Guy Creese

Analysts talk about the need for a single platform that can run in-house or in the cloud, but not a lot has been written about the growing need for a single licensing model as well.

In the SaaS world, this is crucial. We’ve seen a lot of interest from clients in SaaS-based e-mail–as long as they can run some mailboxes in-house as well. What this really means is that enterprises just want to run e-mail, and not worry about where it’s running. To “not really worry” means that they’re able to switch users back and forth between in-house and the cloud without a lot of licensing/pricing work; and that’s not really possible yet.

Buying enterprise software in bulk has historically been a long and labor-intensive exercise. Direct sales reps come and do a pitch, there’s support to consider, licensing schemes differ (e.g., priced per server, per total users, per concurrent user), Legal and Purchasing get involved–it takes a long time. Microsoft’s licensing is so complex that it funds a licensing specialist at every sales office to help sales reps write their offers (or at least so I’m told).

SaaS is a lot simpler. The enterprise goes online, sees the standard pricing, and if it wants to, gets Legal and Purchasing involved–but it’s really pretty easy. The licensing scheme is typically on a per user basis.

When you start trying to migrate users back and forth between in-house and the cloud, it gets really complicated. If you’re moving a user to the cloud from in-house, do you get credit for the software license? If so, how much? And when does the transfer take place? Instantaneously, the next month? In summary, how does an enterprise make sure it’s paying an equitable fee without killing itself in negotiations and minutiae?

The reason I’m making this post today is that this morning Mike Gotta retweeted a tweet to a Forrester blogpost about a VMware announcement.  The licensing nugget hidden in the post is, “ISVs that develop consumer facing applications will welcome Google’s statement to Forrester that only named users that use an application at least once in a calendar month will be counted.” This is a great idea. While it doesn’t help move users back and forth, it does make the cloud licensing more equitable: if you don’t use the service you’ve signed up for, you don’t pay for it.

To conclude, vendors who offer equitable SaaS licensing and pricing, as well as make it easy to move back and forth between in-house and cloud platforms, will score a huge win in the market. So far, the conversation has centered around the tools and technology; now it needs to start including licensing and pricing.

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Category: SaaS     Tags: Licensing, Mike Gotta, SaaS

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