The current client/server licensing model for software is likely tore. be wiped out as the Internet forces key vendors to test radical new licensing policies.
As IT managers turn to free Web-based services, including software outsourcing, instead of investing in existing software solutions, companies like Lotus, Oracle and Hewlett-Packard (HP) are rethinking the licensing model to take into account the way applications are used and the benefits they bring to the purchaser.
"IT directors have justified moving to the browser model, based on the costs of the current licensing system, said Andy Mulholland, divisional director at Cap Gemini. "They've been able to use technology for free but someone still has to pay the costs for research and development." However, he warned that changes might not go down easily with users: "Licensing is an issue that gets every user hot under the collar."
HP is trying to move its larger customers to a position where instead of simply buying a hardware and software licence, the payment is based on expected returns, so payments rise as transaction volumes increase.
"We're cutting deals for a total solution based on a transaction basis, which is beyond the traditional licence," said Terry Walden, HP-UX marketing manager. No such deals have been cut in the UK, yet.
"Web-based applications have largely broken both the server- and the client-centric pricing/business models which are now in use," said Dan Kusnetzky, program director at IDC. "All of the major suppliers are searching for a new model."
"I think that things are ripe for a new model to emerge. One possibility is a microcharge for each use or transaction. If the pricing were set up properly, people using the software in a given way would see the same pricing as they do now. Until this day arrives, licensing chaos will reign supreme," he added.
Lotus believes the industry will move away from selling paper licences for a software product in perpetuity, to a subscription-based model. The purchase of the software service will include upgrades and maintenance, according to Jim Moffat, product marketing manager at Lotus. Oracle has just started trials of Business Online, an service allowing customers to download applications and services.
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