Software // Enterprise Applications
Commentary
8/1/2014
09:06 AM
Doug Henschen
Doug Henschen
Commentary
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Avoid Software Licensing That's Set Up For Failure

Does your software vendor use the honor-system or trust-but-verify approach to licensing? Learn the difference and save a bundle.

Software audits are on the rise, and no matter what data you cite, licensing and tracking compliance stack up as complicated challenges for all but the smallest organizations.

More than a third (37%) of the 564 respondents to our just-completed InformationWeek 2014 Software Licensing Survey say their organizations have been audited by at least one software vendor within the past two years. Audits reconcile the software you have installed with what you have licensed and are entitled to use, as spelled out in contracts.

When installs and entitlements line up, you're in compliance, but some enterprise software vendors estimate that some 80% of their customers are out of compliance, according to Amy Mizoras Konary, research VP, software licensing and mobile enterprise applications, at IDC. When discrepancies are uncovered, fines average more than $500,000, according to Express Metrix, a provider of IT asset management software that helps companies track what's installed.

[Want more advice on software licensing? Register for our August 5 audiocast, Software Licensing: How To Pay Less And Use More.]

Strict compliance is rare, in part because most enterprise software vendors don't use the sort of license keys that consumer software publishers use to unlock software. Further complicating matters, some software vendors take what Mizoras Konary calls "the honor system" approach to making their software available.

"The feeling from the vendor's perspective is that if you make it really easy for people to get your software, even software that they haven't licensed, then they might test it out, see the benefits, and start paying for it," she says. "It does create a possibility that people are going to end up using products that they have not licensed and paid for, and an audit might uncover that."

Anybody following the controversy surrounding Oracle's Database In-Memory option over the last week won't be surprised to hear that Oracle is the poster child of the honor-system approach. Oracle is well known for making it very easy for people to download, install, and use anything and everything available for Oracle Database, whether they've licensed the product or not.

Other enterprise software vendors have embraced what Mizoras Konary calls the "trust-but-verify" approach, whereby you might see a pop-up message that says something like, "You don't have access to this feature. Call your sales representative and we'll turn it on for you." She puts Adobe, SAP, and others in this camp.

"The majority of vendors are in or moving to the 'trust-but-verify' camp. It used to be the other way around, but what customers ended up saying is that with the complexity of their IT environments, the honor system seems like it's set up for failure because it's almost impossible to stay in compliance."

No matter what approach your vendors use, audits don't have to induce terror, and software license compliance tracking doesn't have to be a cumbersome manual process. Software-asset-management and software-license-optimization software can go a long way toward bringing software installation into line with entitlements. It can also help you eliminate shelfware and consolidate buying for better discounts.

Software alone can't solve the compliance problem. IT leaders need to clearly understand the needs of different types of users and roles. They also need to get on the same page with CFOs and purchasing departments on buying strategies and then forge measurable and enforceable contracts with clearly spelled out terms and entitlements.

Want to learn more about how to take control of licensing? Join InformationWeek Radio on August 5 at 2:00 p.m. ET (11:00 a.m. PT) as Amy Mizoras Konary discusses "Software Licensing: How To Pay Less And Use More." The topics of discussion during the interview will include:

  • Moving from simple license tracking to proactive license management and optimization
  • Avoiding compliance problems by anticipating sticking points such as virtualization
  • Coordinating CFO, purchasing, and IT policies and practices to get better terms.

To learn from Mizoras Konary's years of experience with software licensing and compliance challenges, register for this free, 30-minute InformationWeek Radio show and plan to be part of the online chat and Q&A session that follows.

The nature of pay-as-you-go makes the cost calculation seem easy. It's not -- but it is more critical than ever. Get the new Cloud ROI issue of InformationWeek Tech Digest today (free registration required).

Doug Henschen is Executive Editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data and analytics. He previously served as editor in chief of Intelligent Enterprise, editor in chief of ... View Full Bio
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Somedude8
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Somedude8,
User Rank: Ninja
8/1/2014 | 11:36:01 AM
Simpler would be better
It would be a lot easier to be in compliance if the licensing terms and costs were actually understandable. Outside of some really simple products, so much of the licensing is incredibly convoluted. How much does it cost to license SQL Server for example?
Laurianne
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Laurianne,
User Rank: Author
8/1/2014 | 1:12:19 PM
Virtualization
Virtualization and licensing remains a confusing area for some IT pros so I am eager to hear her advice on this topic.
D. Henschen
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D. Henschen,
User Rank: Author
8/1/2014 | 1:23:43 PM
Virtualization is just the beginning
Virtualization is just the beginning of the complexity. Hybrid-cloud deployment, shared services with software-cost-allocation, and growing use of mobile devices and usage-based licensing schemes are making it ever harder to both stay in compliance and to cost-effectively purchase only what's needed. Keep in mind that what's licensed, what's installed and what's actually used are three, distinc things, and they're often wildly out of sync. If you've installed or are using more than you've licenced, you're out of compliance and may face steep fines if uncovered by an audit. If you've licensed software that's not being used (whether it's installed or not), you're paying too much and you could strike a better deal.
D. Henschen
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D. Henschen,
User Rank: Author
8/1/2014 | 1:29:53 PM
Re: Simpler would be better
There are efforts toward change. Some software vendors are behind coming up with a standard -- ISO 19770 -- that would provide one way to use IT asset magement software to discover what software is installed and in use as well as what companies are entitled to use based on their software contracts. That effort is progressing slowly because it's hard to get software vendors to agree on things. It would be ideal, though, because it would let companies use a single tool set to monitor and optimize all thier software spending.

The Campaign For Clear Licensing is a new organization currently set up in the U.K., but its founders say it will open up U.S. and German branches early next year. Maybe they can put pressure on vendors to embrace ISO 19770!?
Somedude8
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Somedude8,
User Rank: Ninja
8/1/2014 | 2:40:55 PM
Re: Simpler would be better
I wasn't aware of either of those. Sounds like a step in the right direction.
Li Tan
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Li Tan,
User Rank: Ninja
8/2/2014 | 6:13:00 AM
Re: Simpler would be better
That's the situation in my company. There is assest management daemon in the background and verifying the software installed periodically. As the end user, I can only installed licensed software via RAP. I am not able to install other stuff e.g. through copying the installation file. I believe this is the right trend to manage license in the future.
kbannan100
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kbannan100,
User Rank: Strategist
8/2/2014 | 3:38:47 PM
Re: Virtualization is just the beginning
I think it's going to become more difficult as we create service catalogs for IT-as-a-Service offerings and start letting users request and roll out their own software running on the private cloud. Still, the hassle is worth it because it makes for happier users and an IT staff that doesn't have to spend time working on things that don't matter as much. There's a solid blog about the EMC/VMware/IDG study about running IT as a business and creating service catalogs here: http://bit.ly/1oke1W2

--KB http://bit.ly/1iMdSE5    
Brian.Dean
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Brian.Dean,
User Rank: Ninja
8/3/2014 | 8:24:24 PM
Re: Virtualization is just the beginning
Agreed, the hybrid-Cloud that creates the need for virtual Clouds -- makes pricing complicated. Since, private Clouds enter into the picture due to security requirements, it holds true that firms are willing to pay extra for an increased level of security. It could turn out that firms that transfer software between the private and public Cloud on a regular bases, begin to employ a team of in-house auditors to get the best deal and remain in compliance.
Lorna Garey
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Lorna Garey,
User Rank: Author
8/4/2014 | 3:53:47 PM
Re: Simpler would be better
Those both sound like worthwhile efforts. All standards move sloooowly, but given the cost to software vendors of both audits and unauthorized use of software, one would think there would be impetus for a universally accpted way to enforce licensing agreements.
Software Compliance
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Software Compliance,
User Rank: Apprentice
8/6/2014 | 11:03:57 AM
License Misuse is the Elephant in the Room
Vendors have largely ignored that all to often end users will employ software as part of commercial service.  Nearly all standard licenses prohibit using licenses to do any sort of 3rd party work.  This type of misuse may not be easy to detect but can have large financial reward for the vendor.
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