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Can Bulk Licenses in the Cloud Save Software Vendor Revenues?

By Daryl Plummer | March 30, 2010 | 2 Comments

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I posed an interesting question in our cloud council meeting last month. Since then, I have been trying to get more detail on the issue. The question was, when will cloud services providers begin to acquire bulk licenses of popular software products to deploy on behalf of cloud services consumers?

The essential issue here is that software products licensed for on-premises deployment are not always able to be deployed in the cloud without license changes or additional cost. This is because the company that purchased the software purchased it for their own use and moving to the cloud arguably means that another company (the service provider) is now affecting the terms of use. Now, common sense says this is not rocket science to figure out. The original buyer is still the user of the product. The cloud provider is just hosting the product in another location. Still, the issue comes up more often than you might think.

Check your license agreements before moving that software to the cloud.

So, the thought occurs to me that there might be some massive movement towards cloud providers stockpiling licenses of databases, middleware, tools, or even apps so that they can provide those software options to customers even when that software is not part of their line of business. I don’t mean companies that are in business to deliver those products as a service but rather companies that will deliver them as a value-added capabilities to make configuration, deployment, and licensing (and possibly even more critically – maintenance) easier for their potential consumer base.

Sure, there is “software as a service” out there, there is “platform as a service” out there, there is “database as a service” out there, but I am talking about availability of software to be managed and maintained by the consumer while using a provider’s “infrastructure as a service”, not the software delivered “as a service”.

So, if Amazon acquired bulk licenses of middleware products from Tibco or Software AG, or even IBM, would you buy them? Certainly if you would, it could open up a new line of revenue for software vendors that are constantly under pressure. And yes I know that the model of cloud moves away from just running software in the cloud and towards software delivered as a service. However, there are a host of products being run on premises right now that need to be migrated to virtual servers in the cloud or many companies just can’t act.

And what about those companies that want to buy licenses of new products without the hassle of having to start on premises at all? They can get the license for a cloud deployment from their software vendor at a price subject to their individual buying power; or, they could get it from a bulk supplier who can combine all its purchases into massive price pressure and pass the savings on.

So now I ask you these questions: Is it desirable or feasible that bulk software licenses from cloud providers will become an important line of revenue for software vendors? Is it at all feasible for general cloud infrastructure providers to also sell software licenses acquired in bulk? Or, is it more likely that the continued pressure on software licenses and maintenance will keep building until it all goes BOOM!?

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  • Gene Litt says:

    Negotiating with ISV to extend an existing license & support to offsite platforms feels like the natural progression (when necessary). Since, in the case stated, the SP would isn’t providing any support/services around the s/w, you’d typically have to engage the ISV anyway. There are new variables to manage in a Cloud which require a little sw-specific hand-holding from someone.

    As ISV’s adopt more granular metered pricing I could see IaaS SPs serving as a clearinghouse for a transaction fee, but not laying out cash for bulk purchase and placing a bunch of sw into inventory that they sub-license to users (which gets legally sticky).

    My company, Shunra, is working with Cloud SP, Skytap, to let Enterprises do QA & Performance Engineering in the Cloud using HP LoadRunner and Shunra’s WAN Emulation software (the necessary ingredient to ensure your test results – TRTs – reflect how your application will work at your remote offices). Skytap provides IaaS and *relies* on ISV partners to provide services & support to help customers work effectively in a Cloud environment.

  • Daryl Plummer says:

    Contract negotiation is the thing! Yes!