Software Licensing Featured Articles

Audit-based Software Licensing on the Way Out

March 14, 2014
By Mae Kowalke, Software Licensing Contributor

Increasingly, audit-based software licensing is not making sense for developers.

There are several problems with audit-based licensing. First, an audit approach is prone human error, which can fail to properly account for use. It is easy for copies of software to end up on additional machines and go uncounted, and for users to under-report usage. This has always been an issue.

With the rise of new methods of software use, however, ensuring the right amount of licensing is also becoming more difficult.

First, there is virtualization—capturing every installation becomes a far trickier game when virtual machines can be turned on and off and spawned easily. Not only is there often a question over whether these virtual machine installs constitute an additional install of the software, they also make it problematic for reporting, even when stipulations are clearly spelled out on the topic of virtualization.

Second, there is the rise of usage-based software models and hosted solutions. The audit method simply does not hold up well in the cloud, as it both is complex and often leads to revenue leakage.

“Many producers have moved from no-enforcement to enforcement and have often seen 20-30 percent increase in revenues by reducing non-compliance as well as by being able to provide different pricing tiers and different pricing models,” noted Mathieu Baissac of Flexera Software in a recent interview for the ITAM Review.

“The reality is that even Microsoft has moved into an enforcement model with the KMS, MAK and other solutions for their new releases of Office and operating systems,” he added.

A better approach than software audits is a proactive software license enforcement policy based around compliance checks and data usage reporting built into applications. With this method, software usage can be captured and reported to both the user and to the developer licensing the software.

In the case of virtualization and the number of installations, this can paint a true picture of use that can then be followed up with the correct licensing scheme. And, for hosted and per-use licensing, this can enable accurate billing.

“This is a common approach with producers who move from no-enforcement to enforcement,” said Baissac. “[It] introduces licensing with a gentler enforcement approach generally, and then once customers are comfortable with this approach greater enforcement, for instance, for particular geographies and/or certain types of customers.”

The use of third-party license management solutions, such as that offered by Flexera, make it relatively easy for developers to properly capture application usage and offer a range of licensing options once usage is captured.

Such platforms can also help developers keep their software compliant and ensure that updates and upgrades are delivery consistently to all customers, all while enforcing license agreements.

“When enforcement is built into the software products rather than left to enterprises to manage, customers no longer have to worry about ‘discovering the applications,’ nor monitoring usage and ensuring it complies with their licensing agreements,” said Baissac.

Edited by Blaise McNamee

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