The Changing Landscape of Software Licensing & Support- How do Legacy Vendors Adapt?
This is a pretty ominous question to start off a blog, but reality is, it’s an extremely important one to ask. For the past 20+ years that I’ve been selling in the Open Systems sector of IT, most software sales were based on an initial license fee (tiered depending on system type, size, etc.) and an annual support/maintenance fee (typically a percentage of the license cost). In some cases, a five-year cost-of-ownership would yield a support/maintenance fee that was equal (and often greater than) the initial fee paid for the license. This was generally acceptable as it was virtually the same model used in the “legacy” mainframe world. As Open Source has become more mainstream and growth of the “CLOUD” and “as-a-service” solutions become more prevalent, so has the concept of a subscription based model rather than the traditional license and maintenance one.
Some have and will continue to argue that subscription models are more expensive in the long run and that may be true in some cases, but not all. In fact, even in those cases where the TCO over a multi-year period appears to be higher, we’ve found that those are cases where a term license is being used. However, as I explained previously, a term license is actually the property of the vendor at the end of the term. Some OEM’s (including a couple of our own partners) don’t always fully disclose and explain this to the end-users as it typically only comes into play when an upgrade happens. Subscriptions are (for the most part), all encompassing and cover, during the subscription term, not only the use of the software, but all support, upgrades and maintenance as well. The key factor with a subscription is at the end of the term, there’s no further liability. This means that should you decide to no longer use the particular application in production, you no longer have to pay any fee’s to “maintain” it in your environment. In the case of a license, as long as you have something running, you’re obligated (in most cases, whether production or not) to pay support and maintenance.
Let me say at this point, I am generalizing as this is not the case for every OEM, but it is generally accepted practice in our industry. In some cases, it’s also what keeps some software firms afloat through the down years in their cycle.
We at HighVail not only advocate on behalf of our clients for a subscription-based software distribution model, we insist upon it with our partners. It’s far more cost effective for the end-user as it enables building standard models with predictable recurring costs, which provide more flexibility to manage, maintain and scale up or down as your needs evolve and change.
Many of you reading this post are probably thinking this sounds a lot like the “promise” of CLOUD, which means I’ve accomplished part of what I set out to in writing this. CLOUD does bring a lot of “promise” and we’ve been moving in that direction with what we’re calling HighVail’s Managed Solutions Offerings (maybe we need to re-think the name?). By taking advantage of the ability to bundle the solutions we deliver to our clients, we’ve been able to gain (at the very least) cost savings by simplifying part of time consuming and cumbersome processes. But the real goal of this weeks post is to create further awareness of the changes that are occurring in “traditional” IT. It’s not just about the “CLOUD”, whether that be private, public or a hybrid approach. What we see is a desire, a need and often a requirement for agility, both financial as well as technological. An alignment of IT with business goals where partnerships and their leverage are key factors in successfully attaining those goals.
We’ve been very successful to date in delivering managed services in a way that is unique and innovative over traditional approaches. Our programs are designed with the end-user’s business needs in mind. They provide the flexibility needed to get ahead of the curve rather than being delayed by a process that should have little or no bearing on the end goals.
I would love to hear your comments, feedback and perhaps even challenges to the thinking I’ve outlined here. More importantly (well for us at least), we’d be thrilled to be given the opportunity to present and discuss our Managed Solution approach. From the perspective of the clients that use it and our partners that benefit from it, it’s well worth the time. We hope you will feel the same way.
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