Surf the Software Licensing Tsunami, Part 2

The rental software licensing model has benefits, but in order to make wise decisions for your company, you must also learn about its potential problems.

In the previous edition of the CAD Manager’s Newsletter, we discussed the tsunami-like effect of software companies transitioning from perpetual licensing to rental usage models. I included a checklist of action items to perform so you can be ready. (If you haven’t read it yet, you may wish to do so before continuing.)

While rental software will certainly change the costs of our software tools, it’ll also change how we administer and run those tools from an IT point of view. In this edition, we’ll explore some of those changes so you’ll be prepared to survive — and thrive — in the coming year(s). Here goes.

Licensing Terms Change

With traditional software, you buy the license, then purchase an annual maintenance agreement to receive updates. At the end of the year, you can choose to renew the maintenance agreement — or not — based on your own determination of value. In this mode of operation, you only worry about your software licensing situation once per year, and even if you decide not to renew a maintenance agreement, your software will still run.

How might this scenario change with rental? Let’s ponder some possible complications:

• Multiple license periods. Software companies are now offering rental periods of a year, three months, and even one month, in some cases. While this approach does allow control for staffing up/down as project load dictates, it also makes license management a much more time-consuming problem for CAD managers because there are more license types to track, and licensing may need to be addressed more frequently than in the past.
• Token tracking. Some software products use a “token” or usage-based system to bill for software when actually used. The typical implementation is that a fixed number of tokens are purchased, which are then debited as software is used. Under this licensing system, CAD managers must constantly track token usage, which is a hassle. It can also be hard to control costs with token-based systems, unless users are restricted from use — which is yet another CAD management hassle.
• Software time-outs. With a variety of rental periods and usage tokens for various products, it becomes a real chore to keep track of how many licenses/uses are available at any given time. And if you mess up and miss a renewal deadline, the software simply stops running, which can be a serious problem for your users.

Do you have a good feel for how these factors may impact your company, based on your software product usage and software company policies? If you haven’t considered these potential issues already, you need to — now!

Software Goes to the Cloud

Beyond the change to rental, imagine a software company moving away from their traditional “install it on your own machine” software tools and replacing them with a cloud-based software tool instead. This evolution from local to cloud-based software is already well under way by Autodesk (the 360 series of products) and Bentley (Cloud Services Subscriptions) to name just two of the major companies moving in this direction.

To grasp the magnitude of how this could change your CAD environment, consider these questions:

• How will this affect our Internet bandwidth needs? More cloud-based tools means more Internet bandwidth will be required, and that can be very costly for large companies with many users.
• Where will the design data be housed? If the design data is to be housed on the cloud server where the application is hosted, then security will be a huge concern. If the design data is not housed on the cloud server, then even more Internet bandwidth will be used as the data is passed to the cloud application and back down. Either way, dealing with cloud-hosted applications requires strategic and/or budgetary planning.
• Where will the licensing files reside? Will your company have to maintain licensing servers in your own network, or will the cloud-based software company maintain it?
• What happens if your Internet fails? With locally installed software, you can at least keep working during Internet outages, but with cloud-hosted software or licensing, all work will stop.

What do all these changes have in common? The need for much more IT involvement, because factors including data security policies, Internet bandwidth, network outages, and provisioning license servers are outside the purview of most CAD managers.

Per-User Licenses Change Usage Patterns

Another important consideration in software’s transition to rental/cloud delivery models is the move toward a named-user licensing model. In plain English, per-user licensing means the network login parameters of each user will dictate whether they have a valid CAD license or not. In contrast, perpetual software licenses are simply authorized based on a serial number, and any user sitting at the authorized machine can use it.

Here’s where it gets interesting: If individual users must each have a unique license, rather than sharing them, then costs will go way up. To avoid these new licensing charges, many companies may choose to have generic login user accounts so that multiple users could utilize one software license on a shared machine or for travelling. Another way around the problem would be to use Remote Desktop Connection to log into a remote machine managed by the IT department.

Given how cheap hardware is now and how comparatively expensive rental software will be, it becomes easy to see that manipulating user logins will be the cost-effective way to get around renting more software — thus requiring even more IT involvement just to secure and run CAD.

What Management Thinks

Now envision yourself going to your senior management team and saying, “I need thousands of dollars just to upgrade our software to a cloud-based Internet mode of operation, and thousands more to get our Internet bandwidth high enough to run it.” That is not a discussion I want to have, and most CAD managers I know don't want to deal with it either. Senior management staffs will not see a compelling reason to spend more money to get the same degree of functionality while taking on more IT hassles.

The time to have a conversation with your senior management and IT teams about these types of changes is now, not when the bill comes due. You can tell them you don't understand all the implications yet, but tell them what you do know at this point. Don't be ashamed to say that you're not an accountant or an IT manager, and therefore you don't necessarily understand how all this will play out.

Your Action Items

To get ready for this conversation, assemble the following information:

• Understand all your software delivery requirements for all projects. This way you will know which versions of CAD software you must have to meet contractual requirements, and that will dictate licensing needs.
• Analyze your user accounts to identify opportunities where multiple users could share software licenses to economize. This will require homework on your part and coordination with IT.
• Have an approximate game plan for moving to any cloud-based services. Only your IT department can verify whether you have adequate Internet bandwidth to run all these tools and plan for purchasing more if required.
• Create a spreadsheet that adds it all up. The good news is that your software resellers will help you understand the parameters and pull a spreadsheet together. After all, they want to do business with you.

Summing Up

As you read through all the possible licensing scenarios that could impact your company, you should begin to realize how much planning will be required. You may also see how much more you need to learn about the accounting and IT impact these changes could hold for you. And while you may not enjoy the prospects of these changes, you’re responsible for helping your company navigate though them.

The time for planning is now. If you weren’t concerned about this issue before, consider this your wake-up call. Until next time.