Software License compliance: simple arithmetic or much more?

What can and probably will affect your software licensing process?

The general impression about license compliance is that it’s just a game of numbers — “We have installed five licenses of ’X’ software and procured three, so let’s buy two more.” However, licensing involves many more complexities, such as ambiguous clauses and metric definitions which CIOs and CTOs should be aware of.

Here are some challenges with regard to licensing that may catch you off-guard unless you have a combination of people, processes and technology to track and manage software licenses.

Change in licensing: The upgraded version of a product provides additional or modified functionalities of the software, enhancing its value. This may cause software vendors to introduce changes to the existing Software License Agreement. These changes could potentially affect the software license calculation of the product. Whenever an organization decides to deploy an upgraded product, they are forced to sign a new Software License Agreement. Furthermore, vendors may change their licensing models for business reasons. In 2014, Microsoft moved the licensing of MS SQL from a processor-based model to a core-based model [1]. Organizations tend to overlook such changes and could potentially end up trapped in a non-compliant position.

Virtualization: To keep up with advancing technology and meet the needs of customers’ ever-changing IT infrastructure, software vendors update their licensing policies by customizing their software. Virtualization is a mechanism used by customers to optimize IT costs while enhancing the efficiency and agility of the business. It is very essential for SAM practitioners to understand the significance of virtualization in software licensing because it can introduce hidden license costs into the IT equation. Virtualization can make or break the license position of most server software products.

User-based licenses: Usually, when the license metric is based on the number of users, organizations get caught off guard when it comes to inactive users. Most licensing guides read that all users that have authorization to access a certain software product require a license. Often, organizations believe that if a user has never used a product, despite having access to it, then the user does not require a license. This could potentially make these organizations non-compliant.

Hardware configuration: Lack of awareness about the diversity of license metrics is an issue a lot of organizations struggle with. One such category of metrics, which is unknown to most, is “hardware-based license metrics”. Organizations unaware of these metrics can run the risk of being non-compliant because of improper change management policies. When an organization grows, the number of employees goes up, in addition to increased reliance on technology. To cater to such changes, organizations upgrade their servers and boost their processing capabilities, increasing their license consumption. If companies do not follow up with license procurement, or possess enough spare licenses, they put themselves at the risk of non-compliance.

Non-production and/or Disaster Recovery (DR) environments: Deploying software in non-production or DR environments is not free of cost. Most major vendors have a clause in the software license agreements for the usage of their products in non-production or DR environments. SAM managers need to be aware of this too.

Indirect usage: Many software products/applications have incorporated the concept of licensing for users ‘indirectly’ using their software. Let’s say that you have procured 100 user-based licenses for your software.  So now you can create 100 user IDs which allows 100 users to use the product/application, right? However, this may not be the case. You will also need to take into consideration, other application/systems querying or interfacing with the target software product/application. If a company is unaware about this licensing model, it is likely to be non-compliant.

License computation and compliance is not just a formula-based practice where you perform a simple arithmetic calculation to arrive at where you stand in terms of compliance. The list of things you might miss while performing a license compliance analysis is endless. It is important to effectively deploy a ‘Software Asset Management Office’ consisting of a team of licensing experts who keep themselves abreast of changes to licensing terms and conditions. Having such a team of experts to handle licensing related challenges is not a luxury, but a necessity. After all, prevention is better than cure, especially, when your cure involves payment of hefty penalties.


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