The ITAM Review

News, reviews and resources for worldwide ITAM, SAM and Licensing professionals.

Top Ten Licensing Types – Where is the market going?

5361319682_f5cffc8f13_z

Where is the licensing market going?

If you would like to find out more about SAM Licensing or need general help with SAM then why not attend one of our SAM Workshops taking place in London, Berlin or New York soon.


 

No matter what, all software and applications have a license attached to them. Even free software has some form of license. There are far too many different licensing models currently on the market, each with different terms and conditions that the licensee needs to adhere to. We all know what happens if you break those terms and conditions, auditors can end up fining the organisation large sums of money.

There is a number of different software licensing models currently offered by software vendors, including a number of emergent models that were not around in the licensing world ten years ago.

Current top ten licensing types on offer from vendors (no particular order)

  1. Device – Also known as ‘machine based’. License is locked to an individual machine.
  2. User – License is assigned to a named user who must be identified to ensure the license agreement is validated and the license terms are adhered to.
  3. Networked (WAN & LAN) – A license that covers machines that is on the same network infrastructure. This is either in Wide Area Network or a Local Area Network format. Also known as ‘concurrent license’.
  4. Subscription (user or device) – License only available during time of subscription. No rights to use it pre or post agreement dates (unless agreement renewed).
  5. ‘Cloud based credits’ subscription – Cloud credits are the unit of measurement required to perform certain tasks or rights to run certain applications provided by the vendor. Hosted in the cloud and are usually a subscription model.
  6. General Public License (GPL) – License and software available for free. Allows users to use, share, copy and modify the software. Separate legal metrics to ‘freeware’.
  7. Client Access License (CAL, includes both device and user metrics) – Allows users to connect to server software to use the software’s features/functions.
  8. Capacity Based License – License is based on the capacity of the CPU/Hard Drive or other hardware configuration elements.
  9. Font licenses – Font specific license. Related to the fonts used online or internally by an organisation.
  10. Freeware – License requires no purchase but the copyrights are still held by the developer. Developer can sell the software in the future and does not distribute the source code.

 

Top Ten vendors and their licensing

Based on the top ten vendors by revenue for the previous financial year, here are the licensing models available for their applications. This will give us a good indication as to what the most popular license metrics are, and also help us predict trends in the licensing market:

Screen Shot 2014-12-01 at 12.11.58

* Oracle ‘Developer License’
** Oracle’s ‘Update subscription service’. Still counts as a license!
+ Whilst the vendors may not provide subscription licensing, they do provide subscriptions to maintenance and other services.

What are the current trends in software licensing?

Software licensing trends have shifted recently, away from the popular device and user based model to a subscription-based model. In the 1990’s and the 2000’s the predominate method of software licensing was user and device based licensing for desktops, and less complex licenses for servers. A number of vendors still provide user or device based licensing, but they have evolved their license metrics to make them more complicated and to generate bigger revenues.

License Type % In use by top 10 vendors
Device 70%
User 90%
Core/Processor 90%
Networked 70%
Subscription 90%
Cloud Credits 30%
GPL 10%
CAL 10%
Font 20%
Freeware 30%

Subscription user and device based licensing are the most common ways to license desktop applications. Vendors have leaned more towards the user subscription model in an effort to combat software piracy, to generate more income and also to ensure that users are using the latest version of their products. Unsurprisingly, within the datacentre environment the most popular licensing metrics are by Core or Processor.

What software license models will be the most popular in the future?

With recent trends in software licensing it appears that cloud based subscription licensing will be the most popular method of licensing software in the future. A number of Tier 1 vendors have already moved to either a subscription license model, or a cloud based subscription model. Whilst this license metric is fantastic for home use and the general public, for organisations it will be more expensive and harder to manage.

Another license metric that is coming to the forefront is the idea of ‘cloud credits’. This is when an organisation purchases a number of credits. These credits are then used like a concurrent license, with a set number of ‘credits’ checked out when someone uses a certain application. These credits are reset every 24 hours for some vendors, but returned to the pool immediately for others. This is obviously a new license model, so it needs to gain maturity. This will happen over time if the vendors think it is successful.

Conclusion

Software vendors will continue to introduce new licensing metrics to the software world; as they try to generate as much revenue as possible and to ensure the lack of software piracy. Whilst it is completely understandable for software vendors to crackdown on piracy, introducing complicated software-licensing metrics without providing adequate support or education to the users is not. Any changes to the software license metrics, terms of use and pricing need to be communicated in a clear and helpful manner so that the end-user knows exactly what their rights are, and how much they should be expecting to pay.

Unfortunately, a number of software vendors do not provide such a service and they end up leaving their customers confused and out of pocket. This also results in a breakdown in the relationship between the end user and the software vendor, thus damaging the likelihood of any future business or relationship.

There is an obvious need to provide a better education around software licensing metrics, and for vendors to make their licensing easier to understand. That’s why bodies such as the Campaign for Clear Licensing is so important in helping make licensing less complicated.

This is an ‘active’ blog, so have your say! Disagree with our list of top licensing models? Have your say and get in touch!

 

Image Credit

About David Foxen

David Foxen is a Software Asset Management expert and enthusiast. He had a vast experience of successfully implementing SAM, SAM tools and also made huge cost savings. A member of the ISO Standards WG21, David is a massive ITAM geek, so uses any opportunity to talk about the subject to who-ever will listen. He believes that the industry needs to share its knowledge and success stories to help the SAM industry mature and become more effective. Always willing to help, his primary goal is to make a difference to organisations and the SAM industry so everyone will know how epic SAM is!

9 Comments

  1. Kirk Munro says:

    Interesting article, thanks for sharing it. I have a question though. Why do you specifically call out the GPL open source license (which, according to your chart only applies to HP) instead of mentioning open source licenses in general? For example, MS-PL, MIT, Apache 2.0, and others. With a broader category of open source, some of the other top vendors would be included as well, not just HP. Also, some of the open source licenses are permissive, others (including GPL) are fairly restrictive. For GPL in particular, you must distribute the source for your application if you use GPL-licensed source code in your application. I didn’t get the impression from this article that open source was being properly identified across the top vendors with the slant towards GPL, nor did I get the impression that GPL was properly explained.

  2. David Foxen says:

    Hi, thank you for your comment. As i’m sure you are aware, there are different licensing rules for GPL and Open Source software, so they should be considered different metrics. We carried out extensive research on the top ten vendors for the license types they offer, and that table is a summary of the license metrics currently available and how the vendors define their free software.

  3. Niall says:

    You can add GPL to
    – Microsoft for LinuxIC/ Windows Services for Unix
    – Oracle for mySQL Community edition
    – SAP for older versions of MaxDB
    There are probably others out there; these are the ones that come to mind.

  4. Great roundup thanks David, it’s really interesting to see the usage across vendors. I’ve definitely seen the push toward subscription and cloud, and from the vendors perspective it’s an obvious and lucrative move. I’m currently comparing options with one particular vendor as our renewal approaches, trying to find the hooks between the old perpetual based licenses and newer subscription based jobbies. It’d be great to see any deeper insights you might have of the trending and potential risks as we start to swing to the cloud.

  5. John Tomeny says:

    Hi David. I noticed that in your reply above you described the items in your table as “license metrics”. And in your article you frequently call them “licensing models”. During the years when I served as convener of the ISO/IEC 19770-3 license entitlement standard development group we researched this topic extensively, and we developed a chart of the many common models in use today.
    The end-point licensing chart included things like “device”, “user”, “high water mark” (concurrent user, floating, network), “organizational boundary” (enterprise, site), “usage” (pay-per-use or transactions) and a few others. The datacenter chart included “capacity”, “logical partition” (lpar), “hardware configuration” (MIPS, MSU, PVU, etc.).
    We determined that “subscription” could not be considered a license model (“metric”) because it did not fit the definition of “the rights and limitations by which compliance is measured”. Rather it was simply an expiration date applied to some other metric. I notice that you even elude to this by parenthetically referring to subscription as a “user or device” license, which is what it generally is. So “subscription” is more accurately described as a clause or a term of a licensing purchase plan (the selling vehicle for licensing).
    It is important to distinguish clearly the difference between “license models (metrics)” – the rights and limitations by which compliance is measured and “license purchase plans” – the selling vehicles for licensing. Otherwise we find ourselves measuring the wrong thing to determine compliance.
    I’m sure that we could debate for a long time about whether “subscription” is a compliance metric, but I’ll leave you with this: When Adobe introduced their “Named User” Subscription plan (variously referred to as “Creative Cloud for Teams”), they made clear that when the software was launched without end-user authentication that it would run in “demo” mode. Thus, there was no risk of failed compliance audit since the software license was self governing. But when they released their ETLA (Creative Cloud for Enterprise) subscription plan they introduced a method to pre-activate installs before deployment – thus, *not self governing. So when an organization licenses one or both plans, in order to successfully measure compliance the organization must first ask if the license model is “user” or “device”. “Subscription” is a secondary consideration, just like the many contractual clauses that can exist on other license agreements – especially in the “user” model it is not the measure of compliance, thus not a license model.

  6. John Tomeny says:

    Incidentally, when concurrent use licensing was first introduced to desktop computing (in the late 80’s) there were WAN or LAN limitations applied to them. And continuing to today, it is rare.
    At Adobe’s request, I drafted the earliest language that Adobe used to describe the limitations of their concurrent-use licensing: “…must have a reasonable mechanism or process in place to ensure that no more than the licensed number of copies are in use at any one time.” There were no geographical or network infrastructural limits applied.
    It wasn’t until the mid to late-1990’s, when customers began to “chase the sun” with Microsoft concurrent-use licensing (“CUL”) that Microsoft applied time-zone limits to their CUL. (“chase the sun” means to use a CUL in multiple time zones around the globe in such a way that users in one time zone were not at work while others in a different time zone were using the licenses.)

  7. John Tomeny says:

    I apparently left a critically important word out of my second post. The missing word is “no”. As in: “there were *no* WAN or LAN limitations applied to them”.

  8. Wilson Bigg says:

    David, this is a good article and useful, thank-you. One point I would like to make is that a Network License is not always AKA Concurrent License. They are two separate things.

    Some vendors grant a license for their software to be used throughout a customer’s LAN and or WAN with no limitation on users. Conversely, some vendors offer concurrent use of their licenses to maximum number of users, which is different.

    In the latter case they may constrain or limit the use by way of a license server and these are often called network licenses e.g. Palisade @RISK

    Admittedly, compliance ultimately rests with managing a specific vendors’ definition of a metric and not necessarily a generic understanding of that license type.

    Yours In Pedantry

    Wilson

  9. Erica Goetzman says:

    Hi,

    I notice you listed a “User Based” license as one that must have a “named user.” That does not have to be the case. User based and named user licenses are very different; a user based license does not have to be a named user license.

    Thanks for the compilation.

Leave a Comment

attend our virtual conference

29th September - 1st October

Hear from expert speakers on topics such as audit defence and licensing, cloud cost management, addressing SaaS & IaaS risk, and much more. Find out more.