ad info




CNN.com
 MAIN PAGE
 WORLD
 ASIANOW
 U.S.
 LOCAL
 POLITICS
 WEATHER
 BUSINESS
 SPORTS
 TECHNOLOGY
   computing
   personal technology
   space
 NATURE
 ENTERTAINMENT
 BOOKS
 TRAVEL
 FOOD
 HEALTH
 STYLE
 IN-DEPTH

 custom news
 Headline News brief
 daily almanac
 CNN networks
 CNN programs
 on-air transcripts
 news quiz

  CNN WEB SITES:
CNN Websites
 TIME INC. SITES:
 MORE SERVICES:
 video on demand
 video archive
 audio on demand
 news email services
 free email accounts
 desktop headlines
 pointcast
 pagenet

 DISCUSSION:
 message boards
 chat
 feedback

 SITE GUIDES:
 help
 contents
 search

 FASTER ACCESS:
 europe
 japan

 WEB SERVICES:
COMPUTING

Software licensing in limbo

July 16, 1999
Web posted at: 9:23 a.m. EDT (1323 GMT)

by Dan Briody

From...
InfoWorld

(IDG) -- Software vendors around the world are involved in a mad scramble to reinvent their licensing models to account for the new trend of application outsourcing, and acquiring and using software will never be the same for it.

From Microsoft to IBM to Citrix, companies are number-crunching and testing new licensing structures in an attempt to protect their current revenue models in the world of rentable applications.

Microsoft, for example, is currently beta testing a variety of methods, including a revenue-sharing model in which the company would give software to an application service provider (ASP) in exchange for a percentage of that provider's profits, according to sources.
MORE COMPUTING INTELLIGENCE
IDG.net   IDG.net home page
  InfoWorld home page
  InfoWorld forums home page
  InfoWorld Internet commerce section
  Get Media Grok and The Industry Standard Intelligencer delivered for free
 Reviews & in-depth info at IDG.net
  IDG.net's personal news page
  Year 2000 World
  Questions about computers? Let IDG.net's editors help you
  Subscribe to IDG.net's free daily newsletter for IT leaders
  Search IDG.net in 12 languages
 News Radio
 * Fusion audio primers
 * Computerworld Minute
   

Meanwhile, Big Blue is looking into a model in which the ASP pays the software vendor only when an application is needed, essentially pushing inventory back to the original manufacturer. But models such as these have broad implications on the way vendors derive profits.

But the industrywide issues associated with these changes are presenting serious challenges to the software makers and are likely to have an impact on the way all software is licensed in the future.

"I wouldn't be surprised to see anything at this point; this is the Wild West in terms of licensing models," said Dwight Davis, an analyst at Summit Strategies, in Kirkland, Wash. "Everyone is looking for models right now."

Concerns of losing out on hefty profit margins on the part of the software vendors will fuel a melange of creative contracts and licensing structures going forward.

"There are certainly bottom-line implications to these models," said Steve Oriola, global marketing executive at IBM's ISP unit, in Armonk, N.Y. "It is an issue that is being wrestled with across IBM."

Microsoft and IBM are not the only companies wrestling with this issue in the short term. Citrix, a supplier of Windows terminal software, is in the process of revamping its licensing model for its MetaFrame multiuser Windows product with a new version geared toward ASPs. It is set for release this fall.

The company is pushing a fresh way of looking at total cost of ownership (TCO), countering with its own version, called Total Cost of Application (TCA) ownership, developed to de-emphasize the costs of hardware ownership.

Ultimately, software makers that decide to sell their wares to ASPs will also likely create a backlash among enterprises that still buy directly through the manufacturer.

"Enterprise IT managers are known to use every tool they can to negotiate better deals with vendors," said Traver Kennedy, chairman of the ASP Industry Consortium, in Wakefield, Mass. "Are enterprise customers going to want to go down the road they have in the past? That is an open question."

But some industry observers also believe that packages like these will wrench software-acquisition decisions out of the hands of IT departments and into the realm of business and finance managers.

"This is throwing software licensing on its ear and there won't be just one model emerging," said Bill Willis, vice president of engineering at InterPath, an ASP in Research Triangle Park, N.C.

"These will become business decisions and not IT decisions. The CIO doesn't care who owns the software license," Willis added.

But the time may be ripe for IT managers to leverage the confusion and unrest in the software marketplace to obtain better deals on their existing contracts.

"There is so much confusion and complexity in this market right now -- it's a mess," said one IT manager at a Fortune 500 company. "But we can leverage it by trying to negotiate an aggressive deal."

At the end of the day, however, the ultimate answer to software licensing issues may rest with ASPs.

"The ideal solution is one in which the ASP will deliver the entire solution," said Jeff McNaught, vice president of marketing at Wyse, a thin-client vendor in San Jose, Calif. "Server time, operating system, applications, desktop hardware, and support will all be wrapped into one cost."

Ephraim Schwartz contributed to this article.


RELATED STORIES:
Take my apps - please
June 2, 1999
What is ERP?
May 28, 1999
Opponents blast proposed U.S. software law
July 12, 1999

RELATED IDG.net STORIES:
Shrink-wrap ruling gives UCITA-like protection to some software vendors
(InfoWorld)
Licensing time bomb
(InfoWorld)
Richard Stallman blames proprietary software for Y2K woes
(LinuxWorld)
The end of software licenses?
(PCWorld) March 1997
Users: revamp Windows licensing
(Computerworld)
Year 2000 World
Note: Pages will open in a new browser window
External sites are not endorsed by CNN Interactive.

RELATED SITES:
Microsoft
IBM
Citrix Systems
Note: Pages will open in a new browser window
External sites are not endorsed by CNN Interactive.
 LATEST HEADLINES:
SEARCH CNN.com
Enter keyword(s)   go    help

Back to the top   © 2001 Cable News Network. All Rights Reserved.
Terms under which this service is provided to you.
Read our privacy guidelines.