GET LICENSING RIGHT FIRST TIME.

Software Monetization Featured Article

Cloud Bill of Rights Meets Vendor Licensing

October 25, 2013





R “Ray” Wang should be considered one today’s software visionaries, and he certainly didn’t fail to impress at LicensingLive! 2013 hosted by SafeNet (News - Alert) in Cupertino.


Wang, founder and principal analyst at Constellation Research, gave an insightful talk, “The Evolved Customer Experience – Understanding the Evolution of the Software Experience from the Enterprise End-User Point of View”. It resonated with the audience which was largely vendors that sell software and other intellectual property and need to license and protect their products.

Understanding the customer viewpoint is essential if one is to develop strategic service and product offerings that turn on, rather than scare off, potential clients.

Wang’s company is often called in to negotiate complex licenses, licenses increasingly driven by the cloud. This means you may have subscription-based SaaS (News - Alert) deals to work out, or usage-based cloud services.

One problem is the cloud can have many tiers and customers can get dinged on pricing in a variety of ways. This includes prices going up as costly features are added. What seemed an affordable alternative to on-premise can quickly become untenable.

“Client–vendor relationships in the cloud are seemingly perpetual. When converting from an on-premise arrangement, it is imperative that these agreements provide a chance for a new slate. Thus, chief information officers (CIOs), chief marketing officers (CMOs), line-of-business (LOB) executives, procurement managers and other organizational leaders should ensure that the mistakes they made with on-premises licensed software aren't blindly carried over,” Wang argues.

That is where the Enterprise Cloud Buyer’s Bill of Rights comes in. It sets a new stage where users and vendors can create a long-term relationship based on equality and mutual interest.

Wang also hopes the Bill of Rights will drive vendor’s sales, software licensing and support policies so as to let the cloud fulfill its true potential, rather than suffer from customer frustration which drives down sales, upgrades and renewals.

In fact, it is this set of frustrations that may lead customers back to on-premise solutions, Wang argued at this year’s LicensingLive!

The Writing of the Bill

Wang came up with The Enterprise Cloud Buyer’s Bill of Rights because companies are increasingly moving from a one-time perpetual license where you pay for the software, install it and to use it forever, to usage and subscription licenses which are only perpetual if you continue to pay for them.

This creates a requirement for a new set of rules. Getting the client/vendor relationship right from the start is critical if one is to successfully transition to the cloud.

The bill has 55 items that focus on the six phases of the cloud lifecycle; selection, deployment, adoption, optimization, renewal and experience.

Wang believes that over 80 percent of new software licenses aimed at enterprises today include a cloud option. This has huge benefits, but unfortunately can lead to vendor lock-in.

“Buyers do not own the rights to the code in most public cloud models. Buyers pay for the right to access functionality and use the intellectual property, but at the full mercy of the cloud vendor. Should the vendor decide to take a different product direction or go bankrupt, users remain at the vendor’s mercy,” Wang says.

In the world of on-premise or packaged software, if you don’t like your word processor you can just install another one. It isn’t always so easy with the cloud. “While users have access to and ownership of their data, the hurdle in moving from one cloud vendor to another cloud vendor increases with usage over time. Without rights over the app’s functionality, users face lock-in if they cannot easily export their business processes that are instantiated in the vendor's functionality,” Wang says.

He further observed that, “Add in different architectural standards, varying granularity of process flows and complex metadata models, and users face an expensive and daunting challenge switching from one cloud vendor to another. Most migration plans are unclear on how to successfully switch from one vendor to another.”

The route to a good cloud experience is making key demands of vendors, Wang believes, and these demands are spelled out in his Bill of Rights.

Here are some of the key components of the Bill.

One problem with the cloud, Wang argued, it isn’t always clear who owns the data. If you are no longer happy with your cloud provider, can you get your data back and move it to another company? One would think so, but that isn’t always the case. Customers should demand that they, and they alone, own the data. And there should be clear simple provisions and tools to retrieve this data. Part of this is having your data exportable to an open file format, not trapped forever in a proprietary system.

Customers also need to understand the real financial health of their provider. After all, if your provider goes out of business, you could soon follow.

Licensing and pricing should be thoroughly transparent, given upfront, and then updated on an ongoing basis.

“Vendors should be required to give a good notice period (e.g. 180 days) before changing terms and conditions,” Wang believes.

There should also be some form of price protection so costs can be reasonably locked down, and increases limited.

Additional costs need to be public and limited. Often cloud customers get dinged for new items or charged a premium for more capacity. There should be no surprises when it comes to these charges.

Finally customers should know where their data is, and how it is managed. “Clients should determine data properties, including physical location, security mechanisms, access rights, disaster issues and regulatory compliance requirements. Critical information such as host info and availability should be provided,” Wang believes. “The customer should have control over such items as user access rights and password policies (complexity, retries, lockout, etc.) within the platform. Location of the cloud may play a role in selection of the product.”

To see Wang’s presentation and other presentations from LicensingLive! please click here.




Edited by Peter Bernstein
Article comments powered by Disqus