Don't rush in to usage licensing, users warned

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Don't rush in to usage licensing, users warned

Cliff Saran

Users should not rush into adopting the utility-based computing model being proposed by suppliers, delegates at last week's Gartner Symposium were warned by analyst Rakesh Kumar.

Kumar said users should be wary of how utility-based pricing for software would work in practice. It is "very difficult if not impossible" for software companies to build a viable business case for a variable usage-based licensing model, he said.

Major software suppliers are monitored on the financial markets by contracts that are sold and regular income coming in. "If you try to shift this from a fixed income to a variable income, depending on your business cycle, Wall Street will not like it," said Kumar. As a result, users may find that the utility-based licensing they signed up to may be subject to sudden change, he warned.

There are also caveats to the usage-based model even when dealing with a hardware provider, where usage-based pricing is better understood, he added.

Moving to a four-year usage-based contract for storage including servers and software can seem attractive. But users need to consider whether fixed-price contracts will give sufficient value in a market where hardware prices are consistently falling.

Another problem area for usage-based licensing is how to pass the cost of IT to an end-user department. The business may not be prepared for "granular" charge-back of IT services, preferring an annual fee instead, Kumar said.

Despite these problems, Gartner said virtualisation technology would eventually give IT directors a completely different way to buy and deliver IT services and chargeback to the business than has been possible in the past.

Kumar predicted that over the next 10 years IT directors would increasingly buy from their hardware suppliers based on usage.


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