Rationalising software licencing in the virtual age

It was only a few weeks ago that we raised the topic of software licencing and how complex and difficult it can be to keep on top of the day-to-day practicalities of managing licences and maintaining compliance. This was brought home to me yet again in a conversation I had last week.

I was speaking with the IT director of a mid-size company in the insurance sector that has recently undertaken a consolidation effort. As a result the company has reduced tens of sites down to just two and has rationalised the back end systems infrastructure from a kaleidoscope of architectures down to a simpler mix of x86 servers coupled with a single high-end Unix platform running business-critical applications.

The organisation concerned serves thousands of brokers in different industries, and to better enable this all the applications and services are now virtualised so that the infrastructure is flexible enough to cope with unpredictable or ’bursty’ application usage.

Challenging multi-year transformation

One of the things that struck a chord in the conversation was that although the transformation was a challenging multi-year effort, it was possible for the IT team to conceptualise and understand the technical aspects of both the hardware and the software. When it came to the commercial side of things, however, it was a whole different story.

While the hardware was purchased and managed by the IT team, it was felt that software licencing was too complex for this to be practical. With the legal as well as commercial implications, it was not feasible nor desirable for this to be a core competence of IT. To solve the problem, a third-party licencing specialist was enlisted to handle the negotiations, management, compliance and optimisation of licensing arrangements. This is an approach that is often overlooked, or even resisted, when it comes to keeping on top of licence management.

Mindset of software suppliers – an additional challenge

Beyond the inherent complexity, the mindset of some software suppliers was considered to be an additional challenge of the project, a challenge that several of our surveys have highlighted in recent years. The IT director felt that the technology has advanced rapidly to allow a more consolidated, simplified and manageable IT infrastructure to be created. Yet many software suppliers have been dragging their feet on the commercial side, preferring to exploit the mismatch between traditional licensing models and modern systems architectures rather than dealing with it properly.

There are exceptions, of course, and some suppliers have been quick to evolve their thinking, but many are still not making it easy. Variation between suppliers then adds to the problem, making it very difficult to create standardised virtual systems that can be deployed predictably anywhere in the datacentre. These restrictive terms often force architectural workarounds to be developed.

An example given was the need to create a server pool dedicated only to running databases because the licencing meant that if a single virtual machine running a database was deployed on the server, the entire physical server needed to be licenced. This had the net effect of tying supported database workloads to a fixed pool of dedicated servers. This can work well for static consolidation and predictable workloads, but hardly fits the vision of a dynamic private cloud that software suppliers are shouting about.

Removing software complexity

The strategy taken for this project was to remove a lot of software complexity. They used the consolidation exercise to rethink and simplify the software portfolio required to make up the required IT services. In this case they reduced the number of supported database platforms provided as a standard service to the business down to just two major versions which were made available as a pool. This had the effect of encouraging the business application owners to ensure that their applications worked on the supported platforms, as requiring their own was usually five to ten times more costly.

This rationalisation strategy, while simple in concept, proved to be a challenge. It required a determined mindset and extended period to come to fruition. Most companies will not need to go to such an extreme and have a forklift upgrade of their existing systems and applications. Much of the benefit can start to be realised by applying the strategy to new deployments and letting it grow naturally, provided there is enough willpower to keep to the strategy over time.

Risk of lock-in

One of the issues with rationalising licencing is that it places a concentrated part of the IT spend in the hands of fewer suppliers, with the potential risk of higher dependency or even lock-in. Managing this will be a major factor in the long-term value delivered to the business. Before embarking on a rationalisation effort, it would be useful to classify the different software by how critical and important it is to the business, what the unique attributes of the solution are and whether they are really needed, or worth the cost, in practice. This should help to give a good steer in terms of the suppliers it makes sense to commit to, and those that can be worked with or bypassed if the need arises.

Based on the results of this assessment, it might then be useful to spend some time focusing on getting to grips with the software suppliers’ sales strategies, how they fit with the needs of your business and how IT is changing to meet them.

Aggressive suppliers

Some will be quite aggressive in trying to get you to maintain your spend or buy more, with a focus on their business rather than yours. This type of approach often results in inflexible agreements that scale in one way, namely up. Often software that is no longer in use is tied into the overall agreement and it is difficult to remove without an impact on the terms of core offerings. Unless the supplier has some unique technology that business absolutely needs in order to function, it might be best to choose a more flexible alternative.

Other suppliers will be more progressive, and will work with you to get maximum use out of the software that you purchase from them. Their business philosophy is more one of long-term mutual value, and this is often reflective of their performance metrics and the way they compensate their staff. This value-oriented approach is much more in tune with the dynamic and flexible nature of virtualised systems and services, allowing the budget to be allocated and re-allocated to where it is needed and best used rather than trying to forecast and predict the way the business will grow years in advance.

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