Software Licensing and Pricing: What are Floating Licenses?

The question of floating licenses has come up quite frequently in the past 3 months. Floating licenses and concurrent user licenses are the same thing. However, the term floating license is more prevalent in developer environments and in the context of server software. The term has been popularized by Macrovision, a software company that provides software publishers with OEM license management products. Users pay for a total number of access not unique licenses per client. Here's why its a benefit to users over named user licensing:

• Delivers cost savings. Users buy what they need to run at maximum capacity instead of an individual license per user which wastes capacity - which leads to the capture of true capacity. Enterprises end up buying less licenses and dealing with less shelfware.
  
• Works best in 24/7 environments. Traditionally, concurrent user licenses have been popular in manufacturing and call centers.Global development organizations, call centers, enterprises with 2 or more shifts, and international enterprises can take advantage of a set number of licenses throughout various time zones and work shifts.
  
• Addresses licensing compliance. A set number of users have access to the system at any point in time. No requirements exist for licensing by an individual user - thus no wasted usage. Often, the process includes automatic license sharing where a license server will allocate a license until the total limit is reached. When a user leaves, a new slot is opened. Some systems have mechanisms to flex up and buy additional licenses on the spot when capacity is reached.

The bottom line for users.
In general, there are minimal drawbacks to users for floating licenses or concurrent users. Vendors who have moved to named user licensing just wanted to charge more. Typical conversion credits should be anywhere from 1 concurrent user license to 2.5 to 4 named user licenses. In the SMB space, Microsoft, Epicor, and Agresso have led the way by maintaining concurrent user licenses, providing SMB's with a cost advantage that many enterprises no longer enjoy.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2008 by R Wang. All rights reserved

News Analysis: IBM Lotus and SAP - The Duet Sequel?

Before 7000 customers and partners at LotusSphere, IBM and SAP revealed "Project Atlantic", the code name for SAP Business Suite and IBM Lotus Notes integration. The initial release is planned to ship in the fourth quarter of 2008 and will be sold by both companies. Some quick thoughts:

• Collaboration environments just the start of things to come for SAP. Access to new collaboration platforms tied to SAP's business processes will potentially provide users with more relevant and just-in-time information. Future releases plan to include support for reporting and analytics, SAP work flows, and the role based nature of Lotus Notes. One could expect some additional collaboration capabilities that match to the new Domino server.
• "Atlantic" represents the next logical step for SAP to support other user experience platforms. IBM and SAP have had a long history of partnerships. Partnership with IBM extends SAP's agnostic information management ecosystem. Previous partnerships with Adobe (i.e. Flex and Interactive Forms) and Microsoft via Duet (i.e. Microsoft Office integration) follow a concerted mission to be omnipresent in the enterprise information workplace. By being present and "seamless", SAP can increase its penetration with information workers. The result - each partner can benefit from the increased adoption and usage. The addition of IBM's Lotus Notes completes the enterprise on-premise arena.

The bottom line
This latest move emphasizes the growing coopetition among the Big 4 software vendors to expand their ecosystems and increase the usage among existing install bases. With agnostic access of information being a key driver to creating relevant role based information, one should expect new partnerships with Web 2.0 user experiences such as Google in the near future. The real question - " Will Oracle follow suit with announcements from Microsoft or IBM? or Has SAP developed a lead?"


(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2008 by R Wang. All rights reserved

News Analysis: SalesForce.com Refines SaaS Pricing and Software Development Tools

Salesforce.com announced a new pay-per-login utility pricing model for the Force.com Platform and the new Development-as-a-Service (DaaS) offering. Some quick thoughts:

• Pricing by login entices casual users. Salesforce.com offers a lower cost alternative to companies that access applications in "the cloud". This new $5 per login pricing allows a users 5 logins per month at list prices. Promotional ricing is at $.99 per login until 2008. Traditional unlimited access pricing will be offered at $50 per user per month.
  
• New pricing model increases pressure on competitors to improve ease of doing business. The SaaS pioneer once again changes the way enterprises access tools and applications. DaaS breaks down the cost barriers to innovation and provides a potentially effective forum for developers, companies, and customers.
• DaaS is to Middleware as SaaS is to applications. With a set of API's and development tools designed for cloud computing, the tools provide users with access to the "stack" of database, logic, and user interface. Developers have full access to a wealth of tools including a new metadata API layer, Code Share, integrated development environment (IDE), and the SandBox.

The bottom line
Vendors too often focus on making their lives easier instead of their customers. Salesforce.com once again proves how software vendors can build customer centric offerings.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2008 by R Wang. All rights reserved

News Analysis: Oracle BEA Amicably Agree On a $8.5B Deal

Oracle raises the ante $1.8B more from the $6.7B initial offer for BEA. It appears a combination of activist shareholder sentiment and cooler heads at both Oracle and BEA led to this amicable resolution. This is an update to the original post on October 12, 2007. The deal remains strategic for Oracle for the following reasons:

• Oracle seeks to dominate middleware. Middleware platforms provide the nexus for software ecosystems. Each vendor's last mile solutions depend on a strong middleware tool and a community of individuals and solutions providers who build and extend the platform for vendors. Whoever owns the future platform, an applistructure on middleware or a SaaS platform like SalesForce will emerge as winners in the post internet era. Acquisition also marginalizes SAP NetWeaver's role as a standalone middleware solution and puts Oracle in direct competition with IBM.
• BEA's customer base remains attractive to Oracle's vertical ambitions. BEA brings high end custom dev clients to the table. With a blue chip base of the best internal IT shops, those in telecom, financial services, and public sector, Oracle or any acquirer could cement its leadership in middleware over IBM, MSFT, and SAP. These custom development shops represent the best and brightest user base and the most lucrative.
• Leverage development in China. From development teams to business alliances, the BEA team has made significant inroads in the China market. Oracle sees this as a great opportunity to bolster its China investment strategy and build lower cost development capacity just like the work it did in India.
• Oracle should expect a fight for BEA but the competition seems to be off guard. Oracle's potential acquisition takes away the last remaining independent major middleware platform provider leaving future competitors without a large install base and a third party supplier. Other vendors like SAP, IBM, and HP need BEA more than Oracle does. SAP's NetWeaver is among the weakest of the 5 major middleware platforms, despite one of the strongest ecosystems. IBM will be threatened by an Oracle dominance in middleware and continued challenge of commoditizing vertical service offerings into software solutions. HP could use this as an entry point to gain traction in the market. SI's who've built a long term strategy around BEA as an independent platform may seek to counter with an acquisition of BEA.
  

The bottom line
Oracle's long term M&A strategy centers on gaining the biggest install base around not only mission critical applications, but also middleware. At the end of the day, its also about selling more database and gaining the largest share of the IT wallet. We expect accelerated consolidation along key battle grounds of middleware platforms such as MDM, BI, Portals, BPM, and other Information Management tools. Don't expect the competitors of Oracle to sit still!

In a normal market, Oracle would expect a fight for BEA but the competition seems to be off guard. Oracle's potential acquisition takes away the last remaining independent major middleware platform provider leaving future competitors without a large install base and a third party supplier. Other vendors like SAP, IBM, and HP need BEA more than Oracle does. SAP's NetWeaver is among the weakest of the 5 major middleware platforms, despite one of the strongest ecosystems. IBM will be threatened by an Oracle dominance in middleware and continued challenge of commoditizing vertical service offerings into software solutions. HP could use this as an entry point to gain traction in the market. SI's who've built a long term strategy around BEA as an independent platform may seek to counter with an acquisition of BEA.

For BEA customers:

• Seek clarification from Oracle about BEA's future roadmap. As Oracle meets with key customers, now's the time to seek clarity of what BEA's role will be in a world of 2 middleware platforms.
• Lock in maintenance agreements now. Call up your sales rep right away if you are paying less than 22% maintenance. You'll want to sign a long term agreement and lock in your current contract conditions, should they be more favorable than Oracle's.
• Expect Oracle to acquire more vendors with BEA backbones. The acquisition opens the door for Oracle to integrate companies with solutions built on BEA. Many of these vendors play in mission critical business apps that service the high end of finance, telecom, insurance, public sector, utility, and
  

For Oracle customers:

• Understand how the BEA product will weave its way into Oracle's Middleware Strategy. Seek clarification on the attributes within BEA that could become common across Oracle applications. PeopleSoft customers may want to find out if they can remain on BEA for middleware or if BEA will only be applied to future acquired verticals. The BEA platform reaches out to more non-Oracle shops and provides a truly open platform for integration with less lock in at the meta data and process levels. As Oracle makes more acquisition of mission critical vertical apps vendors, expect the BEA angle to play a critical role in creating a smoother transition.
• Consider consolidating middleware strategies. Customer with both BEA and Oracle may want to consider a long term consolidation strategy. Long term costs could be lowered through the reduction of redundant licenses.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2008 by R Wang. All rights reserved

Trends: Enterprise Apps in 2008

ENTERPRISE APPS BUDGETS REMAIN RECESSION PROOF
A potential global financial crisis precipitated by the mortgage melt down, globalization pressures, ongoing middle east conflict, and tumultuous political conditions raise concerns about the world economy. Despite such market pessimism, most end users expect 2008 enterprise software budgets to continue to increase in high single to low double digit rates Some key factors behind this growth include:

• Increasing dependence of business strategy on technology. Gone are the days where a business leader could develop a new service or product offering without incurring IT interdependencies. With time to market concerns, requests for agility, and globalization pressures, business leaders expect rapid deployment and responsiveness from future systems. The result - a push to upgrade applications, seek alternative deployment options like SaaS and hosting, and shift last mile solutions to best of breed industry specific providers.
• Continued shift to business process focus. As enterprises move away from functional fiefdoms in geographic silos, new business models require process focused support across distributed environments. Current systems no longer meet these requirements and lack the ability to capture business intelligence by process let alone "play well" with other systems.
  
• Decreased competitive differentiation in the ownership of enterprise apps. Now that everyone has industry best practices via their ERP system, best practices no longer provide significnt competitive advantage. In fact, most enterprises show negative ROI in their apps deployments. Market pressures push leading enterprises to seek vertically oriented and last-mile solutions that support open standards and work in the spirit of SOA.
  

2008 End User Trends
As tectonic shifts continue to impact the software industry, expect the following 10 trends:

• Vendor consolidation will continue. Nothing remains more certain than the increasing pace of acquisitions. While there may not be the same flurry of mega deals in terms of size, expect the Big 4 vendors (i.e. Microsoft, IBM, Oracle, and SAP) to bulk up on areas where they are weak and continue to dominate commoditized infrastructure areas such as middleware, hosting services, office productivity, and content and information management. Expect most other acquisitions to be focused on value added solutions that extend vertical footprints. Weak markets will lead to a drop in valuations among competitors leaving vendors without a good cash flow (e.g. maintenance streams) to acquire competitors on the cheap.
• Buying decisions will continue shift from IT led to business led. While IT teams will still lead most vendor selection efforts, expect business users to play a prominent role in collaborating on requirements and expectations. A growing number business users will eventually lead these initiatives with heavy IT support in validating dependencies and overall constraints.
  
• Business drivers for new investment will align with efficiency and compliance drivers. During economic upturns, the business driver for projects tend to focus on top line growth and strategic investments. Given the pending downturn and increasing regulatory pressure, expect projects to focus on operational efficiency and compliance. Expect commoditized processes to be BPO'd, varying instances to be consolidated, and standardization on middleware platforms such as BEA Weblogic, IBM WebSphere, Microsoft .NET, Oracle Fusion Middleware, and SAP NetWeaver. Expect CFO's to invest in compliance, analytics, and master data management. Expect collaboration projects among stakeholders such as suppliers, customers, and partners to fall under the efficiency camp.
  
• Partner ecosystems will allow best of breed solutions to reemerge. As enterprises march towards vendor standardization for commoditized technologies, expect business uses to seek best of breed or custom solutions for vertical expertise, mission critical business apps, and other last mile solutions. Standardization onto middleware platforms, and SOA based integrations will allow best of breed capabilities to thrive. Users should not expect one vendor to deliver all last mile solutions. Instead expect to focus on the quality of partner solutions and the level of certification rigor.
• Deployment options will expand. Expect vendors to adopt variants of Multi-tenant SaaS, multi-instance software virtualization, and onDemand hosting. Rapid deployment, subscription pricing, and total cost parity will drive vendors to roll out new products architected and priced to compete with SaaS. Hybrid deployments will become more common as new entrants, traditional vendors, and system integrators introduce new software solutions for SaaS and SaaS-like models.
  
• Master data management will shift from a luxury to a necessity. Business drivers such as compliance and efficiency require consistent and accurate master data around financial accounts, customers, suppliers, partners, products, locations, and employees. Process improvements and SOA initiatives will not succeed without a master data management strategy.
• User experience will matter even more. Requirements continue to emphasize ease of use, intuitive experiences, streamlined flow, and easy access to information. Expect better role based paradigms to emerge from traditional vendors as they compete with SaaS and SaaS like upstarts.
  
• Custom apps and app development will reemerge as a key skill set. Powerful new platforms (e.g. middleware tool sets, SaaS development environments, and applistructures) will allow end users to build last mile solutions on top of existing middleware platforms that are supported with each upgrade. SOA architectures will provide the reusable web service components. BPM tools will deliver the both process flexibility and agility necessary to support future requirements.
  
• Software pricing models will bifurcate by market segment. SMB users will continue to seek user based pricing models such as concurrent user and SaaS. Enterprises will seek user based models but be forced by vendors to look at metric based on enterprise agreements in the spirit of "value based" pricing. The real question - value for whom?
• Third party maintenance will gain traction and force vendors to improve value. The notion of a perpetual license remains an oxymoron. Most software buyers an no longer buy software and not expect to pay a continued annuity stream to the vendor. Despite competitive pressures from the largest vendors to stymie third party maintenance vendors, expect growing interest among the largest users to seek alternatives or more value from existing maintenance.

The bottom line for end users.
TRENDS HIGHLIGHT THE NEED FOR A LONG TERM APPS STRATEGY
Apps strategists, CIO's, architects, and IT directors will want to respond to these emerging trends by building a long term apps strategy centered around:

• Aligning project requests to compliance and efficiency drivers.
• Organizing a sustainable governance structure for a 5 to 10 year period
  
• Ensuring a flexible future state business process model
  
• Delivering technology and solutions that meet business drivers and business process flexibility
• Identifying white spaces in the overall technology solution footprint and supplier road map.
  

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2008 by R Wang. All rights reserved