Licence to Thrill

Still find software licensing complex and confusing? Major software vendors line up to explain the intricacies of software licensing strategy in the Middle East

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By  Stuart Wilson Published  July 24, 2005

The channel role|~|licensingblack200.jpg|~|Nick Black, senior systems engineer at Citrix Middle East|~|Getting to grips with software licensing strategies is an arduous undertaking. The complexity, variety and sheer number of programmes, schemes and purchasing models in use by major vendors is staggering to behold. Bearing this in mind it is good to find a few major vendors committed to creating clear, simple and effective licensing models that can be easily understood by customers and channel partners alike. With so many different licensing schemes in existence, software distributors play a vital role, ensuring that channel partners fully understand the options that their customers have. It is a role that frequently does not receive the recognition it deserves. “As a distributor of a number of software vendors, Tech Data extends the same programmes as offered by the respective vendors,” explained Eliot Shepherd, marketing director at Tech Data Middle East. “In an effort to take some of the complexity out of the programmes we operate a team of dedicated licensing specialists for our resellers as well as producing the only software licensing guide in the region that is published and distributed twice yearly,” he added It is a role that vendors clearly appreciate. Security software giant Symantec, which operates both a consumer and enterprise licensing model, believes that education is one of the most significant value-adds the channel has to offer in the software space. “It is tough for customers to keep pace with the changes of all vendors. It is a joint responsibility of the vendors and the channel — especially the channel — to educate themselves and the customers,” said Vikram Suri, country manager Southern Gulf and Levant at Symantec. For resellers that carve out a niche selling software, licence programmes offered by some vendors also allow them to create recurring revenue streams. Citrix, which sells the vast majority of its software using a concurrent licensing model, is one vendor offering this type of benefit. “The actual software licence is typically perpetual,” explained Nick Black, senior systems engineer at Citrix Middle East. “The second product attached to the licence is called subscription advantage. This is an annual upgrade assurance and maintenance licence. The attach rate is over 95%. The subscription advantage fee typically costs between 10% to 15% of the perpetual licence value, but it is a recurring purchase and resellers can make 20% margin renewing the subscription advantage with customers every year.” ||**||Customer touch point|~|licensingmichel200.jpg|~|Michel de Martigny, VP sales at CA Arab countries|~|Security software vendor Trend Micro offers a similar model for end-users. With security threats evolving on a daily basis the need for users to keep their software up to date is vital in this sector of the market. “Our enterprise and SMB product solutions are offered using a per seat per computer model,” said Justin Doo, Middle East manager at Trend Micro. “Our consumer products are licensed per user and per device for mobile security solutions. Upon purchase, a perpetual software licence is granted and customers can renew maintenance on an annual basis. Maintenance includes product updates, pattern file updates and technical support through channel partners.” The renewal of software licences is a powerful weapon in the reseller arsenal. The ability to revisit the customer once a year and assess their ongoing needs allows the channel to create a long-term engagement model with their clients. However, there is massive variety when it comes to licensing models and vendors are under increasing pressure to create schemes that match the needs and desires of demanding customers looking to get the maximum return on investment from their software spend. Business software powerhouse Computer Associates (CA) is leading the way when it comes to building flexibility into its licensing model. “CA has a global model for software licensing, which is characterised by its flexibility in allowing customers to choose the software they need, when they need it and for how long,” said Michel de Martigny, VP sales at CA Arab countries. “Many organisations today find themselves locked into perpetual licence agreements that offer immediate benefits based on their current business requirement and technology that is innovative at the time they signed the agreement,” he added. “However, these agreements prevent organisations from taking advantage of new technological breakthroughs in software, as they are locked into an old version with no free option to upgrade.” CA’s answer to this problem is the FlexSelect licensing model — a ‘pay as you go’ model that allows organisations to scale their software requirements up and down depending on their business needs. Whatever initiatives vendors take in terms of licensing schemes, the actual transaction with the customer nearly always occurs through a two-tier channel model. “In addition to processing the order requirements on behalf of the vendor and the reseller, we also take responsibility for education, training and marketing collateral to make the programmes and processes easier to understand,” added Shepherd. ||**||Asset management|~|licensingsuri200.jpg|~|Vikram Suri, country manager Southern Gulf and Levant at Symantec|~|With a variety of licensing models used by major vendors including concurrent, per user, per device and even ‘pay as you go’ schemes, distributors certainly have their work cut out communicating the intricacies of these diverse models to resellers. Vendors are keen to point out the pros and cons of the model that they employ but there remains a simmering discord in the licensing arena. Put simply, many software vendors are in the market to make as much revenue as possible while all customers really want is to satisfy their software licensing requirements for the lowest price possible. Citrix claims that the advantages of its concurrent licensing model are clear to see. “There can be a cost break depending on the working profile of the employees,” added Black. “In a hospital where you have three sets of employees working eight-hour shifts, you can buy a concurrent licence that covers 33% of the workforce and everyone can use it. Citrix has a single licence server model that actually logs users on and off.” Companies attempting to get the maximum return from their investment in licences are increasingly turning to asset management solutions to assess their existing software needs. This in turn has spawned asset management solutions as a software product in their own right. Maria Medvedeva, technology services director at CA Arab countries, explained the benefits: “On average, CA has seen companies over-licensed by around 20%, which means there is a cost-saving opportunity. Many CIOs are asking how many licences do I have and what are we paying for them? Gaining control over licence assets is critical as an organisation can save anywhere between 10% and 35% of its budget simply by implementing a good IT asset management solution.” “Software asset management is an effective tool for doing an inventory of what the customer has procured,” added Suri. “In some instances, customers are keen to align purchases for all their licences. This is critical for budgeting and calendaring purposes.” Gaining control over software assets also enables companies to develop technical agility. Concepts such as HP’s adaptive enterprise, IBM’s on demand computing and the various grid architectures that are now being promoted are putting the inflexibility of some software vendor’s software licensing models under the spotlight. Throw in concepts such as virtualisation, coupled with the impact of dual core processors on vendors that prefer to licence per processor, and it is little wonder that the potential for end-user confusion exists. ||**||'Pay as you go'|~|licensingmedvedeva200.jpg|~|Maria Medvedeva, technology services director at CA Arab countries|~|“Some of the software vendors involved in virtualisation are struggling with the issue of licensing,” said Patrick Eichstädt, general manager sales and marketing at value-added distributor Magirus Middle East. “Saying that logically I have bought the software once but virtually it runs on this many servers brings a new facet to the model. Legally the question is where does it physically run and where is the physical entity that the software resides on.” Both virtualisation and software asset management are double-edged swords for the IT industry. “If a customer, after deploying asset portfolio management, realises that they are not compliant with the terms of the licensing agreement, then the channel can ask for additional licensing fees for the additional software that is unlicensed,” added Martigny. “From the other side of the fence, a customer that has too many licences that are not fully utilised can cancel the unwanted licences, meaning reduced revenue for the channel.” “Software licensing models will evolve as the industry is changing to allow for rapid deployment of technology into enterprises — both ‘pay as you go’ and ‘month to month’ licensing models will be prevalent,” explained Medvedeva. “Perpetual and term licensing that does not include free product upgrades and does not allow for technology breakthrough and technological changes based on changing business needs does not provide a competitive edge to enterprises.” In the Middle East market, software piracy also remains a major issue in the licensing arena. Ian Cochrane, marketing manager at Citrix Middle East, concluded: “Piracy is no worse here than it is elsewhere in the world. Understanding the complexity of licensing models is the real issue in this region.” Software licensing will never be simple. Vendors, distributors and resellers need to work hand-in-hand to create the right models for end users to ensure that software licensing issues do not derail the drive towards advanced IT infrastructures. Some vendors are already leading the way but others seem reticent to upset the status quo. “I met a customer recently where software licences were being held on dongles,” said Black. “It is very difficult to be flexible in your IT architecture when everything is hard coded to a device. As some ISVs try and enforce their current licensing policy to try and deliver more revenues, the industry could well be taking a step back in terms of customers’ ability to really build flexible architectures.” ||**||

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