IT customers will likely be paying more for software licensing and maintenance in the next year, even though they don't expect to get much value out of their new agreements, according to findings in a recent study.
The survey, published by International Data Corp., a Framingham, Mass.-based market research firm, polled 100 software companies and 100 enterprise customers, large and small.
IDC found that more than half of the software companies polled plan to change to their licensing models in the next year. Most of these companies are looking to increase support for maintenance, as well as augment their maintenance programs, said study author Amy Mizoras Konary, program manager for software pricing and licensing at IDC.
The vendors are looking to follow Microsoft's lead with Licensing 6.0 and the Software Assurance maintenance program. "They are looking at their company revenues and find that a lot of it comes from maintenance, as opposed to licensing," Konary said. "This is a huge source of deferred revenue. They want to know how to increase what they charge."
No value without a need
For their part, customers do expect to spend more on maintenance, but they don't think that there is a clear connection between spending more money and receiving increased value. And they don't want to be forced into buying something they are not ready for, Konary said.
She said that reaction to Microsoft's Software Assurance program, which allows customers free product upgrades throughout the life of a contract, has been largely negative -- and other vendors risk receiving similar customer backlash. Some customers have complained that, if few major products are released during the term of their contract, they will get little value from Software Assurance. However, since Microsoft has already blazed a trail for such a model, it's possible that the reaction to similar programs won't be quite so strong, she said.
"Either way, given the strategic importance of maintenance as a key generator of revenue, this is the path [vendors] will look to go down," she said.
Konary said that the study also revealed just how little knowledge customers have about their license compliance. "Lots of customers are overbuying, so they have no idea how much they need or how much they are using," Konary said. "Only 4% of customers are using some kind of tracking-compliance software."
Heavy load of contracts to manage
Software customers polled by IDC said that they have rigorous processes for keeping track of their agreements, but many of them are inundated with contracts, she said. The study found that customers are managing an average of more than 40 software contracts at a time.
On the vendor side, some of the largest software companies rely on the honor system when it comes to keeping companies in compliance with license agreements. "The vendors think the users have it in control, and the users are saying, 'There is no way we can do this,'" she said.
Konary said that one key finding in the study is that half of all vendors and half of all users polled said that they would rethink the way they track software usage.
She said that the shortcomings found in the survey will be magnified as utility computing evolves, because it is difficult to track software by use. "It's a big challenge moving down the road in terms of pay-per-use, and having customers not know what they are buying," Konary said.
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