The Future of Software Licensing Looks Cloudy

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It seems odd that after more than a decade of virtualization, the enterprise and software development communities are still trying to work out licensing issues in abstract data environments.

This disconnect does not bode well for the cloud, either, given that identifying exactly how and where software is being used becomes orders of magnitude more complicated once third-party infrastructure is added to the mix.

IDC and Flexera Software recently brought some clarity to the problem in a survey that revealed that nearly half of application producers are bent on changing their licensing and compliance policies to account for virtual environments. This is driven largely by the fact that traditional licensing schemes can quickly counter the hardware savings that virtualization is supposed to provide, which leads to the bane of sales forces everywhere: an unhappy customer. Unfortunately, change is not always good for the enterprise: Of those developers who have altered their licensing models already, nearly half say the goal is to generate more revenue.

Virtualization is also making the developer-licensee relationship more intrusive—for the licensee, that is. With dynamic, virtual environments now easy to set up, compliance audits are on the rise, led by top software provider Microsoft. Redmond is now auditing its customers at twice the rate of other providers like IBM and Oracle, according to CIO.com, and many of these audits are simply routine rather than the result of a compliance trigger. The good news is that, more often than not, Microsoft allows customers to self-audit, which is a whole lot less intrusive than a third-party examination.

Part of this renewed interest in licensing models is the fact that while enforcement was difficult but manageable in a simple virtualized environment, issues like ownership and responsibility get tossed out the window in the cloud. As Info-Tech Research Group’s Sandi Conrad noted recently, few licensing methodologies account for cloud or hosted provisioning other than through simple self-reporting. Even in straightforward IaaS relationships, conflicts between various licenses and contracts can often lead to a wide variety of interpretations as to who is responsible for what.

This is why some software developers are allowing Right to Deploy (RTD) options in their licensing models, says Mike Vizard (also an ITBE contributor) on The VAR Guy. While this has traditionally been the purview of top software providers like Oracle and SAP, small organizations like Actian are starting to see the light as well. The idea is to provide customers with unlimited consumption over a set period of time, usually a year, followed by longer-term agreements for long-standing deployments. If done right, this can actually lead to increased revenue for the developer because it avoids the need for extensive audits and leads to a more amicable relationship with customers.

While it would be nice to imagine a scenario in which software is made available on a single-payment, full-ownership basis, that isn’t likely to happen—or at least, not at a price point that most enterprises could handle. The overriding goal these days is to match costs to data loads, which means software needs to scale along with infrastructure.

In many cases, this is where SaaS will shine. But for the legions of software packages aimed at the traditional data center market, the pressure is on to conform to the new infrastructure reality, preferably without alienating the customer base.