Blog Entry

Apr 29

Software Monetization and the Cloud: Compliance is the Key!

Cloud is changing the way Software Publishers (ISVs) are monetizing their offerings. An increasing amount of workload is now moving from on-premise to cloud. This transition is driven by two factors: what customers and/or competition are dictating, and the need for ISVs to expand their reach to new segments. As a result, more and more ISVs are making the inevitable move to cloud.

With all its benefits, cloud also brings along the challenges of enforcement and compliance. If not managed properly, it could lead to significant loss of revenue and drive up costs. Virtualization, the underlying technology behind cloud, makes it easy to clone machine images containing licensed software. Whether unintentional or driven by malicious intent, cloning creates the risk of non-compliance and revenue leakage. It creates problems for ISVs and enterprises alike as it becomes costly to track and enforce compliance. In the event customers fail to meet the software licensing compliance, they risk facing penalties.

The root of the issue is that the license resides on a machine image that can be cloned and not easily tracked. Traditionally, ISVs have taken a “detect and deny” approach that prevents their software from running in virtual environments. This of course prevents enterprises from moving to the cloud and is considered a roadblock to cloud adoption.

Recently, cloud licensing solutions have been developed that eliminate this issue by moving the license from the local machine or local network license manager to the cloud. The service then has the ability to manage the licenses remotely. This makes the transition to the cloud much smoother. Licenses are obtained from these solutions on a need basis and are time limited. Therefore, if cloning happens, only a small time slice of the license gets cloned, which must then be refreshed periodically. Request for refresh is granted or denied based on the license terms which becomes part of the cost of the  true consumption of license. In addition, with the remote control capabilities, in a matter of minutes licenses can be revoked for serious offenders preventing any further usage of the software.

Newer cloud solutions also offer metered models, i.e. prepaid and postpaid, where there is no need for node-locking and customers are charged based on the actual usage. In such scenarios the number of cloned instances doesn’t lead to loss of compliance as usage is always reported and shows up in the total consumption.

Modern solutions also make it easy for ISVs and customers to set alerts and track software usage in real time. The goal is to improve access to and reporting of software usage, which can improve compliance. Other benefits include access to analytical data for a better understanding of the product usage within the enterprise.

ISVs also get the additional benefit of consolidated reporting across their entire customer base. Not only do they get significant insight on the product and feature usage but they also significantly reduce the cost to track and enforce compliance through one central platform.