Software licensing models have evolved to keep pace with technological advances, yet licensing structures are still as complicated and convoluted as ever and many companies and consumers remain mystified as to how to go about implementing them to comply with all the rules and regulations.
One look at Oracle’s quarter on quarter sales decline and this paragraph begins to make a lot of sense, says Richard Firth, CEO and chairman of MIP Holdings, who has been calling for the end of the traditional licensing model for more than five years. These results point to the beginning of the end, he says.
“Software vendors of any form have to understand how their billing structures align to the income models of their customers. Just because the customer employs more people, why should they pay for more licenses?”
In simple terms, software licensing is a contractual agreement between the software publisher and the end-user. It gives users permission to use their software legally, but also places restrictions on the end user about how they are allowed to use it.
“Just because you’ve bought the software doesn’t mean that you can claim ownership and use it in whichever way you choose, because most software agreements emphasise that the software is licensed, not sold,” says Richard Firth, chairman and CEO of MIP Holdings.
“The licensing restrictions usually include a ban on duplicating the software for anything other than for explicit backup purposes, and for installation on more than one computer – which, if we’re talking about several machines – might actually require users to buy a separate and more expensive volume license agreement entirely. So basically, more inefficiently the software operates, the more the company must pay.”
In its defense, software companies claim that a software license also protects users from possible security risks, as software manufacturers constantly work to eliminate holes in their programs and constantly improve the functionality.
However, not sticking to the software company’s terms and conditions can lead to bugs of a different kind: lawsuits and having to shell out major penalty fees. Late last year, a company in the US state of Wisconsin had to pay $100 000 in a settlement with software industry trade group, BSA/The Software Alliance, in response to claims that it was using pirated Microsoft software on its company computers.
Despite denying the claims, the company, Landmark Services Cooperative, still agreed to pay the fee as well as take steps to improve its software management practices.
When users have a license, there are rules that they have to adhere to when they want to move software to a different computer following an upgrade, or to put it on a secondary machine. Microsoft recently faced a huge backlash about its controversial transferability rule for its Office 2013 software suite. Buyers of the software lost the ability to move the software or the Office license to a different machine.
Microsoft has since had a change of heart and reversed this policy, now allowing users to transfer the license. Why the change? There is speculation that the software giant was facing threatened lawsuits. Their official version is that their decision was based on “customer feedback”.
Firth is of the opinion that software licensing will eventually become a thing of the past, as more and more users opt to drop licensing software in order to move to software as a service which will allow them to use programs on a more pay-as-you-need-and-use-it basis.
The advent of the cloud is facilitating this move much quicker because the software can be monitored for its usage and this has exacerbated the Oracle example.
“Users are getting tired of basically having to pay software vendors for the same product over and over again. Software companies who cling to their archaic licensing methods and do not adapt to this new model will lose customers,” he says.
“Enterprise software licensing is even worse. After paying the initial licensing fee, companies are then expected to pay as much as 25% of the license cost every year after that in maintenance fees.
“This is becoming extremely costly and, with shrinking IT budgets, even completely unaffordable for many companies, which is why many companies are deviating from this model, even though it is often an enormous pain to switch to different programs and software.
“A no upfront capital fee and ongoing annuity fee is both good for the software vendor and the users. It also helps manage the software company’s service levels.” Firth concludes.
One look at Oracle’s quarter on quarter sales decline and this paragraph begins to make a lot of sense, says Richard Firth, CEO and chairman of MIP Holdings, who has been calling for the end of the traditional licensing model for more than five years. These results point to the beginning of the end, he says.
“Software vendors of any form have to understand how their billing structures align to the income models of their customers. Just because the customer employs more people, why should they pay for more licenses?”
In simple terms, software licensing is a contractual agreement between the software publisher and the end-user. It gives users permission to use their software legally, but also places restrictions on the end user about how they are allowed to use it.
“Just because you’ve bought the software doesn’t mean that you can claim ownership and use it in whichever way you choose, because most software agreements emphasise that the software is licensed, not sold,” says Richard Firth, chairman and CEO of MIP Holdings.
“The licensing restrictions usually include a ban on duplicating the software for anything other than for explicit backup purposes, and for installation on more than one computer – which, if we’re talking about several machines – might actually require users to buy a separate and more expensive volume license agreement entirely. So basically, more inefficiently the software operates, the more the company must pay.”
In its defense, software companies claim that a software license also protects users from possible security risks, as software manufacturers constantly work to eliminate holes in their programs and constantly improve the functionality.
However, not sticking to the software company’s terms and conditions can lead to bugs of a different kind: lawsuits and having to shell out major penalty fees. Late last year, a company in the US state of Wisconsin had to pay $100 000 in a settlement with software industry trade group, BSA/The Software Alliance, in response to claims that it was using pirated Microsoft software on its company computers.
Despite denying the claims, the company, Landmark Services Cooperative, still agreed to pay the fee as well as take steps to improve its software management practices.
When users have a license, there are rules that they have to adhere to when they want to move software to a different computer following an upgrade, or to put it on a secondary machine. Microsoft recently faced a huge backlash about its controversial transferability rule for its Office 2013 software suite. Buyers of the software lost the ability to move the software or the Office license to a different machine.
Microsoft has since had a change of heart and reversed this policy, now allowing users to transfer the license. Why the change? There is speculation that the software giant was facing threatened lawsuits. Their official version is that their decision was based on “customer feedback”.
Firth is of the opinion that software licensing will eventually become a thing of the past, as more and more users opt to drop licensing software in order to move to software as a service which will allow them to use programs on a more pay-as-you-need-and-use-it basis.
The advent of the cloud is facilitating this move much quicker because the software can be monitored for its usage and this has exacerbated the Oracle example.
“Users are getting tired of basically having to pay software vendors for the same product over and over again. Software companies who cling to their archaic licensing methods and do not adapt to this new model will lose customers,” he says.
“Enterprise software licensing is even worse. After paying the initial licensing fee, companies are then expected to pay as much as 25% of the license cost every year after that in maintenance fees.
“This is becoming extremely costly and, with shrinking IT budgets, even completely unaffordable for many companies, which is why many companies are deviating from this model, even though it is often an enormous pain to switch to different programs and software.
“A no upfront capital fee and ongoing annuity fee is both good for the software vendor and the users. It also helps manage the software company’s service levels.” Firth concludes.