The Software Licensing in the Cloud Conundrum

One of the thorniest issues when it comes to cloud computing is software license management. Both software vendors and customer alike, albeit for different reasons, are concerned about how software licensing in the cloud will evolve, especially in an age where software pricing is still tied heavily to the class of processor being used.

One of the few cloud computing providers trying to be proactive about this issue is GoGrid. The company today rolled out an image rights management tool that makes it easier for software vendors to manage the deployment of their software-as-a-service on the GoGrid platform.

At the same time, GoGrid CEO John Keagy says that GoGrid expects to use the same technology to help customers manage and monitor their use of software on the cloud. While a standard approach to pricing of application software in the cloud has yet to be worked out, Keagy says GoGrid is committed to providing the tools that software vendors and their customers can use to come up with some form of an equitable arrangement.

Unfortunately, this lack of a standard approach to software licensing only serves to slow down the adoption of cloud computing, which some software vendors are pleased to see because they make more money charging customers for software on a class-of-processor basis. In fact, most software vendors would prefer that customers just sign up for an enterprise-class license that gives them the right to use the software anywhere. But many customers are leery of the fully loaded costs of such licenses when they only use the software on a limited basis.

How software pricing in the cloud will work itself out remains to be seen. Many software vendors are betting that once their software becomes more accessible in the cloud, more users within every customer site will want to access it. That should increase revenue. But it’s just as conceivable that cloud computing will expose how little their applications are actually used, which could result in some difficult questions from investors when a software vendor has to report a drop in revenue because of the shift to cloud computing.

Like all things related to cloud computing economics, the math is not always simple. But at the end of the day, customers should be looking for cloud computing platforms that give them as much visibility into actual software usage as possible. Only then will they know whether the enterprise site license option is really worth it, especially if they discover that their actual usage is a whole lot less than initially anticipated.