Strategic CIO // IT Strategy
News
9/2/2014
09:06 AM
Connect Directly
LinkedIn
Twitter
Google+
RSS
E-Mail
100%
0%

Cloud Won't Cure Licensing Woes

Think options in the cloud will solve licensing woes? Not so fast.

Get the entire Sept. 2 issue of InformationWeek - no registration required.

What could be simpler than cloud-based, pay-per-use, and pay-per-user subscriptions? You can see in real time everything you're buying and using, right? Well, it's not that simple.

Virtualization, private cloud, and public cloud deployment options have only added to licensing complexity, introducing a mix of on-premises, per-CPU, per-VM, per-use, and per-user licensing models in this brave new hybrid world. Only 26% of companies represented in our InformationWeek Software Licensing Survey say they don't use software-as-a-service.

Are you moving some licenses to a per-use model on Amazon infrastructure-as-a-service? "How will the vendor count those licenses and how do you manage a multifaceted environment where you have some licenses on-premises and some in the cloud?" asks Shawn Bennett, executive director of IT procurement at Hearst Corp.

Even SaaS is getting complicated as vendors such as Salesforce.com add multiple offerings (sales, service, marketing), multiple options and service levels, and the temptation of all-you-can-eat enterprise deals. At Hearst, separate newspaper and magazine businesses bought instances of Salesforce independently, Bennett says, "so there's definitely an opportunity to manage it better."

The ease of SaaS deployment facilitates shadow IT. "SaaS can alleviate a lot of compliance issues," says IDC analyst Amy Mizoras Konary. "But you have to set up centralized purchasing so you don't have every sales manager going out and buying Salesforce independently on their corporate American Express cards."

We asked the software buyers in our survey to rate SaaS and on-premises software contracts on a 1 (very dissatisfied) to 5 (very satisfied) scale. On-premises earned a 4 or 5 from 58% of respondents; SaaS got that high rating from only 43%.

Some companies are trying to control cloud spending by creating enterprise app stores, where employees can shop for company-approved applications covered by centralized corporate contracts. Among companies in our 2014 InformationWeek Elite 100 ranking, for example, 32% have widely deployed an employee app store, and 13% on a limited basis. (Nineteen percent have no plans for it, and the rest are exploring the idea.)

Related stories:

Software Licensing: Move From Defense To Offense

5 Signs You'll Face A Software Audit

Get the entire Sept. 2 issue of InformationWeek -- no 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

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
zerox203
100%
0%
zerox203,
User Rank: Ninja
9/2/2014 | 10:52:03 AM
Re: Cloud Won't Cure Licensing Woes
Here Here! This is an ongoing point we see being made about Cloud (or, for that matter, any technology) cannot be used as a bandage to to cover up long term problems in corporate IT. Licensing is no exceptions. If you had a problem with it before, odds are, you're going to have a problem with it now. All the extra material provided in the full issue linked at the bottom explains the how and why, for those that want a little more detail and plenty more numbers to back it up. It's a complex web we've weaved with modern software licensing, but it's not unsolvable - just take it one piece at a time.

Of course, you're also right to suggest, Doug, that at big organizations, that's easier said than done... and that education and communication are the keys to getting it right. That education and communication, too, can be difficult at a sprawling organization with diverse needs. It depends a lot on your culture - that is, whether or not your CIO can go to your CMO and convince him not to 'go rogue' has a lot to do with what kind of relationship your CIO and CMO have to begin with. Best practices certainly go a long way, too;  outlining the how and why (with dollar signs) instead of coming down with an iron fist is definitely the way to go.
D. Henschen
100%
0%
D. Henschen,
User Rank: Author
9/2/2014 | 10:35:40 AM
Clouds upon clouds, options upon options
Consider the cloud poster children, Amazon.com and Saleforce.com. The initial appeal is pay for only what you use, but both companies have come up with so many options and licensing plans, keeping track of costs has become very complicated. It's not just $65 per-user, per-month for sales force automation, for example. Now you're likely using multiple Service Cloud and Marketing Cloud options on top of SFA. So maybe you'll go for that all-you-can-eat Enterprise deal, but have you stopped to add up the costs over five years?

No, you can't get the same kind of agility with on-premises software, but the complications and all-in-costs of the cloud route have to be considered with the same rigor you'd apply to software investments. 
Li Tan
0%
100%
Li Tan,
User Rank: Ninja
9/2/2014 | 9:48:02 AM
More complicated licensing model
This is the situation currently we are facing. Cloud computing is not designed to solve licensing problem. With the introduction of SaaS and pay-per-use, the licensing model is much more complicated. You need to consider not only license fee for the software, but also the function you used, how long you need to use it, even what features you use.
Li Tan
100%
0%
Li Tan,
User Rank: Ninja
9/2/2014 | 9:47:59 AM
More complicated licensing model
This is the situation currently we are facing. Cloud computing is not designed to solve licensing problem. With the introduction of SaaS and pay-per-use, the licensing model is much more complicated. You need to consider not only license fee for the software, but also the function you used, how long you need to use it, even what features you use.
Transformative CIOs Organize for Success
Transformative CIOs Organize for Success
Trying to meet today’s business technology needs with yesterday’s IT organizational structure is like driving a Model T at the Indy 500. Time for a reset.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Tech Digest September 24, 2014
Start improving branch office support by tapping public and private cloud resources to boost performance, increase worker productivity, and cut costs.
Video
Slideshows
Twitter Feed
InformationWeek Radio
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.