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Cloud Computing Disrupting Software Licensing, Pricing

The move to cloud computing will change the game when it comes to software pricing and licensing models according to a new reports from market research firm IDC together with application usage management software provider Flexera Software. Buzz around the cloud is being replaced quickly with real deployments. And, in response, most software vendors are […]

Written By

Leah Gabriel Nurik

Oct 22, 2010

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The move to cloud computing will change the game when it comes to software pricing and licensing models according to a new reports from market research firm IDC together with application usage management software provider Flexera Software.

Buzz around the cloud is being replaced quickly with real deployments. And, in response, most software vendors are not taking any chances of losing business in the transition process. Sixty percent believe they’ll need to change and evolve their current licensing models in the next 24 months in order to adapt to cloud computing popularity. Thirty percent think that change will lead to a significant shift in pricing models and strategy, and that includes back-end licensing and entitlement management as well.

Also, survey results showed users and vendors are still struggling with the age-old problem of deciphering and tracking compliance related to licensing and usage, which results in wasted money on both sides. According to the survey, only 40 percent of software vendors are using tools to monitor customer usage.

In an attempt to reduce costs and increase earnings in the economic downturn, end users and vendors are looking for better and improved strategies for deriving more value from current and future deployments. Seventy-one percent of companies agree that tracking software usage is important, citing software cost reduction and ensuring compliance as their primary reasons. Another way to get there? Opt for usage-based models.

"The majority of enterprises believe that they are either underutilizing or out of compliance with their vendor software licenses, which equates to a significant opportunity for license optimization. Software vendors have also identified opportunities to better serve their customers and improve efficiencies, with 20 percent more companies planning on offering usage-based models within the next two years and 46 percent citing the need to deploy technologies that better track licensing,” says Amy Konary, director of Software Pricing and Licensing Research at IDC.

Here are some of the most interesting additional trends uncovered in the IDC and Flexera survey of 234 participants, which included software vendors, high tech manufacturers, and enterprise IT execs and managers:

Today, 65 percent of software vendors offer seat and 62 percent offer concurrent user pricing models.
Enterprises prefer concurrent user models (59 percent) and usage-based models (16 percent).
Vendors hear the cry for usage-based models, and are responding. Forty-one percent plan to offer usage-based models, while, today, only 22 percent offer it as an option.
One-third of companies that have or plan on implementing usage-based pricing do not track usage at all.
Many deployed applications are out of compliance with licensing requirements — 53 percent of enterprises also responded that at least some of their software license spend is associated with applications that are overused and therefore, out of compliance.
Another big loss of potential cash is in under-used but overpaid license fees. Eighty-five percent responded that at least some of their software license spend is associated with under-used software, or “shelfware.”

Cloud Computing Disrupting Software Licensing, Pricing

Leah Gabriel Nurik

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