Measure what Matters — Software License Metrics

Software licensing requirements are in a constant state of flux as business needs and usage patterns change over time.

In recent years, this evolutionary process has received a number of large jolts, including changes to software marketing, the proliferation of artificial intelligence (AI) and the internet of things (IoT), and the current COVID-19 pandemic. Each of these is altering the ways in which licenses are sold, how businesses are managing existing licenses, as well as changing the requirements going forward.

Now more than ever, businesses can use OpenLM’s software license tracking tools to be sure they’re in compliance with the myriad applications they use. The software helps ensure they’re getting maximum value from their current spend, and that they aren’t risking audits and surprisingly large licensing bills.

SaaS Applications are Simplifying Software Licensing

SaaS, or software as a service, is the culmination of a long-running shift in the way the software industry markets and sells its product.

For the bulk of the industry’s early tenure, software was sold on an individual installation basis, delivery via physical media such as floppy disks, CD-ROMs, and later DVD-ROMs. 

As broadband internet moved from a niche service to ubiquity, software companies began making direct digital software downloads available, eliminating physical delivery. Later, subscription services were added to digital downloads, enabling users to receive automatic updates and bug fixes.

Software as a service takes the next logical leap in digital delivery — by eliminating delivery. Instead of purchasing a piece of software and downloading it to their computer, users are granted access to software running in the cloud. No download is necessary, removing the need for company IT departments to keep track of installations, updates, and other difficult software requirements.

As a result, these cloud-based services are simplifying licensing and compliance requirements. Organizations no longer need to worry about whether their physical installations match available licenses because there are no installations.

SaaS companies license their products on a subscription basis. The most common structure charges a specific fee per user per month. Because the software runs in the cloud, users can access their software on any computer their company has authorized them to use.

While this varies between companies, subscription models generally charge customers ongoingly instead of requiring a single upfront purchase fee. This means that licenses have the potential to be changed, upgraded, and downgraded as a business’s needs shift. This also allows SaaS companies to create tailored licenses that restrict specific functionality based on the user’s investment. Alternatively, licenses can vary per month based on actual usage.

The Internet of Things Is Complicating Software Licensing

Concurrent with SaaS simplifying the software licensing landscape the industry is grappling with several new complications introduced by the internet of things.

This long-touted technology is finally making inroads into the business world. Networks are becoming host to myriad smart devices, smart sensors, and smart machinery. Businesses are rolling out mesh networks that feature passive data collection and enable connected business processes across their organization.

These technologies are challenging several notions found in standard licensing agreements. For one, it’s becoming harder to define what a user is. When networked smart machinery accesses a piece of automation software, is the user the machine or the company? What happens when a factory adds third-party smart components to a previously licensed machining system? Is each component a separate “user”?

The IoT also dramatically increases the number and definition of devices that run software. Copy machines are now software platforms. So too are alarm sensors, smart components, mesh network repeaters, and the full complement of smart products.

Increasingly it’s unclear how fees should be assessed in these situations. If each sensor and device in a mesh network is a user, should a fee be assessed per interaction, or is a quantity-limited subscription model a more practical solution? 

In most cases, the industry is favoring some form of subscription-based licensing, but as the industry grows, and as new uses for the technology are discovered, it’s likely that these models will need to be revisited.

Artificial Intelligence Is Testing the Promises License Agreements Can Make

AI introduces further wrinkles into the software licensing landscape. The difficulty revolves around the technology provider’s ability to promise specific results.

Generally, software output is predictable. When you add text to a document, you create a text document. When you use a spreadsheet to solve a problem, you can be certain that the process will follow specific, predictable rules.

AI, by comparison, is unpredictable by nature. While we can be reasonably sure that the system will improve over time, it isn’t guaranteed. Nor can users foresee the way that AI will perform. Starting with the same initial conditions, AIs can, and often will, generate novel behaviors that vary between iterations.

As a result, AI software vendors have to use very specific language in order to properly define user expectations. When licensing AI services, vendors must distinguish payment for the service as a separate element from potential results.

This is uncharted territory for the software industry, and it’s certain that licensing practices will necessarily adapt over time.

COVID-19 Created Unique Licensing Agreements

Companies are finding it necessary to radically alter the software packages they’re using to conduct business. Massive shifts toward remote work have required significant new installs for video conferencing, collaborative applications, and other novel software packages.

Many software providers rose to the occasion, offering free licenses, delayed audits, and other cost-saving measures. However, structuring these unique licensing agreements presented a variety of challenges. 

These vendors aren’t charities after all, and they’re not in the business of giving away software for free, so oftentimes the licenses had to be written with significant restrictions, time-delayed payments, and other licensing oddities to protect the manufacturers from uncontrolled loses.

As a result, businesses must be hypervigilant when reading license agreements for “free” software to be certain there aren’t “gotchas” hidden in the language.

All of These New Complications Increase a Business’s Exposure to Liability

While SaaS is simplifying license tracking requirements, the industry as a whole is becoming more inscrutable. Businesses are finding themselves facing confusing and potentially damaging license agreements that place a greater onus on them to keep tabs on usage.

Even small businesses are finding themselves underwater with their software asset management (SAM) practices, and larger companies are finding it necessary to devote ever-increasing resources to making certain that licenses are being used properly, and that money isn’t being wasted on unnecessary seats.

OpenLM is now more critical than ever before. Our software solutions take the guesswork out of license management. Users gain significant insight into their current license usage. The software helps IT departments efficiently allocate licenses throughout their organization, make informed decisions about license maintenance and procurement, and avoid antithetical behaviors like license hoarding. 

With robust tracking and reporting features, OpenLM helps businesses avoid costly software audits and focuses their software spending. Software licensing is a minefield for businesses. OpenLM gives them the tools they need to protect themselves in this ever-changing field.

Would you like to see what OpenLM can do to help control your costs and exposure? Visit us for a 30 day free trial of OpenLM with full features.