Licensing can be a headache for the IT department.
A survey by consultancy Morse revealed that
52% of IT decision-makers find it difficult to keep track of how
much hardware -
let alone software - is being bought and
managed across their organisations.
Trends in the IT market for distributed computing, developments
in grid and utility computing, virtualisation, thin clients,
multicore architectures, software as a service and open source are
challenging traditional licensing models to keep up in
demonstrating value.
David Roberts, chairman of blue chip IT user group the Corporate
IT Forum (Tif), criticised current licensing methodology. "It is so
counterproductive it is unreal," he said, adding that the
commercially-sensitive nature of many enterprise supplier
agreements made it hard for users to act collectively.
"It is a very sensitive subject - some key suppliers keep the
business running."
Looking across a range of licensing models, the reasons current
models fail is clear, said Ian Osborne of Intellect, the trade
association for the UK high-tech industry.
Osborne, project manager of the Department of Trade and
Industry-funded Grid Computing Now! project, said,
"Licensing is an insidious issue that inhibits UK
enterprises, and I have not yet met a user who does not want
fairer pricing for software.
"Licence rules have to change to adapt to a new environment and
there needs to be more consensus on a convergence of mechanisms for
paying for IT."
For instance, changes made to
Vista Enterprise edition licences allow
Software Assurance users to run the latest operating system
within a virtualised IT environment. This includes multiple
virtual desktop instances at server level, or on thin-client
discless desktop PCs where storage, software and processing
power is delivered and managed from a central point.
Windows Vista Enterprise Centralised Desktop is a
subscription-based licence model, which Microsoft says enables
organisations to rationalise hardware and software costs.
Neil Macehiter, research director of IT advisory firm Macehiter
Ward-Dutton, said the move shows a recognition of the changing
market. In his experience, more organisations are starting to
consider the ubiquitous connectivity of broadband internet robust
enough to run the operating system from the server rather than the
local hard drive. This delivers reduced maintenance on the basis of
runtime instances.
"Organisations with remote capabilities like branch offices
where the IT department may not have direct control of resources
may find this kind of per-client access attractive," Macehiter
said.
VMware, which has 80% of the virtual infrastructure software
market, has criticised Microsoft for holding back competition in
the market. VMware claims Microsoft is using its position as a
leader in the operating system market and its added platform
dominance with Exchange, SQL Server and Active Directory products,
to drive customers to use its virtualisation products.
"Microsoft's tactics are focused on software licensing and
distribution terms (for SQL Server, Exchange, Windows Server and
Vista) and through the application programming interfaces and
formats for virtualised Windows," said a VMware spokesperson.
Mike Neil, general manager, virtualisation strategy at Microsoft
said, "We believe that we are being progressive and fair with our
existing licensing and use policies and creating a level playing
field for partners and customers."
The move towards server virtualisation from
suppliers including VMware is challenging the more traditional
"per-server" model of licensing. Again, Microsoft serves as a
good case in point of how market forces are influencing changes
to pricing and conditions of use.
Microsoft said Vista Enterprise Centralised Desktop is more
cost-effective than its own thin-client Terminal Services offered
with Windows Server 2003. A Windows Server Client Access Licence
and an incremental Terminal Services Client Access Licence are
required for each user or device using Terminal Services to
remotely run hosted desktop applications, save files and use
network and other resources as though they were installed
locally.
Some smaller providers, such as NComputing, offer similar,
multiple-user virtual access, and NComputing claims it can host 30
users through the same client by using surplus computing resources,
saving on the need for multiple Windows Client Access Licences.
Windows Server 2003 itself is licensed per server and per seat.
Microsoft advises choosing a model best suited to networking and
user-based growth strategies. The maximum number of concurrent
connections of the per-server model is the best choice for a small
network of only one domain or when only part of your client base is
connected to the server at any time.
But Serguei Beloussov, chief executive of server virtualisation
supplier SWsoft, said hardware-based licensing models no longer
accommodate trends in software use.
"Software environments are no longer attached to the physical
hardware. It is no technical problem to move environments between
boxes, it is just the licensing limitations.
"Some suppliers, like Oracle, for example, licence per execution
environment as though this is somehow proportional to usage. But
with virtualisation you could use eight central processing units at
one time and half a central processing unit at another," Beloussov
said.
"Microsoft, for example, is a strategic partner, so we tell our
users to report environment changes to them in case of any
licensing implications. But multicore or software as a service, for
instance, makes the situation even more complex by sharing a single
instance of software across multiple hardware cores or users."
Ollie Ross, head of research at Tif, said different methods of
software delivery were proving to be disruptive to licensing
models. "Suppliers cannot ignore what is happening with the
infinite variety of software systems that are doing an infinite
number of things with commodity computing technologies. The
old-fashioned 'per-processor' models just do not fit any more," she
said.
For instance, Salesforce.com, the software as a service market
leader, uses its on-demand per-user model as a differentiator.
Lindsey Armstrong, co-president for the EMEA region, said the value
of charging per user with on-demand delivery is that the supplier
is always accountable to its customers. "The supplier has to work
hard every month to win your business," she said.
"Per-site licensing is an unnatural way of paying for software -
how many years in advance do you have to know your capacity and
usage to comply? And yet it has been accepted in the IT world. Now
that most CIOs spend most of their IT budgets just keeping the
lights on, they do not want to be committing to spending up
front."
One organisation that found the Salesforce.com approach
attractive is Carbon Trust. Steve Williams is in charge of customer
relationship management systems for the government-sponsored Carbon
Trust, and led the implementation of Salesforce.com CRM software
for 300 remote and branch office users last August.
"We needed to get an enterprise-wide customer view and be able
to track our engagement with organisations to reduce their carbon
emissions throughout the end-to-end lifecycle process of their
engagement with the trust - from looking to identify savings to
measuring and recording reductions," Williams said.
He added, "For us, software as a service was not so much about
being able to turn off licences, but more about the portability and
flexibility of the web-based system. This meant we could do a large
amount of customisation in-house and host remote workers without
loads of extra servers."
Lawrence Buckler is global head of IT at operations management
consultancy Celerant, which is also a Salesforce.com user. He
believes it is possible to outsource all commodity IT
infrastructure and retain only that which supports innovation or
competitive differentiation.
"Getting rid of the assets makes the licensing conversation much
easier, allowing you to focus on what is important in terms of
delivering value," he said.
"Our selection criteria are based on whether every other
consultancy out there needs the same IT function. If not, then I am
willing to pay a premium price."
Value or revenue sharing based licensing models are also proving
popular alternatives. For example, online travel operator
easyJet last year outsourced 200 of its
mission-critical servers for virtually its entire
mission-critical website business on a per-transaction
basis.
Andy Caddy, easyJet IT services director, said the five-year
multimillion pound deal is key to making provider Savvis
responsible for its own revenue by ensuring the infrastructure can
support the travel company's continued profitability. easyJet's
website, ticket reservation and flight operations systems and wide
area network are supported by the managed service.
"For us, that means the cost per passenger comes down and the
numbers of seats we sell goes up," he said. "When you consider 98%
of our revenue comes through the website, the deal has freed up a
lot of time for our team, where they might have been worrying about
air conditioning, racking servers manually and other time-consuming
activities."
Microsoft offers two licence options
>>
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General compliance gets in the way of software asset management
>>
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