IBM’s Licensing Practices Under Scrutiny
February 9, 2015 Alex Woodie
Buying enterprise software is never easy. But the complexity and heavy-handedness that IBM and the other megavendors bring to software licensing and enforcement hurts everybody involved. That’s the opinion of the Campaign for Clear Licensing, which recently announced that it is going to step up its analysis of Big Blue’s licensing practices.
The Campaign for Clear Licensing (CCL) last month announced that it is stepping up its research of IBM and SAP software licensing strategies in hopes of helping customers navigate overly complex structures and pressuring the vendors into simplifying their policies. To that end, the UK-based firm held a confidential roundtable with the goal of getting customers to come forward about SAP and IBM software licensing and audit practices at their own firms.
CCL chairman and founder Martin Thompson says the new attention his organization will pay IBM and SAP comes in addition to continued focus on Oracle, which has been a target of licensing concerns for many years.
“We’re looking at Oracle, IBM, SAP, and Microsoft. Those are the focuses for 2015,” Thompson tells IT Jungle. “Those four vendors, in the data center especially, are the most difficult to manage, have the most complex licensing, and they [customers] have trouble keeping up basically.”
The causes of licensing complexity are many and varied. In some cases, such as with Oracle and IBM, complexity arises following the acquisitions of smaller software companies that have their own licensing policies. In other instances, complexity is simply a byproduct of a company having such a large variation of products, from server OSes and databases to mobile clients and data centers. IBM and Microsoft suffer from these circumstances, Thompson says.
Moore’s Law also factors in, especially with the rise of multi-core processors and virtualization. Enterprise software companies are often restrictive in allowing their software to run in a virtualized environment, for fear of allowing customers to get the same work out of a given piece of software on a fraction of the number of processors. That stifles the ability of companies to adopt newer technology, and serves as an enticement to consider more flexible cloud-based alternatives.
In the corporate data center, Oracle and IBM are the subject of the most complaints, Thompson says, followed by SAP and Microsoft. “SAP is a different sort of beast, but there’s certainly room for optimization and clearer licensing there,” Thompson says. “Microsoft probably puts the most effort into helping people and supporting them. But their licensing is still incredibly complicated and diverse simply because of the range of platforms they cover.”
The CCL’s top 5 concerns for IBM are:
While its top five concerns for SAP are:
The megavendors use complicated licensing to their advantage, and in some cases leverage it get more money out of customers than they might otherwise with more clear and straightforward licensing. “I like to think–perhaps this is a little naive–that it’s not devious,” says Thompson. “There are sales reps that are doing devious things, but a lot of it is simply the pace of change.”
No matter what the cause, licensing complexity is costly to customers and they don’t want to put up with it anymore. It’s difficult for a large company to stay on top of their software usage and rights without employing dedicated license management software, but the use of such software is lower than what you would think. (What, more software licenses to buy? No thanks.)
When a company makes a mistake due to the complexity and is nabbed in an audit, the consequences are no different than if they’re caught printing copies of MS Office CDs in an alley in Shanghai. “As far as the industry is concerned, they’re all in the same bucket: They’re a pirate,” Thompson says.
The software audit has been a dreaded part of enterprise software licensing for some time, but megavendors still routinely make headlines when auditors turn the screws into their customers. “These companies are not charities. They need to be paid. But they’re using audits as a sales mechanism, not as a way of inducing compliance,” Thompson says. “It’s all about money. The audit teams are purely there to generate cash.”
The CCL is increasing focus on IBM and SAP, but that doesn’t mean Oracle is off the hook. Just the same, there are signs that Oracle may be paying attention to complaints about licensing. “They’ve been doing licensing seminars and attending industry events around licensing,” Thompson says. “They’re showing signs they’re at least listening.”
So, what path do the megavendors have out of this morass of licensing complexity? How can they simultaneously serve their shareholders and their customers? Don’t the megavendors realize that if they can somehow simplify the licensing and make the software easier to buy and deploy, then customers will buy more software, and everybody wins?
That day of realization may be a ways off still. While many observers say it’s inevitable that the likes of IBM, Oracle, SAP, and Microsoft will eventually have no choice but to adopt the same flexible licensing schemes that software as a service (SaaS) have adopted, the profits from squeezing existing customers are too great to pass up.
“If you look at younger more nimble cloud-based competitors, it’s easy to get on board. They’re interested in customer satisfaction. They want customer to stay on the SaaS platform because that means they’ll keep paying. That’s the way it’s going,” Thompson says. “The reason [the megavendors] are auditing so much is they’re having their lunch eaten by younger and more nimble cloud-based competitors.”