Enterprises unprepared for software licence complexities of virtualisation

Tensions between application producers and enterprises around virtualisation are likely to heat up. As software vendors and intelligent device manufacturers change their licencing rules to profit from virtualisation, the latest IDC/Flexera Software report, based on a survey of both application producers (software vendors and intelligent device manufacturers) and enterprises, shows that 42% of application producers plan on changing their licencing/compliance policies for virtualisation. At the same time, alarmingly, a large percentage of enterprises, 39%, either don't manage their software licences at all in virtual environments, or they do so manually.
This lack of correlation is likely to increase tensions between buyers and sellers of enterprise software as more organisations are found to be out of compliance with virtualisation licencing rules, resulting in steeper "true-up" or cost balancing penalties.

The new Flexera Software 2013-14 Key Trends in Software Pricing & Licensing Report is prepared jointly with analyst firm IDC, and the ninth annual assessment of key issues and trends on the minds of software vendors, intelligent device manufacturers, and enterprise IT executives and managers.

"Virtualisation adds great complexity around software licencing and creates new compliance challenges for customers," said Amy Konary, Research Vice President - Software Licencing and Provisioning at IDC. "We've seen instances in which the savings that organisations anticipate through virtualisation disappear, and costs actually increase due to higher licencing fees. Smart organisations should be aware of the licencing cost implications of virtualisation and implement software licence management best practices and technologies to help reduce that risk and make more informed decisions."

According to the survey report, application producers are rapidly evolving their software pricing and licencing strategies - but they are largely unaware of the difficulties their enterprise customers have managing software entitlements. 33% of application producers said they've changed their software pricing and licencing models in the past 18-24 months. 48% said their primary reasons for making these changes were to generate more revenue. Yet in assessing the impact of those changes on their customers, almost two-thirds of application producers - 59% -- say it is not difficult for enterprises to determine which products they are entitled to use.

In fact, enterprises experience tremendous difficulties managing their entitlements and staying in compliance. As reported in the previous Key Trends in Software Pricing and Licensing Survey on Software Licence Audits: Costs & Risks to Enterprises, 85% of organisations are out of compliance with their software licence agreements. With 39% of enterprises in today's survey reporting that they either don't manage their virtualised software licences, or they do so manually - software vendor audits will likely yield increased findings of software license non-compliance - fuelling tensions between application producers and their customers.

"There is already some strain on the producer/enterprise relationship. No organisation enjoys the disruption of having to defend against a vendor's software licence audit or paying a true-up fee," said Jim Ryan, Chief Operating Officer at Flexera Software. "Application producers need to understand how challenging it is for their well-intentioned customers to remain in compliance with their licencing terms. And prudent enterprises must understand that virtualisation adds a whole new layer of licence compliance risk exposure, requiring them to be proactive about implementing industry best practices and technology to manage those risks."