As software suppliers look to maximise revenue from
existing customers, choosing the right licensing model for your
business is more important than ever
As IT organisations strive to reduce complexity, one area where
they are still falling short is software licensing.
Six years after Computer Weekly's "Stamp Out Stiffing" campaign
addressed sharp practices among some software suppliers, businesses
are facing up to a potentially greater challenge: weighing up the
pros and cons of the various licence models being pushed on them by
suppliers.
As enterprise software markets mature, many suppliers are
generating more of their revenue from existing customers than from
new sales. "This fundamentally affects how they look at licences,"
said Andrew Pooley, a director at research firm OTR.
"To maintain their growth, suppliers need to maximise revenues
from existing business rather than chase new contracts. It is up to
IT directors to ensure that they select and manage the most
appropriate licence model for their business, rather than adopt an
unsuitable and costly alternative."
David Roberts, chairman of blue-chip IT user group the Corporate
IT Forum, said many more user organisations than in the past were
tied into annual licences, and some of these contracts were proving
cumbersome to administer because they were insufficiently
flexible.
"What users really want is a transparent and fair fixed-price
arrangement," but there are not enough signs that suppliers are
prepared to make that offer, he said.
Jane Kimberlin, IT director at fast-food chain Domino's Pizza,
said suppliers were pushing annual licences at the expense of
traditional perpetual licences, but the benefits were unproven.
"Perpetual licences are the only secure way of ensuring you are
licensed at a known cost. Although an annual licence may seem a
more flexible model with greater customer choice, how flexible is
it really?" she said.
In the enterprise resource planning market, Forrester analyst
Ray Wang said software suppliers were being challenged by users to
deliver simplified licence metrics - particularly by offering
enterprise-wide licences.
Wang said that, as far as possible, companies wanted suppliers
to model usage around business processes or actual amounts of
usage, but the reality was that many existing licences did not
accommodate these metrics.
However, rather than taking steps to meet user needs, suppliers
have been accused in some quarters of heavy-handed tactics, as they
put increased pressure on organisations to ensure they are not in
breach of licensing arrangements.
Bill Monk, director at compliance consultancy LOCS, said,
"Recently there has been lot more pressure from suppliers to
conduct software audits or ensure that the customer is paying what
they are supposed to be paying."
Owen Williams, head of IT at estate agency Knight Frank, also
expressed concern. "Suppliers are interested in pursuing revenue.
They are taking a tougher line to the point where it becomes
unreasonable," he said.
As part of this supplier push to make firms meet their
obligations, anti-piracy software industry groups such as the
Federation Against Software Theft and the Business Software
Alliance have been promoting the use of software asset management
tools.
But Monk said this was not necessarily the answer. "In my
experience, there are not that many tools out there that will do
the job," he said. "The output generated by asset management
software generally needs a lot of filtering and massaging before it
can be put to use."
Monk said a potentially more useful development was the release
of the first part of the ISO 19970-1 standard for software asset
management. "It has its shortcomings, mainly because so few
software suppliers have signed up for it, but once it goes through
several iterations it should plug a gap," he said.
"For small and medium-sized enterprises in particular, what is
really good is that it sets out the processes and procedures firms
need in place to do things properly. In other words, it tells you
how to buy, approve, install and manage software - and a lot of
firms need that kind of guidance."
Have you got a licence for that?
Desktop software is usually licensed per user or via a site-wide
agreement, with subscription-based annual licences, rather than
perpetual licences, becoming more widespread.
Server-based software is often priced per-processor, though the
advent of multicore chips has changed the way some server software
is licensed.
Oracle traditionally charged per core, but with multicore
processors becoming more widespread, it has moved to charging
slightly less per core on multicore chips. Microsoft and others
have retained the practice of pricing per-processor.
For both server and desktop software, an emerging and arguably
fairer model is pay-per-use, but this has generally been targeted
at small and medium-sized enterprises.
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