2012 Key Trends in Software Pricing & Licensing Survey · 2013. 7. 30. · 2012 | Key Trends in Software Pricing and Licensing Survey 6 o 64% of enterprises reported that they have

2012 Key Trends in Software Pricing & Licensing Survey

Sponsored by Flexera Software

2012 | Key Trends in Software Pricing and Licensing Survey 2

Contents

Overview of Survey Findings ................................................................................................... 4

Software Licensing, Pricing, Flexibility & Value .................................................................... 4

Software Usage Tracking, Optimization & Compliance ........................................................ 5

Software Compliance Enforcement ...................................................................................... 5

The Cloud and Virtualization ................................................................................................ 6

Survey Background ................................................................................................................. 7

Methodology and Sampling ..................................................................................................... 8

Enterprise Demographics .................................................................................................... 8

Application Producer Demographics .................................................................................... 9

Software Licensing, Pricing, Flexibility & Value ....................................................................... 9

Application Producers Offer A Wide Array of Software Pricing Models: ............................... 9

Enterprises Demand a Variety of Pricing Models ............................................................... 12

Application Producers Predominantly Deliver Licenses via Email ...................................... 13

Producers Prefer Node Lock and Network Licensing Technologies ................................... 13

Enterprises’ Prefer Network Licensing for Enforcement ..................................................... 15

Considerable Application Producer Dissatisfaction Found with Software Pricing & Licensing

Strategy ............................................................................................................................. 16

Enterprises Evaluate Price-to-Value Software Satisfaction ................................................ 17

Pricing & Licensing Strategies in Flux ................................................................................ 18

Producers Shifting Away From Perpetual Licenses............................................................ 20

Software Usage Tracking, Optimization & Compliance .......................................................... 22

Application Producers Don’t Know What Products Their Customers Are Actually Using .... 22

Most Producers Don’t Believe Enterprises Manage Entitlements ....................................... 23

Enterprises’ Software Investments Are Growing ................................................................ 24

Software License Management Is Critical to Enterprises ................................................... 26

Many Enterprises Are Not Optimizing Their Software Licenses ......................................... 28

Maintaining License Compliance Is Challenging for Enterprises ........................................ 30

Licensing Complexity Challenges Translate to Shelfware and Non-Compliant Software Use

.......................................................................................................................................... 31

Enterprises’ Turning to Automation to Manage Software Licensing ................................... 33


Software Compliance Enforcement ....................................................................................... 34

Software Audits Gaining in Frequency, Especially for Large Software Vendors ................. 34

The Cloud & Virtualization ..................................................................................................... 40

Virtualization and the Cloud Are Prompting Changes to Licensing & Compliance Policies . 40

Server Virtualization Has the Greatest Penetration within Enterprises – and It’s Growing .. 41

Desktop and Application Virtualization Gaining Momentum ............................................... 42

Enterprises at Risk in Their Virtual License Management Practices ................................... 43

Software Licensing and Provisioning Research at IDC .......................................................... 45

About Flexera Software ......................................................................................................... 45


2012 Key Trends in Software Pricing

& Licensing Survey Sponsored by Flexera Software

Overview of Survey Findings The 2012 Key Trends in Software Pricing and Licensing Survey of 334 participants, prepared with

assistance from IDC, found that:

Software Licensing, Pricing, Flexibility & Value

New ways to consume and pay for software abound: A growing diversity of software pricing

models are being demanded by enterprises and provided by application producers, signaling a

market trying out new software consumption models.

o Node locked (40%) and feature concurrent user (floating or network license) (39%) are the

most prevalent pricing models being offered by producers. Device-based pricing (23%) and

feature-based concurrent user (floating or network license) (19%) are the most popular pricing

models with enterprises.

Application producers feel they’re delivering more value than they’re getting paid for,

enterprises say they’re receiving less value than they’re paying for: A significant proportion of

application producers feel their licensing and pricing strategies are not effective in capturing the

value their software provides. In contrast, a good percentage of enterprises register varying levels

of dissatisfaction with the price-to-value they receive from their software.

o Nearly one quarter (24%) of application producers believe their licensing and pricing

strategies are either ineffective or very ineffective. Enterprises indicated most frequently

they were either unsatisfied or very unsatisfied with the price-to-value of their ERP software

(25%), database software (22%) and CRM software (20%).

Producers trying to close the value-to-satisfaction gap: Application producers are changing

their licensing and pricing strategies in order to strike the difficult balance between simultaneously

increasing revenue streams and increasing customer satisfaction.

o 42% of application producers report that over the past 18-24 months, their software pricing

and licensing strategies have changed in order to increase revenues, improve customer

relations and enter new markets. Over the next 18-24 months, application producers said

they would add subscription/term licensing (26%), better enforcement or security (24%),

pay-as-you-use (24%) and add temporary/evaluation/ “try-before-you-buy” licensing (19%).

http://www.idc.com/


Software Usage Tracking, Optimization & Compliance

Application producers don’t know what products their customers are actually using: Most

application producers do not have technology in place to know whether their customers are actually

using their products. Without this type of data feeding the product development and marketing

process, making decisions such as when to end-of-life a product, when to stop support for an

operating system, etc., can be challenging.

o 48% of application producers (up from 40% one year ago) indicated that they do not have

technology in place to know what product version or platform their customers are using and

13% do not know.

Most producers don’t believe enterprises manage entitlements: Application producers seem to

have a general lack of awareness around whether their customers manage their software licenses

and entitlements, and whether this is a difficult task.

o Almost a quarter of application producers (23%) believe their customers do not manage

entitlements at all, and almost half (49%) believe that customers do manage entitlements –

but do so manually with no or only some automation. In actuality, only 29% of enterprises

surveyed said they actually manage their entitlements manually.

Enterprises recognize growing risk of failing to adequately manage their software licenses:

Enterprises overwhelmingly recognize the importance of software license management – yet they

are failing to optimize their license estates, which they recognize is increasing their costs and risks.

o Compared to other objectives, 82% of enterprise respondents (up from 72% a year ago)

indicated that managing software licenses and usage is either important or very important.

33% of enterprises indicated they are either dissatisfied or very dissatisfied with their

current method for managing software licenses and usage. 30% of respondents familiar

with their companies’ practices in this regard, do not optimize their software estates by

reconciling software usage data with product use rights. Only a minority of respondents

answered “no difficulty” when asked to rate the difficulty of maintaining licensing

compliance for the various types of applications they run.

License management challenges resulting in shelfware and out-of-compliant software use;

enterprises turning to automation for help: Because of the difficulties enterprises face managing

their software licenses, increasingly they are over-using software they have (out-of-compliant use)

as well as purchasing software they don’t need (shelfware).

o 38% of enterprises indicated that 11% or more of their application spend is associated with

applications that are overused, and therefore out of compliance, up from 26% one year

ago. Likewise, this year 56% of enterprises say that 11% or more of their application

spend is associated with applications that are under-used (shelfware), up from 49% last

year. 67% of enterprises said they’re using some sort of automation to manage their

software licensing and usage today.

Software Compliance Enforcement

Software license compliance audits continue unabated; large enterprises are the most likely

targets of audits: As application producers seek new revenue sources, and acknowledge they

have poor visibility into customer software usage, software license audits continue to be a popular

tool by which they enforce their license agreements.


o 64% of enterprises reported that they have been audited (or had a license review) over the

last 18-24 months. 36% report having experienced at least two audits over that time period,

and 10% report that they’ve been audited more than 3 times. Large enterprises – those

greater than $1B in revenue -- were significantly more likely to be audited three times or

more in the last 18-24.

Multi-million dollar audit true-ups are common: Enterprises, especially large ones, report that

multi-million dollar software audit true ups are common, validating findings that application

producers remain aggressive about enforcement as a source of revenue-leakage recovery.

o 24% of enterprises said their total true-up paid over the past year was $1 million or more.

5% said theirs was between $5-10 million. And $4% said their total true-up costs were

more than $10 million.

Microsoft is the most aggressive auditor: For the second year in a row, enterprises report that

Microsoft has been the most frequent auditor.

o Enterprises say that over the last year, they’ve been audited most frequently by Microsoft

(51%), followed by Oracle (27%), IBM (24%), SAP (22%) and Adobe (19%). 24% say they

were audited by other vendors.

Enterprises are not practicing continual license compliance: While organizations are

conducting self-audits – they are doing so only infrequently.

o 42% of enterprises indicated that they do self-audits at least once per year. 25% indicated

they do self-audits more than three times per year. Large enterprises, those over $1B in

revenue, were much more likely to have a regular self-audit process that occurred more

than three times a year, with 30% reporting this to be the case (compared to only 10% of

smaller organizations).

The Cloud and Virtualization

Virtualization and the cloud are prompting changes to licensing & compliance policies: As

new technologies take hold, application producers are thinking about how their licensing and

compliance policies must change.

o 48% of application producers indicated that their compliance/licensing policies will need to

change to adapt to cloud technology. 43% say their policies will have to change to adapt to

SaaS, 50% say changes will be required to adapt to virtualization, 47% will require changes

for mobile platforms, and 34% will change to accommodate software appliances.

Server virtualization has the greatest penetration within enterprises, while other types are

gaining hold: Among the virtualization strategies enterprises are adopting, server virtualization has

the greatest penetration.

o 56% of enterprises report that 41% or more of their applications have been virtualized

using server virtualization. 35% of respondents indicated that between 10-25% of their

applications are delivered through application virtualization. 26% say that between 10-25%

of their applications are delivered through SaaS, and 24% say that between 10-25% of

their apps are delivered though desktop virtualization (VDI).

Virtualization adds license compliance risk: Tremendous focus has been placed recently on the

added software compliance risk exposure faced by enterprises due to virtualization. Some causes

include the evolving rules around virtual licenses within software license agreements, and the sheer


difficulty in tracking virtual license usage. According to the survey, enterprises are not yet fully

managing that risk.

o 43% of respondents indicate that either they don’t manage their virtual licenses, or they do

so manually.

Survey Background

The 2012 Key trends in Software Pricing and Licensing survey was conducted by Flexera Software with

input from IDC’s Software Pricing and Licensing Research division under the direction of Amy Konary,

research vice president - software licensing and provisioning at IDC. This annual research project

looks at software licensing, pricing and enforcement trends and best practices. The survey reaches out

to executives at application producers (Software vendors and intelligent device manufacturers) and

enterprises who use and manage software and devices. Now in its eighth year, the survey is made

available to the industry at large each year.


Methodology and Sampling In total, 334 respondents participated in the survey, including 101 enterprise executives and 233

application producer executives (defined as software vendors and intelligent device manufacturer).

Enterprise Demographics

54% of the enterprise respondents were from larger enterprises of $1 billion or more in

revenues and almost one third (31%) were from companies with $3 billion in revenues or more.

45% of respondents were from the United States, 33% were from Europe, and 7% were from

Australia.

14%

17%

23%

31%

16%

Which of the following best represents your annual company revenues?

Less than $100 million

$101 - $999 million

$1 billion - $3 billion

> $3 billion

Do not know


Application Producer Demographics

The largest segment of application producer respondents (54%) came from companies with

$10 million and under in revenues. 4% of the respondents were from companies with $1 billion

or more in revenues. The remainder of respondents was from companies ranging from $11

million to $500 million. 66% were from North America, 17% from Europe, 3% from Asia/Pacific,

and 3% from the Middle East.

Software Licensing, Pricing, Flexibility & Value

Application Producers Offer A Wide Array of Software Pricing Models:

Application producers offer a wide variety of software pricing models, which reflects a great

diversity in demand for how enterprises want to consume software. Node locked (40%) and

feature concurrent user (floating or network license) (39%) are the most prevalent pricing

models. Device (33%), named-user (27%), token concurrent user (floating or network license)

(24%), site (22%) and client access license (CAL) (21%) are also popular. Looking out over the

next 18-24 months, feature concurrent user (floating or network license) and node locked

licensing are expected to remain the most prevalent. However utility model (usage, time,

number of transactions) is expected to grow by 23%, further signaling increased interest in

usage-based pricing.

24%

21%

9% 8%

5%

7%

8%

1%

4% 0% 14%

Which of the following represents your annual software license revenues (including any revenue from subscription software and/or embedded software in hardware devices)?

Less than $1 million

$1 - $5 million

$6 - $10 million

$11 - $30 million

$31 - $50 million

$51 - $100 million

$101 - $500 million

$501 million - $1 billion


Over $10 billion

Do not know


33%

27%

14% 13%

21%

24%

39% 40%

9%

4%

0%

22%

8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Devic

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-use

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Pro

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Which pricing models do you offer today? Products that are priced per...


34%

30%

14%

16%

20%

29%

43% 41%

23%

8%

2%

23%

8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

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Looking forward in the next 18-24 months, which pricing models do you expect to offer? Product that is priced per...


Enterprises Demand a Variety of Pricing Models

The diversity of licensing models offered by producers makes sense as we examine enterprises’ pricing model preferences. Device-based pricing (23%) and feature-based concurrent user (floating or network license) (19%) are the most popular pricing models with enterprise respondents. Enterprises also prefer site-based (8%), utility model (usage, time, number of transactions) (7%), named user (6%) and client access license (CAL) (6%). The diversity of responses indicates enterprises place different value on software depending on business need.

23%

6%

5%

2%

6%

5% 19%

5%

7%

4%

0%

8%

11%

What is the software pricing model you prefer for enterprise class applications?

Device-based

Named-user

Processor

Processor core

Client Access License (CAL)

Token-based concurrent user(floating or network license)Feature-based concurrent user(floating or network license)Node-locked

Utility model (usage, time, numberof transactions)Financial metric (revenue, cost,royalty)Resource-based (e.g. RVU)

Site-based

Other (please specify)


Application Producers Predominantly Deliver Licenses via Email

67% of application producers indicate that they send license keys to customers via email. 35%

utilize self-service web portals to allow customers to access their own licenses. 29% favor in-

product activation, while 24% ship their software products with pre-generated licenses. In-

product activation is considered the most user-friendly of activation methods. With only 29% of

producers surveyed utilizing this method to distribute license files, demand will likely grow as

the consumerization of IT continues to take hold.

Producers Prefer Node Lock and Network Licensing Technologies

The majority of application producers utilize network licensing (58%) and node lock (50%) to

license their technology. Other popular methods include dongle (27%), and Internet licensing

(software validated against a license server on the internet provided by vendor) (23%).

Between producers that report they don’t use licensing technology (14%) and those that use

only minimal licensing protections -- serial number checks during installation (27%) – producers

have a significant opportunity to invest in licensing technology to enhance the customer

experience.

67%

35% 29%

24%

5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Email (sendthe license

file)

Website(where

customers gettheir ownlicense

keys/files)

In-productactivation

Ship productswith pre-

generatedlicenses

Other (pleasespecify)

If you use licensing technology, how do you distribute the license keys/files?


Looking into the future 18-24 months, software-based solutions for licensing are expected to

increase as compared to dongles. Dongle use is expected to decline by 15%, which correlates

to the fact that 56% said dongles are their least preferred means of software license

enforcement. Producers expect their use of network licensing to increase by 29%, and Internet

licensing by 28% Vendor-compliance audit (trust based licensing) is also expected to increase

by 11% – suggesting a continuation of the audit trend.

14%

27% 27%

50%

58%

17%

6%

23%

3%

0%

10%

20%

30%

40%

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60%

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Which of the following license technologies does your company use today?


Enterprises’ Prefer Network Licensing for Enforcement

Similar to last year, network licensing continues to be enterprises’ most preferred method (45%) of

software license enforcement, followed by product activation (24%). Their least favorite methods are

dongles (61%) and trust-based licensing with manual vendor compliance audit (15%).

0

10

20

30

40

50

60

70

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Looking forward 18-24 months, how will your use of licensing technology change?

Don'tknowWill NotUseIncrease

Stay Same

Decrease


Considerable Application Producer Dissatisfaction Found with Software

Pricing & Licensing Strategy

While a small majority of application producers (52%) believe their licensing and pricing strategies to be

effective, only 9% believe theirs to be very effective. Nearly one quarter (24%) believe their licensing

and pricing strategies are either ineffective or very ineffective. This suggests tremendous opportunities

for application producers to more closely align their licensing and pricing strategies to the value they

believe they are delivering to customers.

0

10

20

30

40

50

60

70

80

90

100

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If a software vendor gave you a choice, which of the following means of software license enforcement would you prefer

most? Product activation(software activatedover the internet byvendor key)

Network licensing(software activatedby internally sharedlicense)

Trust-basedlicensing withmanual vendorcompliance audit

Vendor-suppliedautomatedmonitoringmechanism withannual true-upSerial numberschecked locally

Dongle


Enterprises Evaluate Price-to-Value Software Satisfaction

Enterprises most frequently indicated they are either satisfied or highly satisfied with the price-to-value

of their desktop applications (65%), server applications (51%) and engineering/technical applications

(43%). They indicated most frequently they were either unsatisfied or very unsatisfied with the price-to-

value of their ERP software (25%), database software (22%) and CRM software (20%).

2%

22%

52%

9%

15%

Rate the effectiveness of your company’s pricing and licensing strategy in capturing all the revenue that you

think your products are worth?

Very ineffective

Ineffective

Effective

Very effective

Don't know


Pricing & Licensing Strategies in Flux

42% of application producers report that over the past 18-24 months, their software pricing and

licensing strategies have changed. The most cited reason for the change was to generate more

revenues (69%), an increase of 28% over 2011, perhaps indicating the challenges faced by producers

in this down economy. Other reasons cited for the changes were to improve customer relations (44%),

to accelerate sales cycles (35%) and to enter new markets (28%). Larger producers were more likely

to have changed their pricing and licensing policies in the last 18-24 months. Only 30% of the very

small producers (less than $5M in revenue) had done so, while nearly 60% of the larger producers did

so.

Change remains the norm for the immediate future. When asked how licensing and pricing strategies

would change over the next 18-24 months, application producers said they would add subscription/term

licensing (26%), better enforcement or security (24%), pay-as-you-use (24%) and temporary/evaluation/

“try-before-you-buy” licensing (19%).

0

10

20

30

40

50

60

70

80

90

100

Da

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s

How would you rate your price-to-value satisfaction for the following types of software?

Highly satisfied

Satisfied

Neutral

Unsatisfied

Highly unsatisfied

Not applicable


42%

58%

Has your company changed its pricing and licensing policies in the past 18-24 months?

Yes No

69%

44%

35%

13% 11%

28%

17% 11%

0%

10%

20%

30%

40%

50%

60%

70%

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If you answered "Yes" to question 14, explain why:


Producers Shifting Away From Perpetual Licenses

Application producers report that the majority of their revenues still derive from perpetual licenses. But

subscription/term-based licenses and usage-based licenses also represent a significant portion of

revenue, and these are predicted to increase over the next 18-24 months. Accordingly, having the

ability to implement flexible licensing models will help application producers maximize their revenues

while maintaining operational efficiency.

24% 26%

6%

10%

24%

19%

34%

6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

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In the next 18-24 months, in what ways will your licensing strategy need to change?


Based on your total annual software license revenue, what percentage is associated with the following software licensing or pricing?

Looking forward in the next 18-24 months, what percentage of your total annual software license revenue will be associated with the following software licensing or pricing types?

0% 20% 40% 60% 80% 100%

18

15222936435057647178859299

106113120127134

% for perpetual licenses

% for subscription/term licenses(subscription = termed [specificlength of time] license)

% for usage-based licenses(usage = captures actual use,can be post- or pre-paid)

% for other types

0% 20% 40% 60% 80% 100%

1

15

29

43

57

71

85

99

113

127 % for perpetual licenses

% for subscription/term licenses(subscription = termed [specificlength of time] license)

% for usage-based licenses(usage = captures actual use,can be post- or pre-paid)

% for other types


Software Usage Tracking, Optimization & Compliance

Application Producers Don’t Know What Products Their Customers Are

Actually Using

48% of application producers (up from 40% one year ago) indicated that they do not have technology in

place to know what product version or platform their customers are actually using – and 13% do not

know. Small producers (those with less than $5M in revenue) are less likely to have technology in

place to enable them to know what product, product version or platforms that their customers are

actually using.

Of the 40% who say they do – at least 20% base this knowledge on entitlement or purchase

information, and not on actual data from the product reporting that it has been installed and is being

used. This is problematic because entitlement and purchase data alone cannot reveal whether those

products are actually in use – thus reliance on this information can be misleading. By having

technology in place that indicates what products are actually in use, application producers can gain

valuable market data such as – who is adopting the latest release, how many users are impacted by

end of life decisions, and when can support for a particular operating system be dropped.

40%

48%

13%

Do you have technology in place that enables you to know what product, product version or platforms your customers

are actually using?

Yes

No

Do not know


Most Producers Don’t Believe Enterprises Manage Entitlements

Almost a quarter of application producers (23%) believe their customers do not manage entitlements at

all, and almost half (49%) believe that customers do manage entitlements – but do so manually with no

or only some automation. In actuality, as discussed below – only 29% of enterprises actually manage

their entitlements manually.

Despite the fact that the majority of application producers believe that their customers manage

entitlements manually (50%), only 7% of the producers believe that it’s difficult or very difficult for their

customers. This disparity could be attributed to the relatively smaller size of the producers taking this

survey – smaller software vendors offer relatively few products and versions, and straightforward

licensing models that do not changed often. Or the disparity could be attributed to a lack of awareness

of the challenges enterprises face managing their software licenses.

13%

18%

14%

28%

22% 23% 24%

31%

3%

0%

5%

10%

15%

20%

25%

30%

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How do you believe your customers manage their entitlements today?


Enterprises’ Software Investments Are Growing

Issues of software license management and usage tracking will only get more acute over time, as

software spend increases. 44% of enterprises surveyed indicated that their budgets for software would

increase over the course of the next 18-24 months, a slight increase in the software budget growth

predictions in 2011 (43%) and 2010 (33%). 24% of enterprises report that between 11-20% of their

software budgets are allocated to new software licenses, and 21% of respondents say that 21-30% of

their software budgets go to new licenses. 12% say that more than 30% of their total software budget is

allocated to new software licenses.

Internal software development also accounts for a proportion of most enterprises’ software budgets.

18% of organizations responding to the survey allocate 1-10% of their budgets to internal development;

18% allocate 11-20% of their budgets to software development, and 14% of companies allocate 21-

30% of their budgets to it. 25% of enterprise respondents say that more than 30% of their software

budget is allocated to internal development.

60

39

5 3

12

0

10

20

30

40

50

60

70

Not

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So

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wha

t d

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Difficult

Ve

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ifficu

lt

Not

ap

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Answer Choice

How difficult is it for your customers to determine which of your products they are entitled to use?


1%

16%

24%

21%

8% 2%

0%

1%

1%

26%

What percentage of your total software budget is allocated to new software licenses?

0% 1-10%

11-20% 21-30%

31-40% 41-50%

51-60% 61-70%

> 70% Do not know


Software License Management Is Critical to Enterprises

Compared to other objectives, 82% of enterprise respondents (up from 72% a year ago) indicated that

managing software licenses and usage is either important or very important. Only 8% indicated that it

is unimportant. For those managing their software licenses, 52% said their reason for doing so was to

reduce software costs and minimize shelfware. The second most frequently cited reason was to ensure

compliance with vendor agreements (and reduce cost and risk of an audit) (40%).

33% of enterprises indicated they are either dissatisfied or very dissatisfied with their current method for

managing software licenses and usage, while 32% are neutral. Only 35% report being satisfied or very

satisfied with their current method – which suggests significant opportunity for providers of software

license management and optimization solutions. A cross tabulation of the data based on respondents’

organization size indicates that enterprises larger than $1B in revenue are much more likely (over

twice) to be dissatisfied with their current method of managing software licenses/usage, than

companies with less than $1B in revenue. Almost half (45%) of all of these companies are either

dissatisfied or very dissatisfied with their current methods.

2%

18%

18%

14% 12%

6% 2%

4%

1%

23%

What percentage of your organization’s software budget is allocated to internal development (applications,

middleware, etc.) ?

0% 1-10%

11-20% 21-30%

31-40% 41-50%

51-60% 61-70%

> 70% Do not know


6%

27%

32%

27%

8%

If you are currently managing your software licenses/usage, how satisfied are you with the current

method?

Very dissatisfied

Dissatisfied

Neutral

Satisfied

Very satisfied

0

5

10

15

20

25

30

Very

dis

satisfied

Dis

satisfie

d

Ne

utr

al

Satisfied

Very

sa

tisfied

If you are currently managing your software licenses/usage, how satisfied are you with the current method?

Less than $100million

$101 - $999 million


> $3 billion


Many Enterprises Are Not Optimizing Their Software Licenses

Simply understanding the number of licenses within the license estate tells only a partial story when it

comes to software license optimization. Product use rights (i.e. upgrade rights, downgrade rights,

secondary use rights, etc.) contained in the software contract detail how software licenses can be used,

by whom, in what circumstances and on what devices. Only by optimizing the software license estate –

reconciling product use rights with actual usage – can enterprises hope to buy only what they need and

use what they have. Accordingly, whether enterprises take into account product use rights in the

management of their licenses is an indicator of their ability to remain in compliance and avoid

purchasing shelfware.

According to the survey, 30% of respondents familiar with their companies’ practices in this regard do

not optimize their software estates by reconciling software usage data with product use rights. 53% do,

but only for key, high value vendors. Only 17% practice software license optimization across the entire

software estate.

52%

41%

7%

5%

10%

80%

5%

3%

2%

95%

0% 20% 40% 60% 80% 100%

Most

Important

Semi-important

Least

If you are currently managing your software licenses/usage, what is the most important reason for doing so?

Reduce softwarecosts/minimizeshelfware spend/costavoidance

Ensure compliancewith vendoragreements (andreduce cost and riskof an audit)Prevent downtimedue to denials in themiddle of criticalprojects (concurrentlicenses)Do not managesoftwarelicensing/usage


12%

37%

21%

30%

Do you apply product-use rights to optimize your organization’s software license position?

Yes, for all vendors

Yes, for key high-value vendors

No

I don't know


Maintaining License Compliance Is Challenging for Enterprises

41% of respondents indicated that maintaining license compliance for database software, and 40% of

respondents said maintaining license compliance for server software – was either difficult or very

difficult. Only a minority of respondents answered “no difficulty” when asked to rate the difficulty of

maintaining licensing compliance for the various types of applications they run. This indicates general

consensus among enterprises that maintaining license compliance presents difficulty.

Licensing complexity is the most frequently cited reason (32%) enterprises give for their difficulties in

maintaining licensing compliance. Lack of automated tracking mechanisms (27%) and the complexity of

their IT environments (24%) also contributed to the reasons for their difficulty.

The smaller companies, those less than $100M, were much more likely to highlight the complexity of

the licensing or IT environment, doing so 80% of the time. Very large companies, in contrast – those

greater than $3B in revenue – highlighted the lack of automation tools most frequently (44% of the

time). The greater focus of large enterprises on lack of automation may be due to their expectation of

high complexity and their focus instead on the need for a technical solution to the challenge.

0

20

40

60

80

100

120

Da

taba

se

Mid

dle

ware

ER

P

CR

M

Engin

ee

ring

/Tec

hn

ical

Applic

ation

s

De

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pplic

ation

s

Serv

er

Applic

ation

s

For which types of software is it difficult to maintain license compliance?

No difficulty

Somewhatdifficult

Difficult

Very difficult

Not Applicable


Licensing Complexity Challenges Translate to Shelfware and Non-

Compliant Software Use

38% of enterprises indicated that 11% or more of their application spend is associated with applications

that are overused, and therefore out of compliance, up from 26% one year ago. Likewise, this year

56% of enterprises say that 11% or more of their application spend is associated with applications that

are under-used (shelfware), up from 49% last year. It is important to note that when looking across the

entire software estate the same organization can, and usually does, simultaneously have shelfware and

software use that is out-of-compliance. The increases in non-compliant software use as well as

shelfware point to increasing waste and audit risk for companies that do not proactively manage and

optimize their software license estates.

32%

24%

14%

27%

4%

If you checked "difficult" or "very difficult" to any software type in the previous question, what is the

primary reason why?

Licensing policy is too complex

IT environment is too complex

IT management is toodecentralized

No automated trackingmechanisms in place



11%

32%

19%

10%

6%

1%

2%

19%

What percentage of software license spend within your organization do you estimate is associated with

applications that are overused and therefore out of compliance?

0% 1-10%

11-20% 21-30%

31-40% 41-50%

> 50% Do not know

3%

23%

25% 14%

10%

2%

5%

18%

What percentage of software license spend within your organization do you estimate is associated with

applications that are underused (shelfware) and therefore over-licensed?

0% 1-10%

11-20% 21-30%

31-40% 41-50%

> 50% Do not know


Enterprises’ Turning to Automation to Manage Software Licensing

67% of enterprises in the survey indicate that they use some sort of automation to manage their

software licensing and usage today, with 41% indicating they use automation software that’s part of

their asset management system. 15% use vendor provided software, 29% use manual systems, and

12% use a homegrown system. None of the respondents said that they do not track their software

licensing and usage).

For enterprises using software asset management software, 88% of those systems are installed on

premises, 6% are hosted/cloud based solutions, 5% are delivered via a managed service provider, and

only 1% are hosted via a SaaS provider.

41%

15%

12%

29%

0%

4%

How do you primarily perform tracking, management and reporting of your software licensing/usage today?

Automated (commercial) software

Use software provided by the vendor

Automated (homegrown) software, our ownsystem used only for license management

Manual methods, including the use ofspreadsheets

Do not currently track



Software Compliance Enforcement

Software Audits Gaining in Frequency, Especially for Large Software

Vendors

39% of application producers responding to the survey who are aware of their company’s audit

practices indicated that their companies conducted at least one software audit over the last

year. 13% said they audited customers more than 11 times. And 3% indicated that they

conducted more than 100 software audits.

Total audit true ups that producers reportedly collected within the last year ranged between $1-

$50,000 (6%) and $1M to $5M (2.4%). It should be noted that 35% of the respondents did not

know their companies’ total true-up revenues. Moreover, these audit figures clearly reflect the

practices of smaller application producers, given the demographics of the respondents of the

application producer survey. They do not reflect the audit practices of larger vendors such as

Microsoft, IBM, SAP, Adobe, Oracle, Symantec and others.

88%

1% 6%

5%

If you have a Software Asset Management system in place, how is it being delivered?

Software installed on premise

Software as a Service (SaaS)

Hosted solution / Private Cloud

Managed Service Provider(MSP)


For example, in the enterprise survey, which skews towards large enterprise customers, a

different story emerges of application producers’ audit practices. In that survey 64% of

enterprises reported that they have been audited (or had a license review) over the last 18-24

months. 36% report having experienced at least two audits over that time period, and 10%

report that they’ve been audited more than 3 times.

Large enterprises – those greater than $1B in revenue -- were significantly more likely to be

audited three times or more times in the last 18-24. This was reported by 25% of the

companies in that group.

Enterprises say that over the last year, they’ve been audited most frequently by Microsoft

(51%), followed by Oracle (27%), IBM (24%), SAP (22%) and Adobe (19%). 24% say they

were audited by other vendors. Enterprises elaborating in the survey about who those other

auditing vendors were most frequently sited Attachmate (5 respondents) and Autodesk (2

respondents).

Microsoft was the leading auditor reported across all organization sizes. The other application

producers favored performing audits of the large organizations (over $1B revenue), to a greater

degree than Microsoft did.

In addition, the size of the audit awards varies greatly between the application producers’

claims, and enterprises’ claims. Again, this disparity is likely due to the disparity between

application producers taking this survey (mostly smaller vendors), and those reported by

enterprises as being the most enthusiastic auditors. For example, more than half of

respondents said their total audit true up over the last year was more than $100,000, and 36%

said their total true up was $300,000 or more. 24% said their total true up was $1 million or

more. 5% said theirs was between $5-10 million. And $4% said their total true up costs were

more than $10 million.

Given the significant frequency with which enterprises are facing software audits, it’s not

surprising that they are building safeguards into their internal processes. 42% indicated that

they do self-audits at least once per year. 25% indicated they do self-audits more than three

times per year. Large enterprises, those over $1B in revenue, were much more likely to have a

regular self-audit process that occurred more than three times a year, with 30% reporting this to

be the case (compared to only 10% of smaller organizations).


48%

6%

2%

5% 1%

2%

35%

What is the total true-up revenue from compliance audits your company received within the 12 months?

$ 0

$ 1 - 50k

$ 50k - 100k

$ 100k - 500k

$ 500k - 1m

$ 1m - 5m

$ 5m - 10m

$ 10m - 20m

$ 20m - 50m

$ >50m

Don't know

2%

22%

52%

9%

15%

Rate the effectiveness of your company’s pricing and licensing strategy in capturing all the revenue that you

think your products are worth?

Very ineffective

Ineffective

Effective

Very effective

Don't know


10%

6%

20%

28%

28%

8%

How often have you been audited (or had a license review) by your vendors within the last 18-24 months?

More than 3 times in the past year

3 times

2 times

1 time

We have not been audited or had alicense review within the past year

We have never been audited

0

5

10

15

20

25

30

Mo

re th

an 3

tim

es

in th

e p

ast

ye

ar

3 t

imes

2 t

imes

1 t

ime

We h

ave n

ot be

en

au

dited o

r had

alic

ense r

evie

w…

We h

ave n

eve

rbe

en a

ud

ite

dHow often have you been audited (or had a license

review) by your vendors within the last 18-24 months?


$101 - $999million

$1 billion - $3billion

> $3 billion


19% 24%

51%

27% 22%

12%

24%

0%

10%

20%

30%

40%

50%

60%

Ad

ob

e

IBM

Mic

roso

ft

Ora

cle

SA

P

Sym

ante

c

Oth

er

(ple

ase s

pe

cify)

If you have been audited within the last year, which vendors have audited you?

0

5

10

15

20

25

30

35

Adob

e

IBM

Mic

roso

ft

Ora

cle

SA

P

Sym

ante

c

Oth

er

(ple

ase

specify)

If you have been audited within the last year, which vendors have audited you? (Crosstabulated based on company size)


$101 - $999 million

$1 billion - $3billion

> $3 billion


4%

5%

15%

13%

19%

45%

What was your total software audit true-up cost within the last year for your organization?

More than $10 million

$5 million to $10 million

$1 million to $5 million

$300,001 to $1 million

$100,000 to $300,000

< $100,000

25%

3%

20%

42%

9%

How often does your organization perform a self-audit of its software estate?

More than 3 times per year

3 times per year

2 times per year

1 time per year

We do not perform self-audits


The Cloud & Virtualization

Virtualization and the Cloud Are Prompting Changes to Licensing &

Compliance Policies As new technologies take hold, application producers are thinking about how their licensing and

compliance policies must change. For instance, 48% of respondents indicated that their

compliance/licensing policies will need to change, to adapt to cloud technology. 43% say their policies

will have to change to adapt to SaaS, 50% say changes will be required to adapt to virtualization, 47%

will require changes for mobile platforms, and 34% will change to accommodate software appliances.

Looking at the data another way, of all the application producers that are planning changes in the next

0

5

10

15

20

25

30

35

40

Mo

re th

an 3

tim

es p

er

year

3 t

imes p

er

yea

r

2 t

imes p

er

yea

r

1 t

ime p

er

ye

ar

We d

o n

ot pe

rform

self-a

udits

How often does your organization perform a self-audit of its software estate?


$101 - $999 million


> $3 billion


24 months for these different technologies, between 58% and 68% (depending on the technology) said

that it will require changes to their licensing policies.

Server Virtualization Has the Greatest Penetration within Enterprises –

and It’s Growing

Among the virtualization strategies enterprises are adopting, server virtualization has the greatest

penetration, according to enterprise respondents. 56% (up from 51% in 2011) report that 41% or more

of their applications have been virtualized using this server virtualization. While there is no clear

dominant leader among desktop virtualization, application virtualization and hard partitioning – those

technologies have also taken firm root within organizations.

0

20

40

60

80

100

120

Clo

ud

com

puting

SaaS

Virtu

aliz

atio

n

Mo

bile

pla

tform

s

Softw

are

Applia

nces

In the next 18-24 months, my company's compliance (licensing) policy for _________ will need _________ in order to adapt to the requirements

of this technology. (Please choose the appropriate licensing strategy for each option below)

Stay the same-nochange required

Moderatechanges

Significantchanges

Dramatic changes

Does not apply-already done


Desktop and Application Virtualization Gaining Momentum

75% of enterprises surveyed indicate that more than half of their enterprise applications are delivered

through traditional installed software. 35% of respondents indicated that between 10-25% of their

applications are delivered through application virtualization. 26% say that between 10-25% of their

applications are delivered through SaaS, and 24% say that between 10-25% of their apps are delivered

though desktop virtualization (VDI). These figures reflect that while currently there is no clear winner

between application virtualization and desktop virtualization, some companies are using these

technologies to deliver a large number of applications.

0

20

40

60

80

100

120

Serv

er

virtu

aliz

atio

n-

VM

wa

re, M

SH

ype

r-V

(%

of

severs

)

De

skto

pvirtu

aliz

atio

n/V

DI

(% o

f deskto

ps)

Applic

ation

virtu

aliz

atio

n-A

pp-

V, X

enA

pp (

% o

fde

skto

p a

pps)

Ha

rd p

art

itio

nin

g-

LP

AR

, vP

ar,

Sola

ris Z

one

s (

%of

se

rvers

)

What virtualization technologies has your organization adopted?

< 20%

20-40%

41-60%

61-80%

> 80%


Enterprises at Risk in Their Virtual License Management Practices

Tremendous focus has been placed recently on the added software compliance risk exposure faced by

enterprises due to virtualization. Some causes include the evolving rules around virtual licenses within

software license agreements, and the sheer difficulty in tracking virtual license usage. According to the

survey, enterprises are not yet fully managing that risk. 43% of respondents indicate that either they

don’t manage their virtual licenses, or they do so manually.

0% 10% 20% 30% 40% 50% 60% 70%

Traditional installed software

Desktop virtualization (VDI)

Application Virtualization (App-V,XenApp, etc.)

Software as a Service (SaaS)

>75%

51-75%

26-50%

10-25%

<10%


32%

15%

6%

32%

11%

3%

How do you manage software licenses in your virtual environments?

Automated commercial licensemanagement software

Software provided by the (virtualization)vendor

Automated homegrown software

Manual methods, including spreadsheets

We don’t manage software licenses in our virtual environments



Software Licensing and Provisioning Research at IDC IDC's global Software Licensing and Provisioning research practice is directed by Amy Konary. In this

role, Ms. Konary is responsible for providing coverage of software go-to-market trends including volume

license programs, evolving license models, global price management, and licensing technologies

through market analysis, research and consulting. In her coverage of software maintenance,

subscription, electronic software distribution and licensing technologies, Ms. Konary has been

instrumental in forecasting future market size and growth. Ms. Konary was also the lead analyst for

IDC's coverage of software as a service (SaaS) for eight years prior to focusing exclusively on pricing,

licensing, and delivery. International Data Corporation (IDC) is the premier global provider of market

intelligence, advisory services, and events for the information technology, telecommunications, and

consumer technology markets. For more information about IDC, please see www.idc.com

About Flexera Software Flexera Software is the leading provider of strategic solutions for Application Usage Management;

solutions delivering continuous compliance, optimized usage and maximized value to application

producers and enterprises. Flexera Software is trusted by more than 80,000 customers that depend on

our comprehensive solutions- from installation and licensing, entitlement and compliance management

to application readiness and software license optimization - to strategically manage application usage

and achieve breakthrough results realized only through the systems-level approach we provide. For

more information, please go to: http://www.flexerasoftware.com.

Flexera Software, LLC.

1000 East Woodfield Road,

Suite 400

Schaumburg, IL 60173 USA

Schaumburg (Global Headquarters),

+1 800-809-5659

United Kingdom (Europe,

Middle East Headquarters):

+44 870-871-1111

+44 870-873-6300

Australia (Asia,

Pacific Headquarters):

+61 3-9895-2000

For more locations visit:

www.flexerasoftware.com

http://www.idc.com/

http://www.flexerasoftware.com/products/installation.htm

http://www.flexerasoftware.com/products/software-licensing-entitlement-management.htm

http://www.flexerasoftware.com/products/application-packaging.htm

http://www.flexerasoftware.com/products/software-asset-management.htm

http://www.flexerasoftware.com/

Documents

2012 Key Trends in Software Pricing & Licensing Survey · 2013. 7. 30. · 2012 | Key Trends in Software Pricing and Licensing Survey 6 o 64% of enterprises reported that they have