How the cloud impacts software licensing

With the rapid rise of cloud computing, the explosion of devices connected to the Internet, and wearables, the digital technology landscape is expanding at a frantic pace. The use of business software is changing while many software companies are actively exploring new business models. All this greatly impacts the management of software licenses – an important fact that remains largely under the radar.

This is risky business since the financial consequences of being out of compliance can be enormous. How exactly the cloud impacts software licensing is a hot issue that should rank high on your agenda.

Subscription models

Many organizations currently are migrating towards cloud based subscription models or have already done so. The related worldwide spend will rise in 2016 with 21 percent to 130 billion euro, IDC is predicting. The lion’s share of suppliers’ revenue stems from these subscription models.

The benefits for subscribing organizations are evident. Efficiently purchasing software becomes much easier and transparent. Customers only pay for effective use (pay-per-use) instead of for managing hardware and business applications. Wouldn’t that also eliminate all software licensing concerns and headaches? On the contrary!

Complexity increases

Indeed, migrating to a cloud or Software-as-a-Service (SaaS) model implies less hardware infrastructure and staff for running business applications smoothly. Pay-per-use sounds economical, lean and efficient. However it also means that services will be metered. Exactly that is the problem with SaaS subscriptions.

Many organizations experience difficulties determining which devices are part of a virtual work environment. Although cloud solutions facilitate more flexibility, they also obfuscate the visibility of devices and applications involved. This may raise software compliance questions.

Take for instance the case of an employee who works from home on Monday. The person logs in to his virtual workspace with his own device but does the license agreement allow this? Is every extra device considered to be an extra user? Is there a limitation to the amount of devices an employee is allowed to use?

More monitoring needed

Apart from visibility issues the growth of subscription models also means an increase of software licenses. As the name suggests, in this respect cloud computing casts the shadow of complexity over a company’s license landscape. Moreover, in recent years the number of software license audits is on the rise.

Besides the Business Software Alliance (officially BSA | The Software Alliance) and large players like Microsoft, Oracle and IBM, also other software publishers are regularly conducting audits, often in cooperation wit the Big Four accountancy firms. If a customer is found to be underlicensed then the claims can top hundreds of millions, in euros or dollars.

License management, a solid investment

More and more, organizations feel the urge of accurately managing their software use and license administration. This is a solid investment: monitoring and optimizing the use of software – often the lifeblood of a company – minimizes the chance of financial claims and helps ensuring the effectiveness of business processes. In this way, executives will at the helm while software license audits won’t bring large unpleasant surprises anymore.

The rise of cloud computing raises complexity in the organizational IT landscape. That is why proper software license management must be prioritized in 2016.