Featured Article from Software Licensing

Software License Schemes Make CFOs Unhappy, Says Report

February 13, 2013

When it comes to software licenses, there are a lot of landmines to negotiate. Fail to buy the correct number of licenses to cover the entire office's operation, and it can cost a business big money. Buy too many for the business' needs, and it's money wasted. Worse yet, it's not always immediately clear just how many licenses need to be purchased, and according to a recent survey from Flexera, the overall complexity of software licensing issues is leaving many chief financial officers (CFOs) disgruntled over how much the company is spending on software licenses.

The report, which went in both functional directions and covered both CFOs and software producers, showed a clear disconnected between the perceived needs of companies and the perceived needs of software makers. While more than 20 percent of businesses felt dissatisfied with licensing agreements related to their customer relationship management (CRM), enterprise resource planning (ERP) and database software, believing them to be inherently overpriced, 24 percent of software producers believed that businesses actually weren't paying enough for their software to reflect its true value.

This disparity illustrates the concerns of businesses that software licenses are getting too complex to be of much use, and how difficult it can be for businesses to successfully navigate the minefield of licenses involved in software. Companies traditionally buy more licenses than they actually need. While this is commonly a waste of money, it's also necessary in the event that software needs change and more licenses are required later on than were needed when the software--and its accompanying stock of licenses--were purchased. This prevents a company from getting hit with unexpected fees during what's known as a "true-up", in which companies pay extra for licenses they should have purchased, but did not.

Extra licenses are difficult to dispose of since software is often licensed in bundles, making the licenses often incompatible with other companies' needs. The revelation that 42 percent of software companies from the Flexera survey had also changed their licensing policies in a bid to raise revenue will likely also raise some ire with already puzzled CFOs.

Interestingly, the growth of cloud-based software may help change this picture around in favor of the beleaguered CFOs. Cloud-based technology often comes with usage-based licenses as opposed to those based on user counts, and with nearly 20 percent of software makers looking to go to usage-based licenses, it may make things a lot easier for CFOs to handle. But this in and of itself may make for significant problems, as some project that eventually companies will have multiple kinds of licenses to deal with, meaning that compliance costs, and monitoring costs, will only increase. The rise of the bring your own device (BYOD) movement and virtualization steps may make an already complex process even more so, and that doesn't help in terms of keeping costs down.

Some more mutual work on the part of software users and software providers would likely help here; of course software users want to save money where they can, and software providers want full value for their own work. But these two policies, seemingly at loggerheads, are also the foundation of the entire value structure. Businesses are willing to pay for software that can save them money elsewhere--a net savings is really all that's required--and software makers can make money providing that software. A little more cooperation on each side's part would likely go a long way.

Edited by Rachel Ramsey
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