Entitlement and Compliance Management

Adobe Goes All In On Subscription Licensing, Half In On Cloud

By Randy Littleson

You may have seen the news that Adobe announced the Adobe Creative Cloud and that they are going all-in on a subscription pricing model (see "Adobe Goes All-In On Subscription Pricing Model", "Adobe Kills Creative Suite, Goes Subscription Only" and "Adobe CEO: The Truth About Creative Cloud" for more details).  This is certainly interesting news and confirms what we've been seeing in the market and our research confirms – the move to subscription and usage-based licensing models is real and gaining speed.

Unfortunately, as is often the case, the discussion about software licensing models often gets confused with the deployment model.  In this case, Adobe has decided to only offer the product with a subscription licensing model.  You can no longer purchase it via a perpetual license model.  This decision does not directly have anything to do with how the software is deployed and delivered.  If you read into the details of the story, the software is now a hybrid deployment with both a local client application with cloud services as well.  In fact, the CEO comments that you can use the product just fine in a disconnected mode where you have no internet connectivity.  Even by their choice of name, Adobe Creative Cloud, Adobe has added a bit to the confusion as this suggests this is a fully cloud-based, software as a service (SaaS) product, which it is not.

We continue to see growing adoption of subscription licensing models for both on-premises and on-demand (cloud or SaaS if you prefer) applications.  Subscription licensing models are both viable and available for any type of software, including on-premises, on an increasing basis.  The only thing that does seem to be an absolute it that once a company has chosen to offer its product as a SaaS or on-demand service, it almost always does so via a subscription vs. perpetual model to more closely align revenue with ongoing operational costs associated with delivering the service.

I suspect you will continue to see more and more vendors moving this direction – adopting subscription and usage-based licensing models.  The market is demanding it and vendors are responding.  They are also demanding more cloud-based offerings as well which is why we continue to see many established companies acquiring cloud-based applications.  But keep in mind that the software licensing model and delivery model are two separate things that may or may not be related – and each offers their own benefits to both application producers and their customers.

For more information on subscription and usage-based models, please read:

• Usage-based Software Licensing Examples and Patterns
• White Paper: 2012 Key Trends in Software Licensing and Pricing Report

Product Bundles or A La Carte Products: Entitlement Management Tradeoffs and Best Practices—Part 3

By Bashyam Anant

In Part 1, I talked about the well-known tradeoff that product bundles are advantageous for producers while a la carte offers are advantageous for consumers. In Part 2, I discussed the tradeoffs of product bundles versus a la carte from an entitlement management perspective and in Part 3, I will discuss best practices regardless of the course you pick.

Product and Entitlement Management Best Practices

• Keep it simple: Whether you choose product bundles or a la carte offers, have no more than 3-5 orderable options per product family to keep it simple for sales professionals and customers.
• Consider a "base + options" approach to get the best of product bundles and a la carte offers. A base bundle could package features that 80% of customers would want while niche features could go into a la carte offers. Feature usage analysis could help you fine tune what to package into the base versus a la carte offers.
• Invest in an entitlement management system. Regardless of the approach, keeping track of customers based on bundles or a la carte options can become complicated very quickly – an entitlement management system would be the way to go
• Be change-ready - changes in product packaging are inevitable as sales, customer and market needs evolve. Successful software products with active product roadmaps involve packaging and pricing with almost every major software release. Again, entitlement management systems are the proven approach for handling packaging changes without significant IT change costs.
• Avoid dependencies between options in an a la carte model. In the EZ Calculator example, if you had made "add" and "divide" a la carte, then the "average" feature would require both "add" and "divide" to be ordered and activated.
• Avoid version upgrades at the product bundle level. Version upgrades are either part of software maintenance or require separate purchase. If you version a product bundle, versions for products in a bundle have to be synchronized. This is probably one reason that Microsoft's Office suite is released once every few years. Version upgrades for a la carte product options can be independent of each other – making them more flexible for publishers. Note that SaaS and cloud-based apps can escape issues related to product versioning since by definition; most SaaS products support only one version for all customers.
• Pick orderable names carefully – ensure that the value of a bundle or option is self-evident from the name. Look to buyer personas (E.g. Accountant or Scientist for EZ Calculator) or customer segments (e.g. Home, Small Business, Enterprise for Microsoft Office) or use case groups for inspiration.
• Think through entitlement lifecycle use cases before you pick a course. Think beyond the initial order – subscription/maintenance renewals, upsells, version upgrades, software updates and machine management are all essential use cases to map out into a seamless customer experience.
• Standardize on one approach (i.e. bundles or a la carte) across product lines in your company. This makes it easy for sales professionals and customers.
• Invest in a customer experience czar. Once you grow beyond a few products and handful of customers, the sheer complexity of entitlement management can bog down your business and your perception as a company. Having a single voice for your company that ensures consistency of entitlement lifecycle processes and customer experience is key.

What approach has your company picked? Why? Are you planning on changing it? I would love to hear your perspectives.

Related articles

Product Bundles or A La Carte Products: Entitlement Management Tradeoffs & Best Practices - Part 1

Product Bundles or A La Carte Products: Entitlement Management Tradeoffs and Best Practices - Part 2

Why Producers Need a Proven Commercial License and Entitlement Management System to Support the Full Software Lifecycle Process

Why Salesforce.com Isn't Suited for Complex License and Entitlement Management Processes

Product Bundles or A La Carte Products: Entitlement Management Tradeoffs and Best Practices—Part 2

By Bashyam Anant

In Part 1, we talked about the well-known tradeoff that product bundles are advantageous for producers while a la carte offers are advantageous for consumers. This time we will discuss from an entitlement management standpoint, product bundles versus a la carte and the tradeoffs.

• SKU management. Suppose your app, EZ Calculator, offers features like add, subtract, multiply, divide and so on. You want to target casual users, accountants and scientists. The table below lists the SKUs you could offer as bundles or a la carte to monetize the features in EZ Calculator. Notice that a la carte offers can achieve the same business results with fewer SKUs. When you add upsell paths (e.g. Basic Edition to Scientist Edition), the number of SKUs grow for the product bundles approach.

SKU	Bundle	A la carte
1	EZ Calculator Basic Edition: add, subtract, multiply, divide	EZ Calculator Base: add, subtract, multiply, divide
2	EZ Calculator Accountant Edition: add, subtract, multiply, divide, average, NPV	EZ Calculator Accountant package: average, NPV
3	EZ Calculator Scientist Edition: add, subtract, multiply, divide, exponent, logarithm	EZ Calculator Math package: exponent, logarithm
4	EZ Calculator Basic to Scientist Edition Upsell: exponent, logarithm
5	EZ Calculator Basic to Accountant Edition Upsell: average, NPV
6	EZ Calculator Complete Edition: add, subtract, multiply, divide, average, NPV, exponent, logarithm

• Sales positioning & ordering experience. For the initial sale to a new customer, product bundles can be easier to position and order. In the EZ Calculator example, if you are an accountant, you just buy the Accountant Edition if the bundle is offered. But, an accountant would need to buy Base plus the Accountant package in the a la carte model. Too many a la carte offers could end up in a complex and confusing selling and ordering experience. Note that if you do offer upsells between bundles, the ordering experience post the initial sale could be just as complex for product bundles.
  
• Dependencies between features could be hidden from customers in a product bundle. Too many a la carte options with dependencies between them might require a product configurator to get orders processed correctly. 
  
• Packaging evolution over successive software releases. With product bundles, new and chargeable features have to be added to an existing bundle. To monetize the extra value from these features, bundle prices have to inevitably increase over time, if you stick with the same set of bundles. Case in point: between 1995 and 2011, cable channels included in Basic Cable grew 5% per year and monthly prices for Basic Cable went up 6.1% per year, almost in lockstep. Eventually, price increases will force some customers to drop out. In contrast, new features can be added to existing options or to new a la carte options – so a la carte is more flexible for producers without the inevitable price increases for customers associated with bundles. 
   
• Product & software license fulfillment experience (or service provisioning for SaaS) for initial purchases are usually streamlined and simplified for product bundles. In contrast, a la carte offers can result in an error prone experience as there can be dependencies between them. But, if you do offer upsells between bundles, the product and softwa licensing experience could be just as complex for product bundles over time.     

Interestingly enough, SaaS and cloud-based products seem to have picked the product bundle
approach to the extent that I could survey them. For example:

• Salesforce.com: http://www.salesforce.com/crm/editions-pricing.jsp
• Eloqua: http://www.eloqua.com/products
• Box.com: https://www.box.com/pricing/    

Unlike on-premises software, pure SaaS/cloud-based apps can mitigate some of the downsides of product bundles:

• Because they use subscriptions, upsell SKUs can be avoided by waiting till the end of a term and renewing users/customers on a higher bundle.
• Product and software license fulfillment issues do not exist by definition – users/customers are simply provisioned for whatever bundles they ordered

However, pure SaaS/cloud-based apps:

• Would still run into the issue of evolving product packaging (for new, chargeable features) without price increases for customers if they use bundles
• For 3 or 5 year subscriptions (an industry best practice), they would need upsell SKUs if users/customers do not want to wait 3 to 5 years to move from lower to higher bundles.

On balance, other than the initial ordering and fulfillment experience for first time customers, product bundles have no compelling entitlement management advantages over a la carte offers. I have tended towards the a la carte option largely because of the flexibility they offer over the product lifecycle. Despite what some leading SaaS/cloud-based providers have done, my sense is that they will have to re-think their product bundles approach at some point.

In Part 3, I will discuss product and entitlement management best practices regardless of the course you pick.

Related Entitlement Management blog posts:

Posted by Deloitte:

• Strategies to Improve Licensing and Entitlement Management Capabilities

Posted By Flexera Software:

• Why Producers Need a Proven Commercial License and Entitlement Management System to Support the Full Software Lifecycle Process
• App Stores for B2B Application Producers are Simply eCommerce Sites
• Publishers MUST Provide Entitlement Data to their Customers before Holding them Accountable for Compliance
• Consider How Software is Deployed to Drive Adoption of New Licensing and Entitlement Models
• Integrating Entitlement Management into Your Existing IT Infrastructure
• Best Practice: Publishers should provide software entitlement and maintenance information to customers and channel partners 7x24

Why the Pay-For-Use Licensing Model Was Dead On Launch

By Mathieu Baissac

In the early 90’s I had a cell phone. It was one of those old clunky things, at least 2 or 3 inches thick and it only knew how to call people (imagine that). Just like the cell phone, the cell plan that was tied to the phone included a clunky pricing model – I paid afixed amount for unlimited local calls and a per-minute charge for roaming.  As you can imagine, the fixed amount wasn’t the issue, the roaming charge was the issue, for lots of reasons:

1. It was hard to know if you were roaming or not unless you looked at the phone as you were talking (my android phone still has a feature where it beeps if I go into roaming)
2. It was hard to predict your monthly pay outs—my bill, month to month, swung by 50-300%
3. So I tried very hard to not use my cell phone, unless it was an emergency. Of course, when you travel 50% of your time, this really dampens your productivity.

As soon as an operator provided a “some roaming is included” plan – I switched.

Now imagine the same with software and pay-for-use. If it’s highly predictable or a small amount, then I can see someone signing up for it. In fact, today as consumers we subscribe to $1.99 apps, $4.00 books and even $50.00 electrical bills, but would a CIO sign up for pure pay-for-use model, i.e. “every time your users run the French dictionary, you owe $1.00” or “for every KB stored by your users, you owe $0.50.” I just can’t imagine budgeting this way. The only exception is # of users – because new hires are budgeted.

Bottom line, in my opinion: Pure pay-for-use won’t work for most enterprises (some exceptions noted). The answer, in my opinion, is hybrid software licensing models:

1. Pay up front for some amount – for predictability
2. Pay in arrears for any over-use – for flexibility

With those types of pricing models, CIOs will start playing some very interesting “WHAT IF” analysis, such as “budget for 10% overage, how low can my upfront be.” CIOs will then have truly gotten rid of shelf-ware and Publishers will be fairly rewarded for their IP.

Check out these related pay-per-use and usage-based software licensing, pricing models and metrics blogs:

• Usage-Based Software Licensing Examples and Patterns
• Usage-Based Licensing without Usage Data – Is it Possible?
• The Next Evolution of Software Licensing: Monetization of Usage Data
• True Pay-As-You-Go Software Licensing Model – Myth or Reality?

App Stores for B2B Application Producers are Simply eCommerce Sites

By Mathieu Baissac

Recently I've been asked by several application producers (and newspapers) how we can help them with their App Stores. As someone who worked on an eCommerce site since early 1995 for a software reseller, I find myself scratching my head a little.

Components of an App Store

Typically –when I hear "App Store" I think about the traditional sites like Google Play, App World, Nokia Store, Windows Store  and a few others,  Amazon  and of course the "App Store" -  provided by Apple.

App Store components include:

• Registration/User account creation process
• A catalog with icons/images, various search/listing mechanisms (free vs. paid, application categories, most purchased/highest rated, content segmentation (e.g., app vs. video), wizards based on past purchases), and a detailed page per application with ratings, reviews, additional images, etc.
• Pricing. Typically it's just 1 single price, but with Windows Azure, that's changing (and other producers will follow) 
  
  
  
   
• Purchasing process. Credit card or PayPal.
• Delivery process. Often pretty simple (download link in the UI). Amazon does allow PUSH to a number of registered devices.
• Update automation. Notifying when new versions are available and providing the download mechanism.

Why App Stores as Defined Today Won't Work for Most Application Producers

The App Stores that I've surveyed (see above links) do some things quite well:

• User account creation and device registration
• Catalog, search, list management
• Detailed catalog screen shots
• Delivery
• Update automation

 However, I cannot see most application producers using the current App Stores. They lack:

• Pricing complexity
• B2B-oriented payment models (e.g., POs, wire transfers etc.)
• Enterprise-style bulk purchasing (e.g., 100 copies of an app that can then be delivered to 100 different users)
• Incorporation of channels and channel partners

 In addition, today the App Stores are very "perpetual" oriented:

• Apps are cheap
• Users get all new versions of the app for "free"
• Users do not have to purchase "maintenance"

Why eCommerce Solutions are Still what Producers Need

eCommerce producers such as Oracle (ATG), IBM (Websphere/ Sterling Commerce),  Hybris (mostly in Europe), Digital River, Zuora (for subscription/pay-for-use billing) and many others provide all the things needed to make eCommerce occur (e.g., catalog, pricing, payment processing).

They can also achieve that "easy-to-use" model that App Stores provide, even on mobile devices:

• Shopping is done in the eCommerce site
• Customers get "Activation IDs" or other unique identifiers for each item purchased
• Customers are redirected to an Electronic Software site to download the software (FlexNet Operations On-Demand with FlexNet Electronic Software Delivery)
• Using FlexNet Licensing  – users activate in the product
• Customers get emails when new releases are made available OR using FlexNet Connect – updates are automatically pushed to the device

What am I missing? Any reasons why we can't just say for B2B application producers: App Store = easy eCommerce+Delivery+Update?

 

Car-as-a-Service – Part 1: Transformation of Business Models in the Automotive Industry

By Bashyam Anant

Google's driverless car, which was awarded a driving license in Nevada in May 2012, is a bellwether for the technology-driven transformation of the automobile industry.  Observers are dreaming up possibilities as exemplified by "if you give a car the abilities of race car drivers (instead of the average driver) and combine them with "conservative software" used for standard driving then you can develop a safer driving experience."  What if you were able to try out driverless features in your car for one month at no charge? If you liked it a lot, you could buy an annual subscription. When your subscription runs out, you could renew it through your smartphone. On a weekend, you might want to upgrade the driverless feature from "commuter style" to "race track style", and be driven at breakneck speeds on a racetrack.

Such possibilities are endless. At their core, they speak to the imminent transformation of business models in the automotive industry – from a business that is characterized by occasional vehicle sales today to the "car-as-a-service" future which creates an on-going relationship between auto manufacturers and consumers with recurring revenues from sales of apps and services. Note that Google's driverless features were retrofitted onto a Toyota Prius, and were enabled by a combination of hardware platform (e.g. laser radars), breakthrough software and Internet-enabled services, the essential ingredients of a "platform + apps + services" recipe driving the transformation of automotive manufacturers discussed below.

Until recently, comparing Apple to Ford would have been dismissed as a meaningless exercise. In this article's context, however, it serves as an indicator of the payoff that automotive manufacturers can expect should they succeed in replicating Apple's formula of "platform  + apps  + services"  exemplified by the iPhone platform + iPhone Apps  + iTunes content. The table below shows that Ford and Apple are roughly similar by revenue. But, Apple's market capitalization per dollar of revenue (3.1 in the table below) is 10 times that of Ford's.

 

The good news, though, is that these types of returns are very much within reach, and Ford, in particular, is already making progress in that direction.  Ford Sync is an early example of a next generation vehicle information and communications system – a connected, software-driven dashboard in simple terms. Ford offers Sync in four editions based on levels of features, bundled services and optional subscription plans as summarized below:

 

	Sync	Sync with Voice-Activated Navigation	Sync with MyFord	Sync with MyFord Touch
Handsfree calling	X	X	X	X
Entertainment
Voice-activated music search, Bluetooth audio streaming	X	X	X	X
Voice-activated radio tuning		X		X
HD Radio (pay per song)				X
Satellite radio (subscription)		X		X
Navigation	X	X	X	X
Subscription Services				X
411 business search, Personalized news, weather, sports, traffic alerts	X	X	X	X
Vehicle Health Report	X	X	X	X
Wi-Fi hotspot				X

 

Ford Sync illustrates several strategies to grow revenues from a "platform + apps + services" approach, covered in Part 2.

Next time: Car-as-a-Service – Part 2: Platform + Apps + Services = Strategies for Growing Revenue

Related articles

Consumerization of Industrial Technology

Google's Driverless Car | Shocking Effects & Information

Usage-Based Software Licensing Examples and Patterns

By Mathieu Baissac

For the last year, I've been talking to a large number of software vendors and device manufacturers about pricing their products using usage-based licensing models.

There seems to be an explosion of new licensing models being considered. I personally believe that this new approach will be the default pricing model within the next 5 years and therefore wanted to share some potential applications (to stir up the creative juices).  I have kept these examples anonymous, as most of these licensing models have not been released in the market place yet (but soon)…  

• Marketing application vendor
  • Old: moving from user/size of database
  • New: # of emails sent on a monthly basis
• Development platform/ hosted RDMS
  • Old: # of developers, perpetual license
  • New: # of gigs managed on a quarterly basis
• CAD/CAM vendor
  • Old: perpetual license based on features/capabilities
  • New: # of drawings rendered in 3D on a monthly basis
• Telephone equipment provider
  • Old: perpetual license based on features/capabilities
  • New: peak throughput # of text messages sent per month
• Translation services
  • Old: each job was priced based on complexity, language, speed of job
  • New: # of characters translated by the month (regardless of all other factors)
• Video data conversion provider
  • Old: hardware
  • New: # of megs converted per month
• Project management vendor
  • Old: perpetual software based on size of hardware (# CPU cores)
  • New: # of active projects managed per month
• Chip design software vendor
  • Old: perpetual software based on size of hardware (#CPUs)
  • New: # of designs compiled per month
• Application converter
  • Old: perpetual software-per seat
  • New: # of applications "managed" for conversion & perpetual license for capabilities
• Software development tool vendor
  • Old: perpetual concurrent # of users
  • New: # of users exceeding perpetual license per month

There seems to be some patterns:

1. Combination of "usage" (pay-for-use) and "capabilities" (pay perpetual or time-based for access to these services)
2. A significant reduction in what is being monetized (2-3 meters, no more than that)
3. Meters are aligned much closer to the value derived from the use (# of megs converted vs. #CPU)
4. All producers are providing a predictable/consistent pricing meter and a variable component so that CIOs/finance can budget

I think the combinations of:

• Simple
• Easily tied to value
• Mostly predictable

 Is right on the money….

Learn more about compliance management solutions that enable usage-based licensing and pricing.

Year in Review: Most Watched, Read and Viewed Software Licensing and Entitlement Management Content of 2012

By Ann Reist

In keeping with our review of 2012, I also wanted to share with you the Most Watched Videos, the Most Read White Papers and the Most Viewed Webinars. "

Most Watched Videos

1. Creating "One Avid" with a Unified Software Licensing Framework
2. InstallShield Uses Tamper Resistant Software Licensing Code to Prevent Piracy and Hacking
3. Subscription Licensing Helps Transform Business from Hardware to Software-Centric
4. Insights from Citrix: Software Licensing Implications of Virtualization and the Cloud
5. Software Pricing and Packaging Best Practice Advice from Software Pricing Partners
6. Software Licensing Implications of Moving Applications to the Cloud

 Most Read White Papers

1. 2011 Key Trends Software Pricing and Licensing Report**
2. 10 Reasons to Buy a Software Licensing & Entitlement Management Solution
3. IDC White Paper—Software Licensing & Entitlement Management: The Next Generation
4. How to Grow SaaS Revenue, Profits and Market Share with Use-Appropriate Software Licensing and Pricing
5. Software License Compliance Management: Optimizing Software Revenue and Customer Satisfaction
6. Ten Steps to Optimizing Your Software Licensing Revenue
   

** Note the 2012 Key Trends Software Pricing and Licensing Report is now available.

Most Viewed Webinars

1. 2011 Key Trends in Software Licensing and Pricing and 2012 Predictions
2. Why Software Publishers are Migrating from Certificates to Activations
3. Software Licensing and Entitlement Management: The Next Generation—An IDC white paper webcast
4. Bridging the DevOps Divide by Automating the Handshake between Dev and Ops
5. Making the Most (Money) with Your SaaS Offering
6. Creating a Customer-Centric and High-Performance Entitlement Management System

 

Top 13 Entitlement and Compliance Management Blog Posts of 2012

By Ann Reist

After researching the most read Entitlement and Compliance Management: Talking Successful Software blog posts of 2012, we found that the most popular topics were on the subscription economy, software-defined networking, usage-based (pay-as-you-go) licensing, virtualization, software license compliance and SaaS. Not surprising, as all these topics and technologies will most likely continue to dominate the market in 2013.

Top 13 Posts

1. Don't be Afraid of Subscription License Models
2. Common Software License Types and Terms
3. What the Heck is a Token Software License Model?
4. Software Defined Networking Enables New Software Licensing and Business Models
5. Usage-Based Licensing without Usage Data – Is it Possible?
6. Software Licensing – What are the Best License Metrics for a Virtual Machine World?
7. The Software Industry is Recovering from the Recession
8. True Pay-As-You-Go Software Licensing Model – Myth or Reality?
9. What is the ISO-19770-3 Standard and How Will it Make Software License Compliance Easier?
10. Virtualization is the Biggest Game Changer in Software Licensing in Many Years
11. The Next Evolution of Software Licensing: Monetization of Usage Data
12. An Introduction to the ISO/IEC 19770-3 SAM Standard Software Entitlement Tag
13. SaaS is More Than a Software License Model

What technology played the biggest role your in business in 2012? What topics would you like us to address in 2013?

Software Licensing Strategies to Address Cloud Computing License Abuse Challenges

By Bashyam Anant

In a recent CloudTimes article they ask, “Can Cloud Computing Stop Software Piracy?” The answer really depends on who runs the software in the cloud and how publishers in that context make money, as we discuss below.

The article points to a Business Software Alliance (BSA) study that found that “42% of users admitted to sharing their login credentials to paid cloud computing services with other people”.  SaaS publishers that we serve have reported similar levels of abuse. The article highlights that even though the SaaS publisher operates and remains in control of the application in this context, they still might be leaking revenues to unlicensed software use. So, does credential sharing matter? Yes, if you happen to be among the 25% of SaaS publishers that employ a named-user licensing model[i].  In our experience, developing software license policies that allow a given user to access the software from a set of registered devices is an important strategy to minimize credential sharing abuse, as Salesforce.com[ii] and Netflix.com[iii] exemplify.

What if you charged for a SaaS application based on a usage metric, as about 31% [iv] (up from 20% in 2010) of SaaS publishers do? While the CloudTimes article does not discuss it, unlicensed software use in this context refers to scenarios in which enterprises consume more than what they agreed to pay for. For example, for one Flexera Software SaaS application (we have been a SaaS publisher since 1996) where we charge based on the number of unique machines managed by the application during a license term, we have found that about 12% of customers exceed their unique machine quota. Clearly, if you charge based on a usage metric, you need a way to track usage, compare them to entitlements and use this data to drive compliance conversations.  

CloudTimes also mentions the notion of “dark clouds” – where an unauthorized party obtains a copy of the publisher’s software, deploys it in the cloud and either uses it or charges for it. Some publishers we serve have shared anecdotes where they have found instances of dark clouds running their software. For example, an intelligent device manufacturer that is pursuing a software-based strategy for telecom and networking products found that their virtual appliances had been downloaded from Amazon EC2 and deployed in another datacenter to drive an unauthorized business. This is indeed software piracy as is commonly understood. Software license enforcement solutions such as those from Flexera Software can be an effective weapon against this form of abuse.

Lastly, enterprises that deploy software in private clouds also run the risk of going out of compliance with the publisher’s software license terms. This is because virtualization technologies that are at the heart of private clouds make it very easy for an enterprise to clone software and over-deploy it. Microsoft has found that 11% of Windows Operating Systems that run as a guest operating system in a virtual environment are unlicensed[v]. In this setting, publishers and enterprises can and should look for a win-win – enterprises should be able to move virtual machines unfettered by software license enforcement while publishers should be able to monetize the value they deliver. Compliance management solutions that track usage of software in virtual environment and report it back to the publisher hold the key to ensuring a seamless experience for enterprises while protecting the interest of publishers.

In summary, while some members of BSA might believe that cloud applications will greatly minimize software piracy, we think the answer depends on the business and deployment model:

• Virtual private clouds greatly increase the likelihood of “piracy” through accidental overuse
• Credential sharing abuse is an issue and takes concerted efforts to minimize

What do you think?

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[i] Source: Softletter SaaS Report 2010, http://www.softletter.com/Research/SoftletterSaaSReport.aspx

[ii] https://login.salesforce.com/help/doc/en/activating_computer.htm

[iii] https://signup.netflix.com/TermsOfUse#account

[iv] Source: Softletter SaaS Report 2012, http://www.softletter.com/Research/SoftletterSaaSReport.aspx

[v] Microsoft TechEd 2011