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Issue of November 2006 

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A tangled web of licencing

The varieties of software licences out there must outnumber the number of ice-cream flavours sold by Baskin Robbins. Dominic K explores the intricacies of enterprise software licencing.

Software licencing grants a company permission to do things with computer software. Some models are based on the number of machines on which a licenced program can run, whereas others are based on the number of people using an application. Licencing modes vary from vendor to vendor and solution to solution. The model can even change depending on how a solution is bundled. Usually vendors provide software based on the named user or device, or per processor (which usually includes per core licencing). In select cases, vendors also offer site or even unlimited licences for a specific duration.

Network licencing

Licence agreements and related pricing must be consistent with current network environments. The proliferation of networks is causing licencing practices to evolve at a faster pace to accommodate the needs of both users and vendors. Current primary network licences are applicable for concurrent use, site, enterprise and nodes. Concurrent user licences authorise a specified number of users to access and execute licenced software at any time. Site licences authorise usage at a single site but are losing out to enterprise licences that cover all sites within a corporation because of the popularity of virtual computing environments. Node licences are losing importance in a client/server environment because in this model software may be used only on a specified workstation from which a user logs on to access and execute the application. In an era when users are quite likely to log in from home or on the road, this obviously doesn’t work too well.

Enterprise asset management software allows vendors to be more flexible in licencing arrangements. Asset management software monitors and restricts the number of users or clients who may access and execute the application software at any point of time, thereby ensuring compliance with the organisation’s licences. This is important because a user pays only for his actual usage, and vendors can monitor usage to protect their intellectual property rights.

Then there are innovative approaches which have been welcomed by users with open arms; currency-based licences fall under this category. This type of licencing provides a user with a specified monetary amount of software licences, i.e., licences for different business application software so long as the total value in use at a given time is less than a pre-set limit.

Licencing model Description
GNU General Public Licence Most software licences curb your freedom to share and change an application. In stark contrast, the GNU General Public Licence (GPL) guarantees your freedom to share and change free software-to make sure that software is free for all users. The GPL applies to the Free Software Foundation's (FSF) software and to any other program whose authors commit to using it.
Sun Public Licence Sun's Public Licence is a software licence that applies to some open source software released by Sun Microsystems (such as NetBeans before the 5.5 version). It has been approved by the FSF as a free software licence, and by the Open Source Initiative (OSI) as an open source licence. It is derived from the Mozilla Public Licence.
IBM Public Licence The IBM Public Licence is a free software/open-source software licence used by IBM. It is confirmed by the OSI and FSF. It differs from the GNU GPL insofar as it places the liability on the publisher or distributor of the licenced program. This is to facilitate commercial use of programs without placing the contributor in risk of liability. Its proponents say it has a clearer definition of who's responsible for the program than the GPL has.
GNU LGPL The GNU Lesser General Public Licence (formerly the GNU Library General Public Licence) is a free software licence published by the FSF. It was designed as a compromise between the strong-copyleft GNU GPL and simple permissive licences such as the BSD licences and the MIT Licence. The GNU LGPL was written in 1991 (and updated in 1999) by Richard Stallman, with legal advice from Eben Moglen.
The Apache Licence This is a free software or open source licence authored by The Apache Software Foundation (ASF). All software produced by the ASF or any of its projects or subjects is licenced according to the terms of the Apache Licence. Some non-ASF software is licenced using this licence as well.
Artistic Licence The Artistic Licence is a sotware licence used for certain free software packages, most notably standard Perl implementation, most of CPAN modules, and Parrot, which are dual-licenced under the Artistic Licence and the GNU GPL. It was written by Larry Wall, the creator of Perl.
Academic Free Licence The AFL is an open source or free software licence written in 2002 by Lawrence Rosen, general counsel of the OSI. This AFL applies to any original work of authorship whose owner has placed a defined licencing notice adjacent to the copyright notice for an original work.

OS licencing

Microsoft’s licences are ‘non-concurrent.’ In other words, if a company is running Office on 100 computers, but no more than 40 users run Office at the same time, you still need to buy 100 licences.

Microsoft offers a volume-licencing programme as part of enterprise subscription agreements. These programmes are targeted at large organisations with 250 or more desktop PCs. To an enterprise subscription agreement customer, Microsoft offers products such as Microsoft Office Professional Plus, Microsoft Office Enterprise, Microsoft Windows Vista Enterprise, Core CAL Suite, and Enterprise CAL Suite at volume pricing for a duration of three years.

Putting the software pedal to the metal
It costs more to fix problems once the software has been released to the public than while it is being crafted. The same holds true for fixing software before it is deployed, say, during a pilot. That's why it is imperative that software be tested thoroughly by an enterprise's IT team before it is released for deployment. Says Unni Krishnan, CTO, Solutions & Technology Team, Shopper's Stop, "Generally, wherever possible, we prefer to get the software in advance and internally test the application against business requirements, operational constraints, and solution specifications. In some cases we prefer to use the pilot project route where the vendor consents to give us the product subject to a successful pilot completion."

Procedures followed to test and evaluate software in order to ensure that the software satisfies the licencee's requirement are detailed below. (Courtesy: Adobe)
Testing Type Description
Compatibility testing Compatibility testing ensures that an application is compatible with the operating system and hardware platform on which a company intends to deploy it. Sometimes a company may want the assurance that the software will also run on another platform that it may migrate to in the future. Or a company may want to run the same software on multiple platforms. Compatibility testing can be performed manually or be driven by an automated functional or regression test suite.
Conformance testing Conformance testing verifies an implementation to certify that it complies with industry standards. Tests are created that check an implementation vis--vis portability, inter-operability and compatibility with a defined standard.
Functional testing Functional testing verifies that an application is performing as per the specs laid down, and that it is feature-complete. This entails a series of tests which perform a feature-by-feature validation of behaviour using a wide range of normal and erroneous input data including testing the product's user interface, APIs, database management, security, installation, networking capabilities, etc. Testing can be performed on an automated or manual basis using black box or white box methodologies.
Performance testing Performance testing is employed to understand an application's scalability factor, or to benchmark performance in an environment of third-party products such as servers and middleware that are being evaluated. This sort of testing is particularly useful to identify performance bottlenecks in applications that will run in real-time or near real-time environments.

The open source factor

Open source encompasses a variety of licencing schemes. In almost all cases open source software is protected by copyright law, and the rights owner lets others use and distribute the software under terms of a particular licence; GPL, LGPL, BSD licence and Apache licence are some of the better-known ones.

Sachin Dabir

Open source licencing models give users access to the source-code used to create the software. Where they differ is with regard to what a user can do with the source-code. In most cases, a user can modify the software, use the modified version, and distribute it to boot. A user can inform the original owners of the changes so that they can add to it in the next release.

Informs Sachin Dabir, Head, Enterprise Sales, Red Hat India, “The most important criterion for CIOs is predictability of costs. Their budgets are finite. If there are hidden costs or additional costs due to licencing policies or technical requirements, then CIOs have a major problem. For this reason it is imperative that they work on a model which gives them visibility into what a solution will cost over a period of, say, three to five years. This is provided by a subscription model.”

Licencing enterprise-wide applications

Merwin Fernandes

Some prevalent licencing models for enterprise software which are followed globally are based on a two-axes mode. On one axis lies various solutions and modules of enterprise solutions that are licenced depending on the requirement of the client. On the other axis you find that the licencing of these solutions or modules is done based on various quantitative parameters.

In case of Finacle from Infosys, you will find the core banking solution, CRM solution, treasury solution, consumer e-banking solution and modules such as retail banking, corporate banking, lending within core banking or securities, money markets, and forex with treasury on the first axis.

On the other axis a Finacle licence is extended based on defined parameters such as named users and customer accounts. Explains Merwin Fernandes, Vice-president, Business Head, Finacle, “Period-based or perpetual licencing is a third element to the licencing model. Another emerging concept in enterprise licencing is usage-based pricing under the ‘software as a service’ umbrella. Here, pricing could be based on solutions, modules and parameters such as the number and type of transactions.”

On the other hand, Adobe’s licencing models are per CPU, per user, per form and per document.

When software fails

System failures are rare but they do occur. Regarding software failure Fernandes says, “These could be on account of changing requirements and project scope, or lack of adequate top management commitment and involvement in the project. They could also be because of inadequate risk assessment and risk mitigation plans, having unrealistic expectations, inadequate project management and/or implementation capabilities and services on the part of the vendor, and so on.”

As various components in a system interact, the failure of one component might introduce one or more faults in another. For example, parties to licencing arrangements often fail to describe adequately the actual software being licenced, or ignore the impact of organisational changes, or leave unresolved rights with respect to future developments or enhancements to the software. New packaging delivery methods will continue to affect licencing and updating practices, as will customer demand for greater flexibility in licencing.

Points to consider

While models like the number of users are best suited in a consolidated and stable industry, models like customer accounts-based pricing are best suited for a rapidly growing bank

The optimum model for an organisation depends on its requirements in terms of solutions and modules; current quantitative usage factors such as the number of users and number of customer accounts; and future growth plans. While models like the number of users are best suited in a consolidated and stable industry, models like customer accounts-based pricing are best suited for a rapidly growing bank.

Essentially, the question is whether the organisation concerned finds it beneficial to make a large upfront investment and amortise it, or have a model whereby it pays as it grows. The third option CIOs may consider is to not have any capital expenditure at all, but pay based on usage through a utility pricing model which is directly accounted for under the profit and loss statement.

It is advisable to introduce project control, and selection accuracy is a must to maintain comprehensive and accurate business software data in order to attain appropriate and objective selection results. The goal, as always, is a complete implementation according to organisational needs and parameters.

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