Software Licensing: The current situation is utter nonsense

John McGreavel | Information Week | March 23, 2011

Good opinion piece in Information Week on commercial software licensing by John McGreavey.  I've been in this industry for many years, and with the changes in platforms, virtualization, hosted solutions, accounting treatments, and remote usage options, I understand that pricing models must evolve. But the current situation is utter nonsense.

For each vendor, we were looking at an 80 percent to 90 percent discount from the list price. In what other market is an 80 percent discount the norm? "This new Lexus lists for $70,000, but we can get you into it for $14,000!" Let me guess: We now have to hunt through the contract for future fees that are based on the list price, right? More time spent negotiating maintenance and other aspects of the contract to avoid dependence on the five-times-higher list price.

But wait, we're licensing a number of different software modules from the same vendor, so one licensing model should apply to all, right? Not so fast. Some parts of the suite are licensed by a named user--straightforward enough. But we're running a browser interface, and one user will access the system from many different browser-enabled devices. Does such usage require more than one named user license?

Meantime, some software modules require a different level of named user license. And we need multiple levels of named user licenses, depending on the function of the user. Other modules within the same platform are licensed by company size--number of employees. Another module is licensed by CPU sizing. And yet another's licensing differs if you already own certain of the vendor's products, or if this is a new installation throughout the enterprise.

I understand that our software vendors must earn returns that support continued investment and innovation. But how much time and effort would be saved by both parties with simpler, more transparent licensing methods? It's time for a change.