Technology advances add to licensing headache

Server virtualisation, multicore processors and capacity on demand do not fit with traditional models of software licensing, and IT managers are facing growing complexity as suppliers struggle to find a solution


Server virtualisation, multicore processors and capacity on demand do not fit with traditional models of software licensing, and IT managers are facing growing complexity as suppliers struggle to find a solution

Advances in technology are leading to a change in software licensing models. But as suppliers are forced to revisit their licences to offer more flexible deals, the task of IT directors in managing these arrangements is becoming more complex.

The technologies that are driving this change include server and desktop virtualisation, multicore processors, software as a service, utility or grid computing, and hardware capacity on demand.

Users can find themselves with multiple types of licences depending on which hardware or software they are using.

With no industry standard for licensing, companies end up paying different types of licences for the operating system, database and middleware components of their IT systems.

Dave Reynolds, technical services manager at Hampshire County Council, said server licence management had been "a headache" over the past few years.

Hampshire County Council shares services between Hampshire District and Borough Councils and various local NHS organisations. It is a Citrix user with a 250-machine server farm, running Microsoft Office applications over the Citrix virtualised environment.

"With our shared services agenda, getting an organisation like Microsoft to understand that we need to license Office desktops for NHS departments and district and borough councils was difficult," he said.

"We negotiated a very open Enterprise Agreement with Microsoft six months ago to ensure we can do that. In the Citrix world, they have been very flexible with us from the beginning."

Another organisation, the Association of Teachers and Lecturers, has been using virtualisation to help it to recover quickly from systems failures and maintain business continuity. It faced licensing issues when it implemented a VMWare virtual infrastructure in July 2005.

Ann Raimondo, the ATL's head of IT, explained that, early on, some application suppliers were reluctant to support the association running their applications in a virtual environment because of the licence and support complications.

Server virtualisation

Server virtualisation technology allows users to pool their computing, storage and other resources across a number of hardware platforms to make more efficient use of those platforms.

It uses the concept of virtual machines - software compartments that allow software to run independently from the hardware they reside on.

From a software licensing perspective, the issue is that virtualisation allows users to run multiple instances of an application, or shift it from one machine to another, which can violate some licensing agreements.

Neil Macehiter, partner at analyst firm Macehiter Ward-Dutton, said, "Server virtualisation is undoubtedly forcing software suppliers to reappraise their licensing models. Though the technology is nothing new, the licensing models of many software suppliers do not allow for flexibility."

For example, with situations where the user licenses the application by the number of processors they are using (per-CPU licensing), if the user moves their software from a two-processor machine to a three-chip machine, or if they run it on two virtual machines, they could violate their licence.

Roy Illsley, senior research analyst at Butler Group, said Microsoft was one of the few suppliers that have addressed the virtualisation issue.

In October 2005, Microsoft said, "The licence for the upcoming Windows Server R2 enterprise edition will allow four virtual instances at no extra cost."

Illsley said, "This will inevitably lead other suppliers to review their licensing policies."

Multicore processors

Multicore processors have multiple processing units, or "cores". They work in conjunction with hyper-threading technology, which allows applications to be run as simultaneous "threads".

Multicore processors pose a similar licensing conundrum to server virtualisation for suppliers, and consequently for IT managers.

Because applications are often licensed per processor, if the user were to run them on a multicore chip, some suppliers would consider this to be equivalent to running them on multiple processors. So, in effect, it means the user is not paying in proportion to what they are using.

"There is no standard way to deal with this yet - unless you are a games player. The Playstation 3 will have eight cores, using multiple cores to parallelise processing. But the enterprise software companies are lagging behind [games producers] and have not even got an idea of what it means for the user," said Macehiter.

Some suppliers, like Microsoft, have decided to charge per processor, rather than per core. Others, such as Oracle and BEA, will charge a percentage of a licence per additional core. And others, including IBM, have different licensing plans depending on the operating system that is in use.

"A price delta for additional cores is reasonable, such as the 25% charged by BEA," said Andy Butler, vice-president at analyst firm Gartner. "The additional core does not provide double the performance."

Ilsley said, "What suppliers are going to come up with is a number of different ways to license software. Virtualisation and multicore will really test the market."

Software as a service

Along with virtualisation and multicore processors, several developments are affecting traditional licensing models. One prominent example is software as a service, which delivers a hosted application over a network and gives the user a fixed monthly fee for their usage.

"Software as a service has changed the licensing paradigm," said Macehiter. "As with many services, if you think of your mobile phone service or your utility bill, the licensing is based on a subscription, and it is paid for on a monthly basis for as long as you use the service."

Grid computing

The software grid, which uses virtualisation to run software over many servers, is another technology that makes licensing problematic. Grid computing raises the same licensing issues as server virtualisation.

Capacity on demand

Hardware capacity on demand is another potentially thorny area which may require application licencers to change their charging models.

This is where hardware suppliers such as IBM and Sun supply hardware with spare processors that can be turned on or off as they are required. Like software as a service, the user theoretically pays in accordance with their usage.

Gartner research vice-president Alexa Bona said, "Although these developments can reduce hardware costs, software licensing charges have not been addressed. The software suppliers generally charge for the total potential capacity, irrespective of what is used. There is no recognition of the utility-based pricing approach.

"Moreover, no mechanism is in place for software suppliers to measure when and for how long these temporary capacity on demand processors were active. Consequently, potential savings in hardware can be eliminated by rising software fees that are based on the total potential system capacity."

Macehiter said that one way forward for software licensing may be to licence in terms of the individual functions an application carries out.

"It is having an impact on the traditional software licensing models, because you are looking at a capability, rather than some larger suite. For example, a licence could cover the capability you get from a piece of database," he said.

This type of licensing model, championed by the open source world, may provide the way forward. "This is on the negotiating table. Both users and suppliers are moving to a model where you do not have to guess your software usage," Macehiter said.

Another alternative is to license monthly. "We are increasingly seeing a transition away from the perpetual licensing model to a subscription model - Sun with Solaris 10 and Java Enterprise System, and Red Hat with Linux charge a monthly subscription.

"It makes it more predictable, and there is not a big price to pay up-front. It also spreads the payment," said Macehiter. Microsoft's Software Assurance illustrates this shift in thinking, he added.

"The challenge is that many of the more traditional suppliers' business models are not fundamentally geared to this approach," said Macehiter.

However, Illsley said he thought that the industry was unlikely to find a consensus over licensing - certainly not from the users.

"I do not think a user-led standard will be established. It would be useful to have one. For one thing, it would help the little guys that do not have the clout to go to a company and demand an enterprise deal," he said.

Tips for managing licences on emerging technologies

  • For multicore processor licences, use Microsoft and BEA's per-processor charging policy to negotiate a maximum of 25% uplift for dual-core processors
  • Encourage software suppliers to price by the socket (or module where two CPU chips can share a socket)
  • Negotiate contracts that recognise partitioning of servers
  • Demand to know suppliers' utility/virtualisation pricing strategies
  • Investigate the suitability of alternative licence metrics offered by suppliers
  • If you are looking for databases for ERP or other business applications, investigate buying them through the application supplier.

Source: Alexa Bona, research vice-president, Gartner

Read article: How software licence buyers can flex their muscles


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