Are you ready for Cloud Computing?

Traditional software licensing models are being challenged by new hardware and software deployment options. Gone are the days when users had to own their hardware infrastructure. Gone are the days of getting approval for the purchase of big ticket items like servers, and desktops, configuring them, and maintaining them to run their perpetually-licensed software in-house.

Cloud Computing – Opportunity?
Today, users can obtain “hardware on the fly” to run any operating system on arbitrarily large servers – “in the cloud.” These virtual systems may persist indefinitely or disappear when no longer needed.  The software on them may be used for only a short burst of time – just enough to get the job done – measured in days or even hours.  Likewise, paying for “cloud-time” is easy, often paying with nothing more than a credit card.

The biggest industry players are driving the cloud movement. Folks like, Google, IBM, and Microsoft are leveraging their enormous investment in computing hardware and advanced virtualization software to build on-demand computing platforms. Corporate users, tired of paying to maintain in-house iron, are increasingly looking to reduce costs with cloud computing, while at the same time simplifying procurement, decreasing deployment delays, and adding unprecedented throughput potential.

Re-think Software Licensing Models
As a result, enterprise-class software vendors are thinking about new licensing models.  Many vendors have already turned to subscription based models where customers pay for software monthly, or annually. But, with cloud computing, users may want to pay by the day, hour, or even minute.  This puts new stresses on today’s traditional pricing and licensing models on which software vendors’ revenue streams depend. But, cloud computing could open  untapped markets for some software vendors’ products, especially those that carry a high per-seat cost, by allowing them to provide convenient access to their software on “big iron” at a much lower price point.

Perhaps software vendors need to move more rapidly toward “post-use-billing” models.  Software applications could connect to a central server to collect usage information, either clock time, or a more precise measure of the amount of work (value) that was derived from a usage session.

Keeping up with the Pace of Change
Cloud computing is just the latest disruptive technology trend that is forcing independent software vendors to look for new ways to license their software products. Companies who use electronic license management are in the best position to keep pace with and take advantage of the ever-changing computing landscape.

One comment

  1. this subject was discussed during DAC this summer. I believe that warranted as well as unwarranted secrecy among traditional companies investing in extensive IP portfolios will ensure they remain cautious towards third party clouds.

    The obvious opportunity is that maybe the cloud will enable younger companies to enter market with less capital than what has been possible in the past.

    Clearly, software vendors will have to make efforts in this direction to keep customers happy in the future.

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