Firms crave simpler licensing

By Dave Bailey
27 Jan 2010 View Comments
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many small firms are outsourcing their service provider licensing agreements to service provider licence agreements resellers

Licensing complexity has become one of the biggest bugbears of IT management. Microsoft chief executive Steve Ballmer had to fend off intense criticism of his firm’s licensing arrangements at the Windows 7 launch last November, and attendees at an SME roundtable on outsourcing last week agreed that licensing had become “mindbogglingly complex” and was forcing customers to outsource applications to the cloud.

Licence complexity has always been a problem for customers of large vendors, and some argue that Microsoft is the biggest culprit, with the company’s huge range of products being sold into almost every country and to different-sized customers all requiring different licences. The complexity is compounded by the fact that product groups within Microsoft decide independently of one another what types of licences are required and how they are priced, and make decisions that will maximise market share and revenue, not increase simplicity.

And Microsoft is not alone in this. Other big vendors such as Oracle and SAP have similarly arcane licensing frameworks.

James Griffin, head of hosting strategy at on-demand services provider Star, said services such as hosted email amply illustrated the kind of problems IT managers face.

“There are the licences for the email itself, then licensing for anti-spam and anti-virus. There are also other areas of software at a server level, and at the client level [client access licenses], which also add complexity. To top it off, the pricing is constantly changing,” he said.

These problems have been exacerbated by new technologies, and at a recent roundtable on SME’s current and future outsourcing plans, Freeform Dynamics research director Dale Vile said that virtualisation was one of the biggest things affecting on-premises users licensing problems.

This is because rather than having one licence per physical server, as used to be the case, vendors are now licensing per core or per processor. On top of the complexity already described, an IT department would have to work out how many processors or cores a licensed product would be legally allowed to run through.

In addition, processors can have multiple processor cores, and some company’s have different licensing requirements for this.

Griffin said, “Microsoft used to have one licence for one physical server but now it has changed its licensing to charge per processor, which is more manageable for customers in terms of cost than charging per core [as some vendors do]. In this respect, Microsoft is doing the right things for its customers.”

Analyst Gartner’s research director specialising in IT asset management, Stewart Buchanan, said that licensing models were originally designed for a much simpler environment.

“As soon as you virtualise, you step outside the original licensing laws, which were based on a physical infrastructure. We’ve seen it happen with server virtualisation, and now it’s happening with the desktop as well,” he said.

“For example, in theory internet cafés, which actually just offer web browser services, should have licences for each of their desktop machines. They don’t, however, and that’s quite a problem,” he added.

Microsoft is one vendor that is certainly aware of the licensing problems faced by IT managers, but it has yet to come up with a satisfactory solution.

Microsoft worldwide licensing and pricing general manager Richard Smith said, “Microsoft will make the purchasing experience simpler for customers and ultimately shift the customer experience to one purchasing platform and a single agreement for any type of offer.”

Not that software licensing complexity is just Microsoft’s problem. Service director for business processes facilitation at analyst Quocirca, Clive Longbottom, said, “It’s fair to say that the software licensing for big vendors’ applications is in a bit of a mess across the board.”

To resolve the issue, many small firms are outsourcing their service provider licensing agreements to service provider licence agreements resellers (Splars). Star’s Griffin said, “They have become one of our most valuable resources. I spend more time talking to them than I do any of the other vendors and partners. This is the medicine we use to take our customer’s licensing pain away.”

Gartner’s Buchanan warned that if firms do resort to outsourcing applications without a service provider licence agreement, the liability for software licensing could fall on them.

“You can pay someone to sort all this out for you, but there’s no way in which you can transfer ultimate liability for ensuring your solution is licensed,” said Buchanan.

He added that any widely accepted solution to the issue of licensing complexity is still some way off: “It is likely that for many vendors, their own strategic development is more important than a few licensing issues facing their customers.”

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