Software Licensing in the Cloud

Software Licensing in the Cloud
New hardware and software deployment options in the cloud are providing new opportunities to simplify and improve on traditional software licensing models. Gone are the days when users had to own their entire hardware and software infrastructure. Gone are the days of purchasing big ticket items like servers, disk farms configuring them, and maintaining them in order to run their licensed software in-house.

Cloud Computing – What’s the 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. Companies like, Google, IBM, and Microsoft are leveraging their enormous investment in computing hardware and advanced virtualization software to build on-demand computing platforms. Corporate IT, tired of paying to maintain in-house iron, are increasingly looking to reduce costs with cloud computing, while at the same time simplifying procurement, increasing pace of deployment, and adding unprecedented scalable 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 opens 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 completed from a user session.

Keeping up with the Swift 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 already use software license management are in the best position to keep pace with and take advantage of the ever-changing computing landscape.

Cloud Deployment Options and Opportunities
The simplest use of the cloud might be for a software publisher to offer a license server that is hosted in the cloud. This would allow customers to simply run off-the-shelf software and be immediately licensed through the publisher-hosted license server. The publisher would control the features that each customer had access to.  If the customer wanted to pay based on a subscription, no problem.  If the customer cancels his subscription or fails to pay, then the licensed feature for that user can be removed from the server. If customers want to pay based on usage, then a central license server, controlled by the ISV, can securely collect the information necessary to produce accurate billing statements.

Traditional Deployment but in the Cloud
Some software customers may simply want to use licensed software as they always have, but deploy license servers  on virtual machines provisioned in the cloud. Google Cloud, and possibly other cloud platforms in the future, offer a persistent “instance ID” that can be used to lock licenses or license servers in the cloud giving ISV the security they need that the software will not be replicated to gain extra use.

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