Management

CAD Manager-Software License Lingo

1 Jul, 2005 By: Robert Green

Decipher the confusing world of software licensing


Last Month, I talked about the metrics of upgrading CAD software in terms of a cost/benefit analysis (http://management.cadalyst.com/0605cadman/). This month, we'll take CAD software upgrading to another level by investigating how licensing terms can affect your planning.

A CAD program is expensive and plays a key role in how your company functions, so it makes good business sense to do your homework and squeeze every bit of cost performance you can from your software.

It's Not Really Your Software

In the good old days, when we purchased software, we bought it with perpetual rights, and then upgrades were offered periodically by the software manufacturer. Software developers sold us software and hoped that we'd upgrade as they created and released new features. In the early years, when new features abounded and bug fixes were fast and furious, upgrading was a no-brainer.

Alas, things have changed. Now a software purchase actually isn't a purchase but more of a complex leasing arrangement. Just read the licensing terms of almost any piece of software and you'll find that the software remains the property of the developer and that you've merely acquired the right to use it according to the developer's list of conditions.

The first thing to be aware of is that because the software isn't yours, it's not a company asset that has value—it's money spent that can't be recovered in any way other than using the software product.

A Leasing Analogy

To help you understand how software licensing works from a financial standpoint, compare leasing a car to licensing CAD software. You may be surprised to see how restrictive a software lease really is.

When you lease a car, the following lease components are almost always present: an inception fee (down payment) is collected that's usually equal to one year of lease payments, a payment schedule (typically monthly) is agreed to for a set duration of the lease term (usually several years at minimum), a maximum use rate (total miles on the car) is determined for the life of the lease, and a buyout price is established so that at the termination of the lease you may elect to purchase the car if you choose.

Almost all car leases give you the power of ownership at the end of the lease. You can choose to purchase the car, trade it in as collateral for another car or just turn it back in instead of paying the buyout price. In all cases, how ownership of the car is transferred at the end of the lease is left up to you, the lessee. During the term of the lease, how you use the car is up to you so long as you meet the financial terms at the end of the lease. The car company won't tell you how or where to drive the car. In general, a car lease is a financial agreement that serves the interests and protects the rights of both parties.

How Software Compares

Now let's contrast a software license with the car lease example to see just how restrictive the software license is.

A software license begins with a lump-sum fee like the car lease, though software inception fees are usually equal to about five years of lease payments (called subscription or support in the software business), rather than a single year of payments as is customary with a car. In theory, whether or not you pay for the subscription service is up to you, but in reality the pricing policy of most software vendors now makes it punitively expensive not to do so because the software company can say your license is not upgradable after a period of time.

For example, Autodesk's current policy is that software more than three releases old is considered nonupgradable unless you pay a renewal fee that's much higher than paying the software subscription in the first place. Though CAD software subscriptions may be called optional, the financial reality is that they really aren't unless you want to risk letting your software licenses lapse.

A software license is said to be perpetual in that as long as you keep paying the subscription fee to keep your license current, you retain the software forever. However, close examination of the license agreement shows that the developer is under no requirement to keep the software in production or even to deliver timely updates in exchange for the subscription fees you pay. There is no "end of lease" in the software lease, and there's no buyout option. The license agreement almost always prohibits you from selling or transferring ownership to any other entity without written permission of the software company.

License Limitations

As you examine the license agreement for your CAD software, you'll likely find a number of other use restrictions not found in the car leasing comparison. To make sure you don't inadvertently violate your license agreement, read through your EULA (end-user license agreement). Be sure to evaluate these topics carefully.

Geographic use restrictions. Think you can use your United States/Canadian software in another country? You may not be able to. We have global software piracy to thank for these sorts of restrictions.

Software audits. Your license may grant the software developer certain rights to audit your compliance with its use terms by specifying the ability to search your company's property or by making you subject to the terms of the BSA (Business Software Alliance), to which many CAD companies belong, along with Adobe, Intuit, Microsoft and others.

Transfer of license. Think you can move a software license to a sister company or subsidiary? Your software license may block such transfers, or require written permission from the software vendor.

When you finish reading your software's EULA terms and consider the stream of money your company pays to retain a software license, the conclusion you have to come to is that software licenses are extremely restrictive rental agreements with very few protections for you, the customer.

License Schemas

What the lawyers take away from us in the form of restrictive software licensing, technology can somewhat restore. With reliable networks, Internet purchase validation and remote activation technology, we can make a smaller number of software licenses serve more people and thus keep costs down. The key words to examine in licensing schemas vary from manufacturer to manufacturer, but can generally be described as follows.

Stand-alone license. A single box of software is installed and used on only one computer. This is where software licensing began and how most small businesses still buy their software. Many CAD managers have historically purchased multiple boxes of software, but then installed a single copy around the entire enterprise to simplify software authorizations and license control.

Activated license. Essentially the same as a stand-alone license, this schema associates the software's serial number to machine biometrics such as operating system files or hard drive volume data. The activated license schema, currently used by manufacturers such as Adobe, Autodesk, Intuit, Microsoft and Symantec, makes it impossible for the CAD manager to install a single copy of software on multiple machines because the activation technology meters the number of activations that can be performed. Though there was substantial end-user resistance to activated license schemas when Intuit and Microsoft started the trend, activation technology is now standard and irreversible, in my opinion.

Multiseat stand-alone. Autodesk introduced this hybrid combination of a single serial number with multiple product activation keys. With a multiseat stand-alone license, the CAD manager can install an application via a network and activate it on any number of machines without messing with network license manager utilities. For CAD managers with many full-time CAD users, this method gets you back to the good old days of a single serial number across multiple machines.

Named-user network. Network-aware installation uses network-based tracking components that require a copy of software to be purchased for every user on the network. Each user who ever logs into the software is a billable seat. Named-user licensing is not common in the PC CAD world, but is quite common for PLM tools such as SAP. This is the least cost-effective way to deploy software because it combines all the costs of stand-alone licenses with all the hassles of network licensing utilities.

Concurrent/floating user network. Network-aware installation tracks the number of users simultaneously logged into the system. The total number of users of the software is irrelevant—only the maximum number logged in at any given time is billable. This is the most cost-effective mode of licensing for most corporate users. For CAD managers with many casual CAD users, the concurrent network licensing schema offers real cost benefits because licenses can be shared. Though some network overhead is introduced, the cost benefits typically outweigh the hassle.

License borrowing. An increasingly common adjunct to concurrent network schemas, a license-borrowing utility lets you take a shared license out of the concurrent pool and place it onto a single computer for dedicated use or for traveling laptop machines. Autodesk network licenses, which use FlexLM, offer license borrowing.

Explain the Consequences

Be sure to discuss these issues with your management team and be sure they're aware of all the terms outlined. In my experience, senior management teams are unaware of how little control they really have over corporate software licensing terms and costs. None of us, CAD managers included, can continue to be ignorant of software licensing issues.

CAD managers must become much more aware of software pricing policies and EULA terms to keep management aware of the true cost of software leasing and to ensure that use terms aren't violated. Be prepared to justify software leasing and upgrading not only on features and ease of use metrics, but also in terms of restrictive licensing and financial conditions.

Robert Green performs CAD programming and consulting throughout the United States and Canada. Reach him at rgreen@greenconsulting.com.


About the Author: Robert Green

Robert Green

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