The Software Licensing in the Cloud Conundrum

Michael Vizard
Slide Show

How Redundant Applications Drive up the Cost of IT

IT costs are ballooning due to redundant application portfolios.

One of the thorniest issues when it comes to cloud computing is software license management. Both software vendors and customer alike, albeit for different reasons, are concerned about how software licensing in the cloud will evolve, especially in an age where software pricing is still tied heavily to the class of processor being used.

One of the few cloud computing providers trying to be proactive about this issue is GoGrid. The company today rolled out an image rights management tool that makes it easier for software vendors to manage the deployment of their software-as-a-service on the GoGrid platform.

At the same time, GoGrid CEO John Keagy says that GoGrid expects to use the same technology to help customers manage and monitor their use of software on the cloud. While a standard approach to pricing of application software in the cloud has yet to be worked out, Keagy says GoGrid is committed to providing the tools that software vendors and their customers can use to come up with some form of an equitable arrangement.

Unfortunately, this lack of a standard approach to software licensing only serves to slow down the adoption of cloud computing, which some software vendors are pleased to see because they make more money charging customers for software on a class-of-processor basis. In fact, most software vendors would prefer that customers just sign up for an enterprise-class license that gives them the right to use the software anywhere. But many customers are leery of the fully loaded costs of such licenses when they only use the software on a limited basis.

How software pricing in the cloud will work itself out remains to be seen. Many software vendors are betting that once their software becomes more accessible in the cloud, more users within every customer site will want to access it. That should increase revenue. But it's just as conceivable that cloud computing will expose how little their applications are actually used, which could result in some difficult questions from investors when a software vendor has to report a drop in revenue because of the shift to cloud computing.

Like all things related to cloud computing economics, the math is not always simple. But at the end of the day, customers should be looking for cloud computing platforms that give them as much visibility into actual software usage as possible. Only then will they know whether the enterprise site license option is really worth it, especially if they discover that their actual usage is a whole lot less than initially anticipated.

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May 4, 2011 9:11 AM Dominic Haigh Dominic Haigh  says:

At Agilis Software we supply software licensing systems to software vendors. We therefore see the issues vendors and ISVs are facing as cloud computing becomes widespread. The first one is often not so much a matter of how to enforce a given licensing policy, but what is the licensing policy they should adopt for customers who want to deploy in the cloud? Only with agreement on what they want to do can they move onto the how - which usually means upgrading from older licensing systems and in-house tools that were designed for managing licenses on specific hardware, or CPU-based licensing.At the cutting edge are companies who are going to models such as usage-based licensing, where the number of instances etc. is not the determining factor in the license. We published a case study recently on an interesting application of usage-based licensing.

May 4, 2011 7:14 PM Jeanne Morain Jeanne Morain  says:

Flexera working in conjunction with key industry partners have developed solutions that help address the even deeper issues for Cloud Adoption around license and regulatory Cloud Compliance.  There is quite a bit of mis-information in this area that confuses not only IT but also Software Producers.  Before Software Producers can change their packaging and policies for the Cloud - the enabling technology providers for the Cloud have to provide standardized solutions around monitoring, pricing and packaging (those that provide the OS, HyperVisors, Management, and other capabilities).  As we speak, many of the leaders are working closely with the Distributed Management Task Force (www.dmtf.org) on standards under guidance from key customers. 

Some of the samples provide above are a bit misleading.  Enterprise license agreements have been around for quite a while.  For most they will not help with Cloud Deployment.  Why? Some of the Cloud providers require a Service Provider License Agreement when the Enterprise bursts from their network to a public Cloud.  In this case customers would have to pay again to use that license as their Enterprise license does not typically apply.  There are limited mechanisms in place to connect or track the license when bursted or standards in this area.  My co-authors (Andi Mann, Kurt Milne) and I discovered these and several other road blocks to adoption.  This is why we stopped with Private Clouds in our book Visible Ops Private Cloud.  Many of the issues and indicators we highlighted do not have solutions yet and it will take time.  For those interested reading more Visible Ops Private Cloud can be found on either Amazon.com or read an excerpt here on new Cloud cost metrics to consider: http://tinyurl.com/3b3zo5q .


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