Rethinking software licensing

The increasing use of virtualization has blurred the lines between physical and virtual worlds, creating a new issue for buyers and sellers of computer software: Software licensing as we know it is dying--or already dead. Consider how software licensing has traditionally worked. If you bought Windows, you had the right to install and run that operating system on one computer. This model made it is easy to estimate how much to charge per instance so that customers could still afford it and vendors could build a solid business.

But what happens when that one "physical" computer is divided up into tens--or perhaps hundreds--of partitions? These "virtual" computers can be created, destroyed and moved around between "real" (physical) computers in seconds. What happens when applications are running on those virtual partitions? Does it mean that a software vendor's revenues should multiply immediately and proportionally? Things start getting a little weird really fast.

Virtualization software abstracts physical computing resources so they can be used in more efficient ways. That saves on hardware, management and utility costs. The most common understanding of virtualization today actually assumes the ability to run multiple execution environments of some sort on a single piece of hardware.

Why should users have to pay many times more for the same software?

Customers deserve more clarity about the licensing issues surrounding operating system virtualization. This should be a straightforward matter unless software vendors decide to suddenly charge per each virtualized environment. If that occurs, they'll essentially be charging extra for the same bits and bytes of software they have already charged for.

There are murmurings in the industry that some large software vendors are going to change the rules on their customers and start charging based on virtual assets rather than physical assets. Such a virtual licensing model would be anticustomer, anticompetitive and anti-innovation and should be rejected outright by users.

Why should users have to pay many times more for the same software? Virtualization does not make physical servers more powerful or make applications run faster. In the case of the operating-system virtualization approach, it does not even run additional copies of the operating system, and the same copy of application software can be used inside multiple partitions. Operating-system virtualization simply provides complete isolation between groups of users, files, applications and processes and makes them behave as if they are running on separate operating systems and their applications.

In fact, virtualization actually benefits software suppliers because it allows for new usage scenarios and could increase their license revenue--while at the same time decreasing cost per user for their customers.

On the other hand, if software suppliers try to license each virtual server, customers might resist and seek alternatives, such as Linux and other open-source options that cost less and more flexibly address virtualization-based licensing.

Where do we go from here? Information technology buyers need to know that the rules they buy into now will not be changed arbitrarily by their software suppliers, especially without clearly understanding the implications of this changing paradigm. One way to address this is for software vendors to charge only for the useful, measurable "units" that are relevant to the software. That coincidentally might also solve the big challenge of tracking the number of actual licenses in a virtualized world.

Another way is to create completely new usage-based licensing models, where customers can flexibly select the best model for their unique environment. (This is common for database software products, for example.) Either way, vendors should not attempt to immediately multiply software fees from their customers and should consider the long-term implications of any changes. The good news is that change does not happen overnight, so software vendors will not be dramatically and immediately affected, even if they stick with the simple physical pricing policies.

But check your license agreement and negotiate hard with your vendor so your price can't be increased when your usage increases. Remember that vendors with the habit of changing their prices to their benefit will continue doing so in the future. Do you really want to depend on that?