Getting to grips with software licensing

IT managers are regaining the initiative as virtualisation and SAAS put traditional licensing models under pressure.

Published Thursday, 21 June 2012
By Keri Allan

IT managers are regaining the initiative as virtualisation and SAAS put traditional licensing models under pressure.

In the current market where budget pressures are commonplace, IT managers are faced with a number of tough decisions, including ensuring the company’s licensing model reflects their growing IT needs whilst keeping costs low. Traditional software licensing and maintenance models have come under scrutiny in recent years, but the majority of organisations in the region continue to use them, as James Fenton, SCEE/MEA software rights management sales manager at SafeNet explains.

“Annual renewable license models with a maintenance element are still a popular offering across the Middle East for many independent software vendors. This especially applies to the traditional on-premise vendor who relies on customers to make an annual subscription towards point releases and major version upgrades. The perpetual license is also common, typically linked to the number of users,” he says.

But are these traditional models providing fair value to customers? UBA CEO Hazem Bawab believes that international software vendors may not support the Middle East customer base with the best value due to factors including lack of localisation of software and local support. Still, nowadays organisations have a wider choice than ever of licensing models to choose from, with alternatives such as pay-per-use models on the cloud.

In the end, the value comes down to whether the IT managers have chosen the most suitable model for their company as each model has its pros and cons and success is dependent on the fit with the company.

Vendors are listening to their customers, however, and solutions are evolving as they improve on current models as well as new technologies hitting the market.

“Vendors today have certainly evolved from the traditional fixed use models that did not help in vendor/client interaction and client usage to remix models and technology partnerships,” says Haritha Ramachandran, program manager, information and communication technologies practice, South Asia and Middle East, Frost & Sullivan.

“The remix model allows the clients and vendors to evaluate the usage and access. Constant monitoring of usage and access allows the vendor to provide streamlined services to the customer and for the customer to curtail unnecessary costs.
“The vendor can monitor the client’s usage constantly to ensure that the client’s needs are met entirely. Today, licensing models have evolved to the extent that they are pay as you go or pay per use, allowing the customers complete discretion in terms of access and usage.”

“The trends you see in the market come about purely because of requirements,” continues Asheesh Raina, principal research analyst, Gartner. “Delivery models such as cloud and software as a service (SaaS) were all things required by the market and they all do provide fair value, but which one depends on case to case. That’s why companies need to evaluate their requirements.”

In the last 24 months we have been witnessing traditional licensing models being challenged by SaaS pay-as-you-use and metered type offerings, which are easily facilitated by vendors pushing applications into the cloud. Interest in these models are high thanks to them tying price to usage.

“SaaS delivery models are threatening the status quo in the software industry because they’re more flexible, scalable and cost-effective, and certainly provide overall better value for money,” says Ansgar Dodt, SafeNet’s SRM VP of sales, EMEA.

Bawab believes that the mobile application movement has also had an effect on the licensing landscape in the Middle East.

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“I believe that the main reason businesses and individuals will start trusting to host their personal and corporate information on the cloud is due to the increase in mobile application usage in the Middle Eastern market. I see that my customers are starting to move towards accepting hosting their data outside their home and office. Privacy laws in the region definitely need to be looked at more closely, but it’s definitely a very good start for SaaS and cloud-based applications,” he notes.

Then there’s virtualisation. Something that’s high on many IT managers agenda, they need to be prepared for another layer of complexity when it comes to software licensing.

Managing your licenses in a virtualised world is tricky, as software vendors often don’t employ state of the art licensing technology to cover such environments. In short, this can lead to under-licensing; the software is used on more instances than licensed for.

“This puts the end user at risk of breaking their license terms, even though they don’t have the technology at hand to manage their license usage professionally. End users can use manual workarounds to make sure they are in accordance with license terms, but a robust solution will only be available once software vendors have upgraded their licensing technology, or even their software delivery mechanism, to cover virtual environments,” Fenton explains.

IT managers really do need to make sure they are aware of the legalities of the environment they are in, as Bawab notes.

“If they are a UAE-based company and have their virtualised solution hosted in the US, certain laws, rules and regulations apply on their data usage and content. We have faced this with one of our customers whom we hosted on Amazon; only to discover later that their Syria-based office couldn’t access Amazon for security reasons,” he highlights.

Again vendors are aware of the difficulties around virtualisation and are evolving quickly to meet its needs by providing virtual licensing tools to evaluate the extra virtual systems that need to be catered for via additional licenses.

“Vendors need to take into account not only the properties of the physical machines, the existing virtual systems and the upcoming virtual machines but also the physical CPUs available, the corresponding network addresses, the existing memory along with the existing and future disk space,” says Frost & Sullivan’s Ramachandran.

There may still be some issues to iron out; however, the newer models such as cloud and pay per use are already changing the current licensing landscape as customer demand and competitive pressure forces traditional on-premise vendors to react.

“While the software needs of the consumers evolve, the vendor needs to evolve as well to ensure he meets the customer requirements completely. Organisations such as Microsoft and IBM have recognised this and evolved with the cloud licensing scheme and pay as you go billing scheme,” says Ramachandran.

Raina believes that some avenues will be displaced and there will be some cannibalisation; however, traditional licensing isn’t going to suddenly disappear.

“The futuristic scenario that will never happen is that a company will become fully on the cloud or fully virtualised. Rather they will exist in harmony – possibly as a hybrid model,” says Raina. “There may well be a mix of on-premise and cloud licenses, but no one model will kill another,” he concludes.