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8/24/2011
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How To Conquer Software's Rising Costs

Complex licensing policies and increased fees can seems like an insurmountable challenge. These steps can help you get a better grip.

Software is playing an increasingly important role at every company. Today it's ERP, databases, and desktop applications; tomorrow it will be embedded systems and ever-more mobile apps. CEO after CEO touts the strategic advantage and cost savings that technology imparts, all of it powered ultimately by software.

Yet, peel back a layer and you'll find CIOs and their IT managers frustrated with the state of software licensing. They view it as having to climb an insurmountable summit imposed by vendors.

In an InformationWeek survey of more than 500 business technology professionals and in interviews with many more industry players, we found that while there isn't much IT leaders can do about tortuously complicated vendor licensing practices, there's plenty they can do to manage contracts and relationships. Instead of being the victim, IT leaders must take charge.

For starters, the 34% of IT organizations represented in our survey that don't involve line-of-business managers in evaluating software licenses need to start doing so. And companies must begin extending their expertise in enterprise software licensing (73% of survey respondents sometimes or most of the time negotiate significant price breaks) to off-the-shelf software. In sufficient quantity, licenses for such software add up to enterprise scale in terms of dollars and risk potential, and IT organizations need to start treating them that way.

Enterprise software like ERP tends to have more mature life-cycle management processes, with RFPs that spell out the scope and contracts that extend licensing terms over at least a few years. Managers of commercial infrastructure software should take a page from that manual. Asset management tools from vendors such as Avocent (LANDesk), Symantec (Altiris), and Flexera can help IT organizations discover, purchase, deploy, maintain, and even dispose of software. Weigh that investment against how much you can recoup when you have a deeper understanding of how many wasted licenses (i.e., ones nobody uses) the company has.

How acceptable is it when a software license contains a clause stating that the licensing terms can change at the provider's discretions?
IT leaders also need to come to grips with who owns the software. Whether it's a commercial or open source license, as users we rent--we never own--so it's unrealistic to expect "perpetual" licenses that never change over a software package's life cycle. Software licensing can also change with changes in computing paradigms, such as virtualization and the cloud.

For example, in early 2007 Microsoft realized that customers were virtualizing Windows XP, and it couldn't do anything about it under the old license agreement. So with Vista, Microsoft created a new type of license for the virtualized form of the operating system, called VECD (Vista Enterprise Centralized Desktop). In 2010, Microsoft renamed this license VDA (Virtual Desktop Access).

More recently, with the upgrade from vSphere 4 to 5, VMware started licensing the product by vRAM usage in addition to its base pricing per CPU, resulting in much higher licensing costs for many customers. After a customer uproar, however, VMware softened the blow considerably.

Even hardware is subject to the vagaries of software licensing. For example, the label inside the Lexmark x543 printer states: "Print use is subject to patent license" and "Use of printer acknowledges your agreement to the license terms." See what we mean about software licenses ruling every bit of technology?

Time for CIOs to Take the Wheel

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