Software companies need new licensing models - and here's why

It's impossible to accurately forecast software use

Software licensing models must be updated to keep pace with the way in which they are used. That was the conclusion of the CIOs attending Computing's most recent IT Leaders' Club in the Four Seasons Hotel, London.

One attendee sparked the discussion with his view that "The licensing models that all of these software companies use haven't evolved fast enough to keep pace with the way that we use any of them." Others unanimously agreed, with certain companies - particularly Oracle - highlighted as models of "archaic" and confining licensing systems.

Licensing as we know it today should be a thing of the past, said a CIO, adding, "[It's] is a lovely way to look back and think ‘You messed that up.'" For example, growth targets are never accurate and so companies are always under- or over-provisioned. That means wasted investment, or fines. "We're all here because we've been stung," was the glum comment from one CIO.

More flexibility is required, with another attendee favouring the idea of a pay-as-you-go model: "Software should now come with a cast-iron monitoring system to tell you what's being used." Later on, the idea was brought up again, with a CIO saying, "We should move to a place where you pay for what you use. People were saying that eight years ago... but software companies don't want that. They want to tie you in to a guaranteed minimum number of users for a minimum of twelve months."

Both existing approaches can be viewed like a mobile phone bill: you either pay for what you use, or you have a fixed-price contract with perks (free text messages, a certain number of free licenses, etc.), but fines if you go over your allowance.

The first model is also referred to as ‘a la carte' pricing, and people in the TV industry have been arguing in favour of it for years - but, like software suppliers, broadcasters do not want to give up the guaranteed revenue of locking customers into a contract.

One tip that was shared in the middle of the discussion was to keep an eye on the Product Use Rights, before signing a new licensing contract. Businesses know that clients rarely read these, and they are apparently used to sneak in upcoming changes to licenses as much as 12 months before they're actually implemented. "You know what's coming by reading between the lines," said an attendee.

Computing 's next IT Leaders' Forum will be held on the 5^th July at The Brewery in London, and examine the topic of digital transformation. For a view of all upcoming events, please click here.