May 11, 2011
Cloud technology is fundamentally changing the computer industry, and high performance computing is not immune. As is always the case when a disruptive technology enters a market, some sectors lead while others lag. In the case of the HPC cloud, software licensing has failed to evolve at the same pace as other key components of the business.
As techies, we get excited about the latest processors, newest chips and fancy hardware, but it’s easy to forget that software is one of the most critical aspects of our business. Whether delivered as a service in the cloud or as a seat in an enterprise site license, software applications bring value to the end user. Unfortunately for those of us in the rapidly evolving field of cloud computing, the traditional licensing models that govern most software packages do not adapt well in the cloud.
There are many types of software, each with its own set of restrictions as to how the licensee can use it. However, the overall problem with traditional licenses and the cloud is the lack of license extension. In other words, the license legalese typically contains no language allowing the license holder or end user to redirect the software use privileges to another party such as a provider of HPC cloud services. In the cloud environment, it can be difficult to determine just who the end user is as defined by the license. And this situation only gets more complicated for large enterprises that might run their major business applications on multiple cloud platforms.
Despite enthusiasm for cloud technology, independent software vendors (ISVs) have been slow to modify their licenses to catch up. Perhaps they’re hoping the cloud will float away because they realize that cloud computing accelerates the coming era of software-as-a-service (SaaS). Many software vendors without hosting capabilities will have their software running on third-party infrastructure with hardware and operating system software they don’t own. Again, the complications to the traditional license are unlimited in the SaaS model.
In the SaaS environment, both revenue models and license models will have to change for the software vendors. The vast majority of software companies have built their entire business structure – sales, marketing, reseller agreements, etc. – on the pay-by-the-seat scenario. The revenue model is practically standardized – An enterprise site license costs X dollars based on the number of seats. Add a 20 percent annual maintenance fee to the base price to cover service and support. And then throw in another 10 percent or more for professional training and consultation. Having an enterprise-wide license model only “relieves” the usage tension by placing “stress” at the procurement process.
These three revenue streams – purchase price, maintenance and training – are easy to identify in the pay-by-the-seat model. But they become exceedingly difficult to quantify and monetize under the cloud model, which many have dubbed the ‘pay-by-the-click’ scenario. This represents a sea-level change to the revenue structure for the ISVs. They have to figure out how to charge for disparate ad hoc access to their applications without taking a huge hit to their revenue streams. So it’s not difficult to figure out why some software vendors are dragging their feet on cloud licensing.
Most of us believe the cloud is here to stay and that SaaS will become main stream as a result. With this in mind, new software licensing models must accommodate the following standard features:
Reliability – Licenses must guarantee that end users have access to their applications whenever and wherever they want or need them.
Low Cost – The entry cost of the new license must be low when compared to the traditional price of buying a seat/site/enterprise license.
Flexibility – The license must allow the owner to transfer the software from its in-house and outsourced system it to a cloud platform operator, as desired. In other words, the license must be able to truly ‘float’.
High Value – The conditions of the license must be fair and favorable so the licensee, either a cloud IT manager or an end user, gets maximum value from the agreement.
Exchangeability – The license structure must be standardized and capable of transparent use in the myriad cloud providers and software license managers and schemes.
These changes won’t come easily, especially due to the well-established revenue streams at stake for the software companies. But I predict they will actually find their overall revenues rise as they shift to a cloud licensing structure. To ease this transition, the cloud industry should consider establishing a Software Licensing Clearinghouse to develop standardized language and schemes that pave the way for the on-demand, utility-based licensing of software.
About the Author
Earl Dodd is the Executive Director of the Rocky Mountain Supercomputing Centers, Inc. (RMSC) in Butte, Montana.
His areas of technical interest are in strategy formulation for Peta/ExaScale architectures and UltraScale 3D visualization and collaboration to drive the next generation computationally-steered workflows and applications. He holds BS and MS degrees in Mining Engineering from Montana College of Mineral Science & Technology ("Montana Tech") and an MBA from Tulane University. Earl has 29 years experience in Supercomputing and High Performance Computing (HPC).
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