The perception among purveyors of on-premise software that revenues will decline with a move to Software-as-a-Service has held back most software providers from making the move, according to two software licensing and protection companies.
While a recent survey of about 300 IT pros showed that 84% of end users are ready to adopt cloud technologies to use software as a service, only 16% of software publishers surveyed said they are there today, according to Prakash Panjwani, senior vice president and general manager at SafeNet, which sells tools to protect software from illegal use.
The reason software providers believe they will lose money is the phenomenon of over-licensing, Panjwani said. This happens because organizations licensing software would rather pay for more than they need than actually have to track software usage. So, software vendors “sell these big site licenses for everyone in an organization to use, even if only some people are using it,” he said. In the cloud, they have to track usage, and “that scares them,” he added.
Yet, of companies already using software as a service, 38% reported they are spending more on software than they did under traditional licensing configurations, he noted.
This involves what Steve Schmidt, director of product management for software licensing company Flexera, called “unlocking” customers and revenues. He said that software sellers need to move from “one size fits all” licensing to a “best fit” model that gives flexibility to users in terms of how long they want to use the software, and what features they want to use and pay for.
Currently, Schmidt said, “there’s no flexibility with regard to packaging and pricing of individual capabilities. Companies want to use what they need and configure it quickly, without software engineering involved.”
To unlock revenues, software sellers need to provision users based on entitlements to the software, create service bundles based on features, and offer a range of subscriptions from a “day pass” to an annual rate, Schmidt said.
But for sellers of on-premise software, the transition to the cloud is tough. “They have to match up to a different user expectation,” SafeNet’s Panjwani said. “It’s a question of how do they adjust their delivery model, and do they have the infrastructure to move to the cloud? That involves hardware and new processes.”
Putting these tracking capabilities together will also lead software sellers down the path toward curbing revenue leakage through either inadvertent piracy, as Panjwani said, or to credential-sharing abuses, as Schmidt said.
In the SafeNet study, companies indicated they were saving on licensing by using virtualization technologies. “Software publishers have been ambivalent about virtualization; they haven’t changed their license agreements to reflect that,” Panjwani said.
Yet, to have the software detect virtual machines and deny usage is not what end users want either, he said. With virtualization, “per-CPU licensing goes out the window. You have to track usage of the application and adopt license models to mirror that usage,” He said.
Schmidt said Flexera studies have shown that software publishers are losing 40% to 60% of potential revenues to credential-sharing abuses—when a licensed software user gives his or her username and password to a colleague to access software. The solution to this problem is to have the license identify machines as well as users, and then to set policies around that.
“The point is to create license offerings to match how customers want to pay,” he said.
To that end, Flexera today is bringing FlexNet Producer Suite for Software Vendors to market. It’s a licensing product specifically for Software-as-a-Service providers that gives them the flexibility their customers need, Schmidt said.
And SafeNet has made available on its website a series of webinars to help publishers combat the challenges of delivering software in the cloud.