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Software Licenses: Vendors Happy, Customers Not So Happy

IT managers are looking for more flexible license structures that allow them to pay only for what they use.

Software vendors are a lot more satisfied with the licensing agreements they offer than their customers are, a finding that spells trouble for vendors that are not tuned in to their customers' needs, says Fred Amoroso, CEO of Macrovision, which sponsors an annual study on software licensing trends. Business software managers are looking for more flexible license structures that allow them to pay only for what they use. Instead they are frequently locked into contracts that push them toward paying peak usage prices, he said.

"Software licenses have to reflect the value of the software to the enterprise as a whole, not it's value on a given server," Amoroso said Monday in a lunchtime address at SoftSummit 2005 in Santa Clara, Calif.

In August and September, the Software and Information Industry Association along with Macrovision, a supplier of software to manage software licenses, sponsored a survey of 500 SIIA members on their satisfaction with existing licensing arrangements. Two-thirds of the vendors interviewed said they had adjusted their licensing and 57% said they were satisfied with the results. Only 28% of customers said they were satisfied with their licenses. As software vendors get larger, their satisfaction with their own license offerings drop, Amoroso said. He interpreted that result as indicating large software firms realize their limited licensing schemes are causing customer dissatisfaction but don't feel able to propagate more license arrangements.

Amoroso said more license arrangements are needed "that work the way the software in enterprises works." Some vendors offer a concurrent number of users license that allows any set of users up to a certain limit to make use of the software. The arrangement frees the software from use only by fixed named users. Some vendors allow the concurrent user license to float on an enterprise network, so users in the different parts of the world can use the software as one shift comes on and another goes home.

But many software package licenses are based on number of CPUs in the server or number of named users. Since CPU usage fluctuates, companies are forced to buy for maximum usage. Average usage can be much lower. The study, "Key Trends in Software Pricing and Licensing," was the second conducted by Macrovision and SIIA. The study shows that software vendors "need to embrace the new models in order to keep customers happy," said Ken Wasch, president of SIIA, in a statement.

Other findings include:

72% of businesses manually track their license compliance or don't track it at all.

50% of businesses would like a way to automatically track software use and ensure compliance with their licenses. The figure is up 6% from last year.

Subscription models, where customers pay a monthly fee for software instead of a one-time purchase price, have caught on with 40% of vendors. The figure is 7% higher than last year. The number is expected to jump to 60% in 2006. 53% of businesses prefer concurrent pricing models to per-server licenses. The figure is up 11% from last year.

Despite some large vendors' "aggressive efforts to license per processor," only 6% of businesses prefer this approach. With the advent of dual-core processors, some vendors are counting two cores, as in upcoming chips from Intel Corp. and Advanced Micro Devices, as two processors. Customers are still seeing one processor. Oracle recently took a step back from such a stance, saying it will count each unit of a dual-core processor as 0.75% of a processor.

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