Dey, Infosys, August 2007

Channels are becoming more important to revenues but...

Channels are not optimized based on performance

Lots of manual processes for channels

No visibility into customer base

Have to rely more on channels to make sales targets

Reluctant to put money into joint market ing

Channel Partners with very litt le sales; Too many partners

Less leads coming from software producers

Increased compet it ion between channel partners and with vendor’s online channels

Lack of/litt le communicat ions between partners and software producers

Periodic sales reports difficult to collect and aggregate

Cut channel costs

Margins decreased for channel partners

Difficult to manage internat ional partners

Partners demanding faster product delivery and fulfillment

Lack of/litt le visibility over final customers

Lack of interest from channel partners to push your products

52%

56% 80%

86% 85%

55%

50% 70%

38% 50%

46% 55%

44%

22% 80%

50%

22% 60%

60%

60%

Challenges reported by Software Producers and Channel Partners

Software Producers Channel Partners

Figure 4: Top Channel Challenges for Software Producers



• Channel partners are demanding faster product delivery and fulfillment

• Recruit ing new channel partners is hampered if the vendor is perceived as difficult to do business with “A recent IPED study has proven that 50 percent of channel partners are dissat isfied with the relat ionship with their vendors...this is due to a mult itude of reasons, including the need for: better training, product customizat ion, better communicat ion, simplified MDFs and partner programs, more shared leads and better deal registrat ion. The bottom line: Vendors spend much t ime and money securing partners to market their products; however, they must enhance their ability to address many of these issues in order to retain exist ing partners.”6

– Inst itute for Partner Educat ion & Development “We have to invest in providing self-service processes for our channel partners. Unt il now, we have been focusing on making better “widgets”. Now we also have to compete at making the ordering/renewal process better for the channel partners so partners will cont inue doing business with us.” – Director of Licensing for a prominent network equipment

manufacturer

Lack of visibility into end customersWhen you think of channel partners, think of customer usage and demand information. Ideally, information about your customer’s usage of your products should flow back to vendors, with physical goods and ent it lements flowing from the vendor to customers in response, as shown in Figure 1. Most software producers and intelligent device manufacturers we talk to say they know very litt le about their customers when channel partners make the sale and nurture the relat ionship with customers.

“Informat ion is everything. Knowing your customer is the #1 goal” – Intelligent Device Manufacturer selling portable computing

devices to educat ional inst itut ions

Grey market revenue leakage is growing for intelligent device manufacturersIntelligent device manufacturers lose, on average, $10B of their gross profits to grey market sales, which translates into 4 percent of high-tech industry profits6. The value of grey market goods grew to about $58B in 2007, up 80 percent cumulat ively since 2002 (equates to 12.5 percent year over year growth).

The grey market is driven by unauthorized brokers who purchase the vendor’s products from legit imate channels

at steeply discounted prices and target end customers by undercutt ing the vendor’s prices. On average, grey market prices are 27 percent lower than the vendor’s pricing, which eats into profits for both vendors and their legit imate channel partners.

“The grey market has many sources, i.e., unauthorized dealers obtain products from a variety of sources normally at a discounted price either due to price arbitrage, abuse of incent ive programs, or simply because the products are not what they seem. For example, an OEM may choose to discount products for a part icular end customer to increase sales, especially if there is a st iff compet it ion for that customer. To obtain deeply discounted products for open-market speculat ion, a channel partner may deceive the OEM into deep-discount ing products for non-existent customers and then divert those products to the grey market for possibly greater gain. Some brokers may misrepresent themselves in the authorizat ion process and use the result ing relat ionship to obtain discounted goods that are then diverted into the grey market.” 7

“Our products are available at 90 percent discounts to regular prices in the Chinese grey market” – Large Software Producer

Software and hardware business models are convergingVirtual appliances are emerging for delivering complex on-premise software. A virtual appliance “provides a turnkey experience similar to today’s hardware appliances. Deploying an appliance can be as simple as a few clicks, with only configurat ion tweaks that need to be made. And since the appliance pre-integrates an ent ire software stack into a composite package, it should only receive one stream of patches, most likely from the ISV, which nearly eliminates complex regression test ing. No longer will the channel be able to rely on installat ion and maintenance services as an entryway to the end user.”8

Software as a Service (SaaS) is expected to grow faster than on-premise software, with some analysts est imating that 25 percent of software revenues will be delivered as SaaS by 20119. Hardware products are becoming more software-like as intelligent device manufacturers enable customers to order capability and capacity on demand. In short, software and hardware revenue models will be more similar than different in future. The role of channel partners is indeed murky under these transformations.

Five Strategies for Customer Int imacy and Revenue GrowthGiven the challenges that vendors and their channel partners face, we have found that five strategies can

6. Driving Channel Growth in the Global Market: Global State of the Market Research, Inst itute for Partner Educat ion & Development, April 20087. Effect ive Channel Management is Crit ical in Combat ing the Grey Market and Increasing Technology Companies Bottom Line, KPMG Grey Market Study Update,

20088. Software Appliances Are Changing Channel Dynamics, J. Waxman and B. Waldman, IDC, November 20089. Gartner Market Trends: Software as a Service, Worldwide, 2008-2013, Sharon A. Mertz, Chad Eschinger, Tom Eid, Hai Hong Huang, Chris Pang, Ben Pring,

Gartner, 5 May 2009



help vendors learn more about their end customers while allowing both channel partners and vendors to grow revenues. These are discussed below.

Strategy 1: Know your best partners by analyzing performanceTo get a handle on lop-sided channel t iers and the result ing lackluster channel performance, vendors must invest in systems that help them assess how much each channel partner is actually contribut ing to the top line. To do this, every order and its associated ent it lements should capture all touchpoints start ing from the vendor through a complex demand chain (as in Figure 1) to the end customer.

To be sure, many vendors do have manual processes in place by which partners could submit gross revenues they have delivered in a given period. While this is valuable, it is not at the level of product families. As a result, it is not possible for vendors to rat ionalize channel partners and incent ives based on product family, geography or other criteria.

Tracking and analyzing order-level partner performance will enable you to:

• Measure the effect iveness of joint market ing programs with partners, at the level of products being promoted

• Set up performance based sales incent ives for individual products

• Assign leads to best partners for a given product based on past performance

Studies show that revenues from channel partners can grow their revenues by 40 percent10 when vendors ident ify and nurture the best performing channel partners. This would translate to about 20 percent higher revenues for a typical intelligent device manufacturer and about 11 percent higher revenues for a typical software producer.

IDC11 sums it up as follows:

“Vendors will not be able to get ahead by simply adding more partners than the compet it ion. 2009 will be the year that the best vendors use “partner analyt ics,” or the intelligent analysis of partner data, to make better informed decisions about which partners to invest in, and which partners to demote or even drop. With lower partner program budgets, gett ing smarter about allocat ing resources to partners will be crit ical. Vendors should be leveraging their partner data to understand which partners are the high potent ials, which are the influencers, which ones do great cross-sell, and which ones are missing opportunit ies. With that knowledge, investments in training, support, sales

assistance, and market ing can be effect ively made with the best partners. Those vendors that are able to combine good data with good analysis won’t care about flat-out partner recruit ing alone. They will beat the compet it ion because they’re doing more with the right partners.”

Strategy 2: Enable self-service for channel partners Given the complexit ies of the channel ecosystem, in particular, business scenarios related to “Make-to-Stock” inventory models and delivery of complex product bundles, it is essential to enable self-service for channel partners to serve customers and channel partners in the best possible manner.

Self-service should include capabilit ies for a channel partner to:

• View what they ordered

• Understand what their customers ordered

• Add/modify customer records as agreed to between the vendor and the partner

• Understand what products and associated services their customers are using

• Administer transfers, mergers and splits of ent it lements between end customers

• Allow electronic fulfillment of software and updates

These capabilit ies could reside within a Partner Portal, a key init iat ive that many vendors are thinking about to increase channel visibility and improve communicat ion. These capabilit ies should also integrate to Partner Relat ionship Management systems for automating order processing, payments and invoicing.

“Seagate has dramat ically reduced order errors and duplicate effort, decreased their costs per order by 60 percent on average and capitalized on new and enhanced revenue opportunit ies. The company has also gained direct, real-t ime visibility into distributors’ and OEMs’ sales and order processes”12

Studies show that streamlined processes and deeper adoption of customer-facing systems can grow revenues by 5 percent13.

Strategy 3: Establish a direct connect ion with end usersThe easiest way to learn more about your customers is to ask them to register their product prior to usage. There are several ways to do this. Many software producers we work with gather basic customer information (e.g. company name, contact email) as part of a product activat ion experience. Other vendors that do not use

10. High-Tech Channel Evolut ion: Solut ions for Sustainable Growth and Success, The JS Group, 200711. IDC Worldwide Software Business Solut ions 2009: Top 10 Predict ions, M. Fauscette, D. Bibby, M. Wardley, M. Levitt, M. Webster, A. Pang, S. White, M.

Perry, B. Lykkegaard, A. Konary, R. Mahowald12. Channel Stewardship: Driving Profitable Revenue Growth in High-Tech with Mult i-Channel Management, P. Bose and R. Dey, Infosys, August 200713.,14. Maintenance Revenue Protect ion 2.0: The Urgent Threat and What Software Vendors Can Do About It, Chris Dowse and Ben Galison, Neochange, 2009



product act ivat ion st ill gather non-personally ident ifiable information on their end user’s usage of their software products after opt-in by end users to gather this information.

In-product messaging is also an effect ive way to engage with end users on an ongoing basis to inform them of possible updates, new product announcements and other promotions. In addit ion, establishing a direct connect ion to end customers increases the value of software maintenance by using ent it lement-based updating to ensure customers only receive the patches and updates their support contracts ent it le them to.

Revenues can be enhanced by 5 percent14 by knowing more about your installed based and driving upgrades and upsells of your products.

Strategy 4: Tie channel incent ives to product act ivat ion by end customersThe source of the grey market for your products can often be t ied back to abuse of channel incent ives by partners, such as misrepresent ing or faking end customer information. Tracking ent it lements (e.g., sold-to customer name) as they move through the demand chain (in Figure 1 for example) along with enforcing product act ivat ion is the only sure way to know who the end customer is, who they purchased their products from and under what incent ive program.

While 51 percent15 of manufacturers collect device serial numbers from channel partners as part of their claims submissions for incent ive programs, it is cumbersome or impossible to correlate serial numbers to incent ive-eligible end customers unt il end customers call the vendor for technical support. As an example, suppose a manufacturer offers distributors a 10 percent rebate for units for Product A sold during the month of September. It is difficult to accurately determine actual sales of Product A by the distributor during September, in addit ion the system being open to abuse (e.g., claiming rebates on serial numbers sitt ing on the shelf). However, if the vendor tracked ent it lements sold to the distributor and the product act ivat ions during September from customers who bought from the distributor, such verificat ion would be easy.

Strategy 5: Empower channel partners to grow revenues via cross-sells, upsells and maintenance renewals With the impending shift in revenues to Software as a Service (SaaS) and virtual appliances, tradit ional revenue streams for channel partners (e.g., installat ion and configurat ion services) are under threat. One response that vendors can offer is to delegate technical and customer support to resellers. They could also empower channel partners to cross-sell and upsell products to exist ing customers and renew maintenance.

“Upsell / Cross Sell Incent ives - Most vendor programs put a disproport ionate amount of emphasis on Solut ion Providers bringing in net-new customers. New customers are valuable, but they take longer to win and cost more to persuade. Don’t eliminate incent ives for winning new customers, but to add a component that pays partners an incent ive for winning more business by penetrat ing exist ing accounts more effect ively.”

“Most vendors allow partners to profit from the sale of the init ial warranty and support services - whether the partner will deliver those services or not. But more vendors than ever are allowing partners to part icipate in the renewal of these service packages as a way to provide partners with future earning potent ial.” 16

Offering these opportunit ies will make vendors more compelling for channel partners:

“From a channel partner perspect ive, the big problem is to get us to actually use a vendor’s system. One reason we would use a vendor system is if it helps us with maintenance renewals. The big problem we face today is that when a customer comes to us for a renewal, we don’t know fully what the customer owns to give them a complete quote. We only know what the customer bought through us, not the complete list of products they own from the vendor in quest ion, which limits the value of maintenance renewal we can sell the customer.” – Director Sales, Mid-market Reseller17

Proact ive maintenance renewals, upgrades and upsells can contribute to 5 percent revenue growth.

ConclusionsTable 1 summarizes these five strategies and their economic impact on vendors and channel partners. Taken together, these strategies can grow vendor revenues by 20-30 percent and channel partner revenues by 40 percent.

15. Effect ive Channel Management is Crit ical in Combat ing the Grey Market and Increasing Technology Companies Bottom Line, KPMG Grey Market Study Update, 2008

16. Engage Your Partner in the Total Business Opportunity, Inst itute for Partner Educat ion & Development, April 200817. Maintenance Revenue Protect ion 2.0: The Urgent Threat and What Software Vendors Can Do About It, Chris Dowse and Ben Galison, Neochange, 2009



Business Challenge Strategies Est imated Economic Impact

Channel t iers are top-heavy with lots of underperforming partners

Know your best partners by analyzing channel performance at the level of individual product families. Invest in and nurture the best performing partners

40% revenue growth for channel revenues which translates to:

• 20% revenue growth for a typical intelligent device manufacturer

• 11% revenue growth for a typical software producer

Inefficient channel facing processes

Enable channel self-service for orders, ent it lements, renewals

60% lower costs per order 5% higher revenues

Lack of visibility into installed base when channel partners make the sale

Establish direct connect ion with customers. • Cross-sell and upsell products based on your

understanding of products used • Protect maintenance revenues by updat ing or

upgrading only ent it led customers

5% higher revenues through effect ive cross-sell and upsells

Grey market revenue leakage is growing

Tie channel incent ives to product act ivat ion by end customers

1.5% of revenue growth for a typical intelligent device manufacturer

Software and hardware business models are converging, threatening tradit ional revenue streams for channel partners

Empower channel partners to cross-sell and upsell products and renew maintenance

5% revenue growth

Total Impact About 20%-30% higher revenues for vendors. Note that the above benefits may or may not be addit ive.

Table 1. Summary of the Five Strategies and their Economic Impact



Glossary

Term Definit ionVendor A software producer or a intelligent device manufacturer

Software Producer A company that is primarily in the business of selling software products

Intelligent Device Manufacturer A company that is primarily in the business of selling hardware devices. Examples include: computer and networking equipment, medical equipment, test and measurement equipment, imaging products etc.

Original Equipment Manufacturer (OEM) supplier

A company that supplies components to other companies to incorporate into an end-customer facing product. Example: Flexera Software FlexNet Operat ions incorporates Cognos report ing. In this example, Cognos is the OEM supplier to Flexera Software.

Distributor A channel partner that primarily fulfills orders from downstream VARs and SIs.

Value Added Reseller (VAR) A channel partner that performs a number of specialized tasks to enable a solut ion for an end customer. Specialized tasks might include product installat ion, training, configurat ion and bundling with other software/hardware provided by the VAR.

Systems Integrator (SI) A channel partner that assembles a complex solut ion using components sourced from many vendors.

End Customer A consumer or business that uses a software or hardware product

Ent it lement What the customer purchased. Example: 10 copies of Adobe Acrobat; 100 ports of a LAN switching capability in a LAN switch.

Product Act ivat ion The process by which a customer fulfills the rights to use a software or hardware product.

Transfer pricing Transfer pricing refers to the pricing of contribut ions (assets, tangible and intangible, services, and funds) transferred within an organization. For example, goods from the product ion division may be sold to the market ing division, or goods from a parent company may be sold to a foreign subsidiary. The choice of the transfer price will affect the allocat ion of the total profit among the parts of the company. This is a major concern for fiscal authorit ies who worry that mult i-nat ional ent it ies may set transfer prices on cross-border transact ions to reduce taxable profits in their jurisdict ion. This has led to the rise of transfer pricing regulat ions and enforcement, making transfer pricing a major tax compliance issue for mult i-nat ional companies.

Source: Wikipedia

About Flexera SoftwareFlexera Software is the leading provider of strategic solut ions for Applicat ion Usage Management; solut ions delivering cont inuous compliance, optimized usage and maximized value to applicat ion producers and their customers. Flexera Software is trusted by more than 80,000 customers that depend on our comprehensive solut ions- from installat ion and licensing, ent it lement and compliance management to applicat ion readiness and enterprise license optimization - to strategically manage applicat ion usage and achieve breakthrough results realized only through the systems-level approach we provide. For more information, please go to: www.flexerasoftware.com

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