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Cover Story - Licensing Policy
A suitable software licensing policy

Software vendors offer licensing policies catering to the differing requirements of various organizations. So what's on offer and how does one pick the best policy? by Brian Pereira

WE all know that a software license grants an organization or individual the legal right to use the software. But a software licensing policy formulated by the vendor also takes into account other factors like upgrades/updates, support (AMC), software piracy control, and the manner in which the software can be used. Enterprise customers look up to a software contract as a means of investment protection and to ensure support. Vendors have devised their own unique policies to address such customer concerns. So how does an enterprise decide which is the most suitable licensing policy?

Says K. Chandrashekaran, Director, Network Systems and Support, Cognizant Technology Solutions, "The business model and requirements of a business should decide the licensing policy of a company. Software development organizations can go in for 'term license and per seat' wherever possible, because the software development life-cycle has now shrunk to a few weeks. The business requirement and technology deployed would be other considerations that would determine the type of licensing a company should choose."

A threat that all enterprises face is change in licensing terms and fluctuating AMC fees (more on this in our next story). "Change in the licensing policy often leads to unplanned expenditure on upgrading/updating the products to ensure one has the latest, even if one does not require it immediately. But to protect investments, an organization is compelled to tow the line," says Chandrashekaran.

So how does an enterprise prepare for anticipated changes?
Wherever possible, enterprises should get into a long-term contract (something similar to Enterprise Agreement offered by Microsoft), for frequently used products, to protect their investments and to stay up-to-date.

Licenses can be broadly classified into two categories—'perpetual' and 'term license.' The perpetual license has no limitation on the period of usage, as the user owns the license. The term license has a limited period of validity—about one or two years.

Licenses could be per seat (per desktop) or per server or a combination of both. If a desktop needs to access multiple servers, per seat license would be more economical, than a per server license. In fact vendors like Novell are moving from the server-centric to a user-centric model as it gives customers more flexibility in deploying applications across multiple servers.

We asked vendors what kind of software licensing policies they offer Indian enterprises. While some policies might appear to be too harsh, others are customer friendly and take important things like upgrades and investment protection into consideration.

Basically, Microsoft offers three forms of licensing: OEM License, Retail License and Volume Licensing.
OEM License: For the PC manufacturer who bundles the operating system with the PC.

Retail License: For products that can be bought off the shelf. In this case, the product comes with a single license.
Volume License: For those whose requirement is large and will spend a minimum of Rs 5 lakh on a specific product.
According to Microsoft India, the most commonly used licensing here is Open Licensing. With this form of licensing small businesses can start their businesses with minimum Rs 5 lakh, and depending on the requirement, as and when they grow, can qualify for higher licensing discounts.

In addition, the company introduced a new policy for businesses last year. On May 10, 2001, Microsoft announced its Software Assurance program—an update to its existing Volume Licensing programs Open License 5.0 and Enterprise Agreement 5.0 to version 6.0. Businesses could sign up for this program between October 1, 2001 and July 31, 2002. Those signing up were expected to pay annual fees for specific software products in advance. That would enable them to receive any upgrades and updates for that software product (as and when available), within a two year period. Software Assurance can be renewed after two years.

The Software Assurance program is a departure from the traditional way in which enterprises purchased and upgraded software. Rather than upgrading their software when they wanted to, or when their IT budgets provided for it, enterprises now pay for upgrades in advance. The program received mixed responses from the industry, and some were against the idea of paying for software in advance.

Says Deepak Shagrithaya, Program Manager-Licensing, Microsoft Corporation India, "Software Assurance is a new, simpler way of upgrading to the latest versions of software, and one that is easier to understand and administer. From customer feedback we learnt that License 5.0 was quite complex in nature primarily because it was offering too many options. Large organizations found it very difficult to maintain different versions of software on different desktops at different locations. The objective of the new licensing program was to make that simple. We kept aside all those upgrade facilities that were available, and replaced that with the Software Assurance program."

Shagrithaya also informs that from August 1, 2002, the customer can no longer buy Software Assurance separately. Software Assurance now comes only with the license. Alternatively, one can buy Software Assurance separately when renewing the expiry of the existing Software Assurance.

In addition, Microsoft has another form of licensing called the Enterprise Agreement. This is suitable for businesses that want to standardize on Microsoft products across the Enterprise, in accordance with their infrastructure. The Enterprise Agreement is for a period of three years and will include licenses as well as upgrades for that period. This program is aimed at customers who have 200 or more desktops. It is also aimed at customers who are looking at the latest technology upgrades and who have standard infrastructure across the organization.

The maker of image editing and documentation software has three volume licensing programs.

Transactional Licensing Program: The Adobe Open Options Transactional License Program (TLP) is for organizations with as few as ten workstations that need volume licensing. This program is open to corporate, government, education, and small business customers. TLP covers most Adobe products and is available worldwide. There are no contracts to sign or records to keep, and there is no need to forecast future software consumption. The Adobe Open Options TLP evaluates each transaction separately and applies the appropriate volume discount level.

Contractual Licensing Program: The Adobe Open Options Contractual License Program (CLP) simplifies software administration through a single licensing agreement that is effective worldwide. By participating in the CLP, one gets the benefit of a large-purchase discount, and has the option to spread license fees, and thus expenditure over the duration of the agreement. Open to corporate, government, education, and small-business customers, this program covers most Adobe products. CLP is a two-year contract between Adobe and the customer.

Site Licensing Program: The Adobe Open Options Site License Program (SLP) simplifies deployment of Adobe Acrobat 5.0 throughout the organization. According to Adobe, participation in the SLP simplifies software installation with a single site-license serial number and it reduces compliance risks too. The program's convenient six-month reporting plan provides easy budgeting and forecasting—especially useful for purchasing departments. The Adobe Open Options SLP is open to corporate, government, education, and small business customers worldwide.

All licenses are on per seat basis. TLP is available through Distributors and Resellers whereas CLP and SLP can only be sold through an ALC (Adobe Licensing Centre), which is Wipro Infotech in India.

The maker of design software offers three types of licensing policies.

Standalone license: Where the license is to be used on one computer and at one location.

Network license: Where the license allows the software to be installed on a network—it could be used through a number of computers. The license is issued based on the number of users that are allowed access to the network.

For instance, if the network license is for five users, then only five users can access the software through the server at any point of time.

Student license: Where the license allows for the software to be installed on a single computer for only education and instruction.

Autodesk's licenses are governed by the following policies:

  • It is non-exclusive: This means the user is only allowed to install and use the software. The user is not allowed to rent, lease, reverse-engineer, reproduce (other than the installation process), alter, adapt or circumvent the copy protection devise without the consent of Autodesk.
  • It is non-transferable: The software cannot be transferred to another user without the consent of Autodesk.
  • The user is only allowed to use the software in the country in which the software was purchased.
  • If the software purchased is an upgrade version, then the previous version has to be deleted within 60 days after installation of the upgrade version.

NetWare 6.0, the network operating system from Novell, comes with a server license plus five user connection licenses. An organization can later go in for additive licenses, in multiples of five. Customers also have the option of buying a server license plus 50 connection licenses. For Novell GroupWise one needs to buy only as many licenses as the number of post offices used.

Novell also has software and licensing policies for SMEs. For its Small Business products, it offers per user connection licenses. So a business that has bought five licenses can go in for one more later, if required.

"For a small organization an increment from 5 to 10 would take a longer time. That's why we also offer an increment from 5 to 6. This way, licenses are not wasted," says Ashit Panjwani, National Manager, Alliance and Marketing, Onward Novell Software (I).

Onward Novell also offers special pricing to existing customers. Those using older versions of its products pay approximately 60 percent of the price of the new product (i.e. approximately 40 percent discount).

Responding to customer concerns about upgrades and updates, Onward Novell has introduced two upgrade programs and made its licensing policies more user-centric.

The Upgrade Protection program is a long-term upgrade protection plan. It's similar to Microsoft's Software Assurance program, in the sense customers pay in advance for software updates/upgrades to be released in future.

One could opt for a one- or two-year contract with Novell.

The Upgrade Promotion program is a short-term, limited upgrade protection plan that may be announced periodically just before a product launch. If a business has an immediate need for the current version of a particular software, they may go ahead and upgrade (without waiting for the new version to be launched), and when a new version of that product is launched in the subsequent months, the company receives the upgrade either free of cost or at minimum cost.

Besides user-based licensing Novell also offers CPU-based pricing for Novell Portal Services.

Says Panjwani, "We have moved from a server-centric model to a user-centric model. So now if a company has 500 users it can distribute the application across various servers. Earlier, the license was restricted to one server/CPU."

Symantec, a developer of Internet and Enterprise security solutions, announced the Symantec Security License Program in July 2002. The objective of this program is to make it easy and cost-effective for companies of all sizes to purchase Symantec enterprise security software solutions. The program's two volume license options provide consistent product offerings, discounts and support for the entire range of Symantec solutions.

The Symantec Value Program is a single-purchase, certificate-based plan ideal for small- to mid-sized companies operating within a single country. It offers incentives for orders of as few as one server or 10 desktop licenses, and allows companies to mix-and-match purchases within a product family to increase the discount level. Companies can purchase a software media pack and the number of necessary licenses via one purchase order. The Symantec Elite Program is a simple contractual plan enabling larger companies to leverage their volume purchasing power to achieve greater value from their software license purchases. This program provides companies the choice of two purchasing options. The Commit option allows organizations to maximize their two-year volume discounts with an up-front purchase commitment; the Forecast option helps companies minimize their up-front capital outlay by requiring an initial purchase of 25 percent of the two-year forecast.

Symantec is also introducing Gold Maintenance, a support program providing upgrade insurance, security content updates and Gold Technical Support. With Gold Technical Support customers will receive 24x7 Web support and toll-free telephone support during standard business hours. Gold Maintenance is required with an Elite Program purchase and can be added onto Value Program purchases. The program ensures that customers always have the latest software versions available and the technical support they need effectively utilize Symantec enterprise security solutions. Customers can also choose to upgrade their support to Platinum or Premium Platinum levels for live, round-the-clock coverage, advanced wireless security alerting or dedicated Technical Account Management.

"From July 1, 2002, all new license purchases are supported by the Symantec Security License Program," informs Ambrish Deshpande, Manager-Channel Sales and Marketing. "From June 3, 2002, no new Global License Program contracts has been accepted. Existing contracts, has been honored through the term of each agreement."

The maker of Web development tools offers the Macromedia Volume License Program (MVLP). According to Macromedia, the program offers flexible licensing solutions that help volume customers save time and money.

Whether they are a commercial, government or education customers, the MVLP offers point-based discounts, the ability to mix products, and streamlined account management, making it easy to purchase and track licenses.

The MVLP provides customers with a cumulative points based licensing option with no contract required. Purchase levels allow customers to achieve deeper volume discounts based on the cumulative point total over a rolling eight-quarter (24 months) period.

The MVLP is a points based system. Discount levels are calculated simply by adding the total points on the order with subsequent orders contributing to advancing levels of discount.

Subscriptions: Software subscription entitles the customer to free version upgrades (e.g., 4.0 to 5.0), updates (e.g., 4.1 to 4.3) and bug fixes during the active subscription period. The subscription period of coverage is two years.

Licensing: For tools like Flash MX, Dreamweaver MX, Fireworks MX, Freehand 10.0, Director 8.5 and Authorware 6.0, the licensing is per seat (per desktop). The same applies to Studio i.e. software bundles like Studio MX, E-learning Suite.

Coldfusion MX is available in Professional and Enterprise editions and its licensing is per Server. Jrun 4.0 licensing is per CPU.

For its FLEXCUBE application i-Flex Solutions offers a perpetual license for enterprise-wide usage for a bank/financial institution. The conditions attached to the licensing of FLEXCUBE pertain to the number of authorized users in restricted premises and locations. The license cost is dependent on the areas and the scale of operations of the institution. i-Flex offers various payment options including a deferred payment mode as in ASP rentals.

"We deliver the application to the end-user in both the ownership model as well as 'pay-per-use' ASP rental model," says Atul Gupta, Head-ASP Business Group, i-Flex Solutions. "The pricing for both options is calculated based on the areas of business as well as the volume of business in these areas. Thus the license fee to be paid would vary for small, mid- and top-tier companies depending on its volume of business. In the ownership model license fee is paid upfront and on completion of the implementation, while in the ASP option the application rentals are paid on a recurring basis over a pre-defined period of time based on the usage of the application."

Sun offers uniform licensing policies worldwide, and licenses are not specific to any country. Sun's Operating Systems are bundled with servers with unlimited user license.

For other specific software, server-based licensing, user-based licensing and on-site licensing are the three options available for the customers.

Sun also offers Incentives and discounts on volume-based purchasing.

Brian Pereira can be reached at brianp@networkmagazineindia.com

Note : We regret the omission of several major companies in this story. Many private limited companies refused to reveal their software licensing policies. Others failed to respond to our questionnaire even after being contacted a whole month in advance: Ed.