Enterprise Software: Complexities of Software Licensing

Technologies like cloud, virtualization and mobile are raising issues and forcing change in the area of software licensing.  In today’s world licensing can be complex, particularly because so many software license agreements are still written for the world of single devices.

Changes in both the way that IT staff and end users interact with software has made the tracking of software usage complex.  The way that users interact with software has changed dramatically over the last ten years — it’s not uncommon now for a single user to use a smartphone, laptop, tablet and desktop for interacting with a single software product.  Users have also become comfortable with using both business-issued and their own personal devices.  On the IT side, the ease with which new virtualized environments can be duplicated, set up and rolled out, is putting severe strains on managing the compliance with software licensing terms.

“Indirect access” is one example where business software licensing terms can be sticky.  Alex Woodie of the Register wrote that “SAP defines indirect access as occurring when a user or product accesses data stored in the customer’s SAP system through a third-party interface… It may surprise customers to find they don’t have the freedom to use their data in any way they like without paying SAP for the privilege, but that’s likely because they didn’t carefully read their licence agreement…While customers own their own data, it can be difficult to determine how many licences would be required for all downstream consumers of that data.”

Both IDC and Gartner report that software vendors have gotten to be much more aggressive in making sure that businesses are staying within the bounds of the license terms for the software that they’ve paid for.  Users that break the terms of the agreement are often subject to stiff penalties.  Very large enterprises are the most common target of an audit, and fees from non-compliance have been as large as $1 to $10 million.

Some vendors are aggressively changing their models for licensing to adopt to more closely match the way that businesses and users interact with software, but many or most vendors are still lagging in making updates to the terms of their license agreements.

Adobe is an example of a vendor that is changing.  Adobe is moving it’s shrink-wrapped product line to a cloud-only set of services.  Two million users have signed up for Adobe’s Creative Cloud since it launched in April 2012.  Adobe plans to quit selling perpetual licenses and plans no further feature updates to its desktop software.  Scott Morris, Adobe’s senior marketing director, said that “This is the decision of our company—to focus on Creative Cloud—and it is huge.  It’s an even bigger decision than when we moved to Creative Suite years ago…  In the same way [as Creative Suite], there will be customers who have a hard time with it at first. But today our customers are on Creative Suite—they got over it; they saw the benefit of it; and that’s exactly the type of transition we’re going through.”