June 30, 2011
Every management team attorney I've ever worked with has gotten serious heartburn when the topic of software licensing comes up. It's one of those subjects most CIOs also avoid discussing, as there are no clear answers, though the angst is palpable. But with software choices--and thus buyer power--at an all time high, the time to have that uncomfortable conversation has come.
While enterprise software licensing is complicated enough, in my experience the licensing of shrink-wrap and click-through software is the most out of control. While many people might simply shrug at the notion that a line employee end user can commit the organization to a contract, that's exactly what employees are doing when they unwrap that software or click through that license agreement. Organizations are starting to take this can of worms seriously, but not seriously enough. Our just completed InformationWeek Analytics survey on the subject reveals that 58% of more than 500 business technology professionals say their organizations have rules governing software licensing--but that means 42% don't. Without such rules, the vendors call most of the shots. Their licensing agreements issue gag orders (as in, you cannot criticize our product publicly), allow for spyware, even give them complete product liability protection. In no other industry do manufacturers enjoy this level of freedom to write one-sided rules and get low-level employees to agree to them on behalf of their organizations. Imagine an automaker telling a corporate customer: "Did your fleet's car explode? Sorry, but we're off the hook. Your driver agreed to that when she first turned on the car." (With software vendors getting involved with automotive, maybe that scenario is in our future.) The most onerous term of these software agreements is the meta-language which states that the user agrees that the terms of the agreement can change at any time, without notice. That's not discussed much within IT circles, but it should be. Imagine if the service contract for your data center air conditioners could change at any time, without notice. It's outrageous. The terms and conditions get more complicated by the day. Respondents to our survey cited unexpected expenses when app vendors realized that virtualization provides a wonderful new way for them to charge customers more. Others reported arbitrary changes in their licensing models, from, say, site licensing to per-user charges. It's no wonder that more than a third of survey respondents have at least one person on staff who spends more than half of his time managing software licensing. How did we get to this place? Vendors used to take on considerable expense and risk to distribute their software. What if they paid the developers to write the software, created discs, printed manuals, manufactured boxes, shipped the software, and no one bought it? Shareware and the Internet made their distribution process much less expensive and complicated, but selling one copy and then having the end user install 20 copies illegally--which, to be fair, was commonplace--reduced revenue and profits. To bolster their financials, vendors had to raise their unit prices. Global CIOs: A Site Just For You Visit InformationWeek's Global CIO -- our online community and information resource for CIOs operating in the global economy. All of this meant that software vendors struggled to stay in business, shifting more power in the supply-demand dynamic to those suppliers that survived. One example that illustrates this academic thought exercise is Microsoft and its Word product. With its main rival, WordPerfect, cratering in the 1990s, buyers didn't have much choice when it came to personal productivity software. I mean, were customers' system administrators really going to say no to Microsoft's EULA, and tell their users that they couldn't have Word, even if Microsoft demanded that they change their religion or sacrifice a goat once a week? People just rolled their eyes and said "whatever" on the terms. And now they're stuck with a legacy of crazy. For example, it's hard to understand why the current Microsoft Office license grants Microsoft permission to collect information from your organization via the Internet. Two developments give me hope. First, while I'm the last to say that the cloud is the answer to everything, I think it can help this situation. Software as a service, if it can be acquired in a way that doesn't lock the customer in, promises to give buyers more power. There's no shortage of SaaS providers, so if one of them asks you to sacrifice that goat, you can say no and move on to the next provider with relative ease. Second, app stores are moving beyond smartphones and tablets to a desktop near you. OnLive CEO and ex-Web TV guy Steve Perlman told me last week about his vision for making this happen on his company's virtual desktops, but app stores make sense whether you're talking virtual or on-premises desktops. I'm not sure what the secret sauce is to ignite an app store revolution on the desktop, but my bet is that someone's going to figure it out, and that revolution will create lots more supply. Again, when buyers have more software choices, it's easier for them to move on when they don't like the terms and conditions. For example, when I didn't like how the developer of a word processing app that I used on my iPad changed the rules of engagement during an update, forcing me to sign up for an account, I downloaded another app that could edit my documents just as well. Are you sick and tired of the licensing circus? Do you see other ways around it? Write to me at the address below, and I'll include the best thoughts in our upcoming InformationWeek Analytics report and our August InformationWeek cover story on software licensing. Jonathan Feldman is a contributing editor for InformationWeek and director of IT services for a rapidly growing city in North Carolina. Write to him at [email protected] or at @_jfeldman. Data centers face increased resource demands and flat budgets. In this report, we show you steps you can take today to squeeze more from what you have, and also provide guidance on building a next-generation data center. Download it now.
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