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To gain access to the software that they need to run their businesses, software customers must navigate a lot of contractual territory. Most customers are managing multiple software license contracts, and the terms of these contracts — even within the same vendor’s roster of products — are almost always different. Complexity increases compliance risk and reduces customer satisfaction.
Meanwhile, customers are also calling for increased flexibility in software licensing — concurrent licensing, pay-per-use models, and licensing approaches that allow customers to take advantage of the benefits of virtualization — while at the same time that they are calling for increased simplicity. Market dynamics are ensuring that the complexities associated with understanding and managing software license contracts will likely increase. So, how can flexibility be simplified? How can complexity be managed?
IDC suggests that software customers employ a three-pronged approach to dealing with this complexity — process, technology, and compromise.
From a process perspective, organizations should consider the manageability of software licenses at every stage of the software purchase process. One company had a database of approved license architectures, and procurement could not start negotiating with the vendor unless the contract met agreed upon guidelines. Another said bluntly, “If you can’t measure something, don’t include it in the contract.”
Breaking down organization silos such as those between procurement, IT, and business units will also help companies manage software licenses. Since the people responsible for software license management and compliance are usually not the same as those negotiating the deal, there needs to be strong communication all around to make sure that IT is not handed a set of licenses that are unmanageable. Another best practice is to develop an in-house repository of terms and conditions. This should be centrally located, and electronic, meaning that paper contracts will need to be scanned.
Technology also plays an essential role in managing the simplicity/flexibility licensing paradox. Traditional IT asset management software is widespread, and can help enterprises identify what kind of software is running on a certain machine. However, these tools do not always go far enough into license management and tracking to be effective for all types of licenses. For example, simply knowing where the software is running is not useful for managing usage- or user-based licenses. Further, machine-based license metrics are more difficult to manage in the context of cloud computing and virtualization, where the machine layer is abstracted and more dynamic than in the past.
Many software vendors offer license management tools with their products to help customers access, distribute and manage their available licenses. The number of vendors offering these types of tools has increased over the last several years as licensing complexity has increased. In addition, as long as these tools are not reporting information automatically back to the vendor, customers really like them.
A recent survey that IDC participated in found that enterprises that utilize vendor-provided license management tools give these a 90% satisfaction rating, higher than the ratings for commercial IT asset management systems, homegrown tools, or manual tracking methods (of course!). Microsoft offers guidance and tracking tools for software asset management (SAM) to end customers through its network of partners. The company reports that there is positive reception from partners regarding the new set of SAM Services with healthy list of partners signing up to offer customers this expertise.
Finally, customers will need to make compromises in order to balance flexibility and simplicity. The average customer will have hundreds of software license contracts that they are managing. Starting with the top 20% (according to spending) and focusing on improving the manageability of that set can be a good starting point. Some companies might find that their top projects are so scrutinized already, that focusing your efforts on the next level of applications will yield the most measurable benefit.
In addition, resist the urge to ask for special terms in every software license negotiation. In many cases where customers find software licensing terms too complex, the terms were created for them in response to their request for custom flexibility. While this might be necessary in one or two cases, anything beyond that can create diminishing returns from a risk and cost perspective.
As long as the software industry continues to face business and technology change, the forces of simplicity and flexibility in licensing will influence software vendor licensing practices and customer experiences. The software licensing world is getting more complex, not less. For their part, enterprises can no longer rely on manual processes, or technologies that do not fully determine software license compliance. IDC expects software license technologies to expand in footprint, helping to alleviate some of the complexities associated with managing software license assets. At the same time, for customers, even with process and technology efforts to help keep it simple, understanding and managing software license contracts will continue to require continuous education so they’re aware of their licensing options.