CIOs Guide to Licensing Models

The Future of Software licensing: Beyond Per-Seat and Into the Library

Are you tired of seeing your software budget balloon while getting nickel-and-dimed for features you barely use? You’re not alone. A recent Forrester report revealed that nearly 80% of U.S. organizations experienced increased software costs last year, and the rise of generative AI is only expected to exacerbate the problem.

CIOs are now under immense pressure to find innovative ways to optimize software spending without sacrificing essential tools. the answer might lie in rethinking software licensing models.

Why Licensing Models Matter More Than you think

The board might glaze over when you mention licensing agreements, but they shouldn’t.Complex, outdated licensing models can bleed an organization dry, both financially and technologically.It’s time to ditch the “one-size-fits-all” approach and explore emerging alternatives.

One promising model mimics a library system, challenging the customary per-seat approach and potentially revolutionizing how companies access and pay for software.

The Per-Seat Model: A relic of the Past?

The per-seat model,also known as named user licensing,has its place. It effectively works well when a limited number of individuals require specific tools with individualized attributes or access controls, such as in enterprise resource planning (ERP) or customer relationship management (CRM) systems.

However, extending this model to domains like engineering simulation can be problematic. Engineers often require a diverse suite of tools for different purposes and stages of design. Similarly,finance teams use a variety of applications,including CRMs,databases,and budgeting tools,not just a single spreadsheet app.

And let’s not forget the hardware: cloud resources, high-performance computing (HPC) power, mainframes, and more. The per-seat model often fails to account for these additional costs.

For the wrong tools, named user licensing is like leaving a car running all the time, even when it’s not in use. It can also create bottlenecks if only one person has access to a critical piece of software.

Token-Based Systems: A Step in the Right Direction

Consumption-based licensing models, where users draw from a shared pool of resources (tokens or credits), offer an betterment. These models consolidate resources under a single framework, allowing users to switch between tools as needed.They also provide better visibility into costs and usage.

This is a popular cloud licensing model, but it’s not without its drawbacks. Cloud costs are still rising, and the “tank” of resources can be depleted quickly.What happens if someone accidentally runs a compute job overnight and drains your entire fuel supply? You have to buy more, and there’s no guarantee it won’t happen again.

quick Fact: According to a recent study, over 60% of companies using consumption-based models have experienced unexpected cost overruns.

Value-Based Models: Promising, But Complex

Value-based licensing is a newer concept that ties software costs to business outcomes. The idea is that you only pay for the benefits you receive. This model works well for solutions where business benefits can be easily quantified.

However, value can be subjective and difficult to measure. Implementing and scaling value-based models can be challenging, potentially extending the sales cycle and making each transaction unique and contentious.

The Library Model: A Hybrid Approach for the Future

The flexible-hybrid model, which combines consumption-based and value-based licensing with a predetermined capacity commitment, is gaining traction. Think of it as a community e-library, where users can check out books (software) when needed and return them when they’re finished.

This model allows teams to access a variety of tools without exceeding a predetermined budget. The only decision is how many “books” each team member can borrow at once.

With flexible-hybrid models, CIOs can enjoy the best of both worlds: software and hardware resources in a single, shared habitat, seamless access to tools when needed, and a built-in cost control mechanism.

Benefits of the Library Model:

• Predictable costs
• Flexible access to a wide range of tools
• Improved resource utilization
• Reduced risk of overspending

Expert Tip: When negotiating with software vendors, ask about flexible-hybrid licensing options and be prepared to provide data on your organization’s software usage patterns.

The Road Ahead: Embracing Versatility and Control

According to research from ITAM, over 76% of organizations consider themselves “over-licensed.” emerging software licensing models like the library model can help address this issue.

However, widespread adoption will require CIOs to critically evaluate their existing licensing agreements and demand more flexible options from their vendors.While AI is a top priority for many businesses, securing AI tools that are accessible to everyone and within budget should be equally crucial.

The future of software licensing is about empowering organizations with the flexibility and control they need to thrive in an increasingly complex technological landscape. It’s time to move beyond the per-seat model and embrace a more clever,cost-effective approach.

Is the Per-Seat Software License Dead? Exploring the “Library Model” with Expert Anya Sharma

Time.news: Welcome, Anya. Thanks for joining us today to discuss the evolving world of software licensing. A recent Forrester report suggests software costs are skyrocketing. Is this something you’re seeing across the industry?

Anya Sharma: Absolutely. The increasing complexity of software needs coupled with traditional licensing models is creating a perfect storm for budget overruns. Many organizations are feeling the pinch, especially with the rise of resource-intensive technologies like generative AI.

Time.news: The article highlights the limitations of the traditional per-seat model. Can you elaborate on why it’s becoming less effective?

Anya Sharma: The per-seat model, or named user licensing, definately has its place, especially for tools requiring individualized access, like ERP or CRM systems. However,it becomes problematic when applied broadly. Think about an engineering team needing a range of specialized tools or a finance team using multiple applications such as CRMs, databases and budgeting tools. Paying for each application, per user, becomes incredibly wasteful. It’s like paying for a car to sit idle when it’s not needed.Plus, it doesn’t account for the costs of cloud resources or HPC power.

Time.news: So, what are the alternatives? The article mentions token-based and value-based models.

Anya Sharma: Token-based systems, which use a consumption-based approach, offer some advancement. They allow users to draw from a shared pool of resources, providing greater flexibility. However, they can be unpredictable. Remember that over 60% of companies can experience unexpected cost overruns with consumption-based models. Value-based models,which tie costs to business outcomes,are intriguing but can be complex to implement due to the subjective nature of value.

Time.news: The article champions a “library model” for software licensing. What exactly is that, and why is it considered a promising solution?

Anya Sharma: The “library model” is essentially a flexible-hybrid approach. It combines elements of consumption-based and value-based licensing with a predetermined capacity commitment.The “library model” enables access to a wide range of software and hardware resources without exceeding a set budget. you have a virtual library of software, and users “borrow” what they need and “return” it when finished.

Time.news: What are the key benefits of this “library model”?

Anya Sharma: The benefits are numerous. First, it offers predictable costs. Organizations can budget effectively knowing thier capacity commitment. Second, it provides flexible access to a wide range of tools, empowering teams to use the right software for the task at hand.Third, it leads to improved resource utilization by preventing software from sitting idle. And it reduces the risk of overspending by providing built-in cost controls.

Time.news: This sounds great in theory, but what advice would you give to cios considering this “library model” or flexible-hybrid software licensing?

Anya Sharma: The first step is to critically evaluate your existing software licensing agreements and identify areas where you’re over-licensed. Collect and analyze your organization’s software usage data. This information is crucial when negotiating with software vendors. Don’t hesitate to ask vendors about flexible-hybrid options.Be proactive in demanding more adaptable solutions.Remember,securing accessible,within-budget AI tools,like other software,requires careful consideration of licensing models.

Time.news: Are there specific types of organizations or industries that would benefit most from this model?

Anya Sharma: Industries that rely on a diverse suite of software tools, such as engineering, finance, and research, are prime candidates. Organizations employing cloud resources and high-performance computing can also see critically important savings and efficiency gains. But honestly,any organization struggling with escalating software costs should explore whether the “library model” could address their Software Licensing needs.

Time.news: Anya, thank you for sharing your insights. Any last thoughts on the future of Software Licensing?

Anya Sharma: The future of software licensing is about empowering organizations with the flexibility and control they need to thrive. It’s about moving beyond rigid, outdated models and embracing an clever, cost-effective approach that aligns with business needs. The “library model” is one piece of the puzzle, but the key is to remain adaptable and proactive in seeking out the best solutions for your organization.