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Software licensing in the cloud

Thomas J. Trappler | April 19, 2013
When a customer controls cloud-deployed applications, the software-licensing issues can get complicated

Someone at my seminar in Los Angeles last month asked about challenges that the cloud poses for software licensing. That's such a broad and complex topic that it could warrant an entire seminar of its own. But this column can at least provide an overview of the issues.

The cloud delivery models that present the most software-licensing challenges are infrastructure as a service (IaaS) and platform as a service (PaaS). Software as a service (SaaS) is less likely to cause problems because, as the name suggests, the software is part of the cloud provider's services. With IaaS and PaaS, though, the customer has shared control over what is run in the cloud environment, including third-party software. In the case of IaaS, the customer does not manage or control the underlying cloud infrastructure but may have control over operating systems and deployed applications. With PaaS, while the customer typically doesn't have control over the operating system, it may have control over the deployed applications.

Where the complexity comes in is that software manufacturers are all over the map in how they address cloud use in their software licenses. Some base their licensing on the number of users, and those users in turn may be named or concurrent. Others charge per processor or core that the software runs on. Still others look at actual usage, a metric that is distinct from number of users. The one thing that these various licensing models have in common is that they are attempts to maximize revenue, and naturally, software makers view the use of their products in the cloud as an expansion of licensing rights that represents an opportunity for increased revenue.

Can the customer argue that the cloud does not represent an expansion of licensing rights? It would be difficult. If the customer acquired its software licenses from the vendor under a long-standing agreement, chances are good that the agreement pre-dates the inception of cloud computing. Of course, contracts generally do not address technology offerings that don't exist at the time of the contract's drafting, so a pre-cloud software-licensing contract is highly unlikely to contemplate the use of those licenses in a cloud environment. Legally, any rights that aren't explicitly stated as being granted to the customer in the license agreement are retained by the software manufacturer. In cases like this, customers do not have any pre-existing rights to use their software licenses in the cloud.

Parsing the clauses

To better understand the challenges that the cloud brings to software licensing, it might be helpful to take a look at some clauses that one might see in a cloud vendor's contract. Below are four, followed by my explanation of what they mean and why they're pertinent.


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