In today’s heterogeneous IT environments, many enterprises are using third party datacenter service providers to meet business needs. Sometimes entire platforms are hosted by a third party. What we are talking about here is infrastructure and virtual machine provisioning. This is different from “cloud” services like Amazon Web Services and Microsoft Azure. The difference is in the way that software licenses are handled.  Responsibility for software licensing is typically retained by the customer for operating systems, database software and/or applications running in the third party datacenter. It seems a simple step to calculate the impact of more virtual servers on your license position. In practice, this is often not the case.

What are the challenges for software licensing?

Many software products are not licensed on just the virtual server “device.” Typically, there is a link to the hardware characteristics and software configuration of the physical infrastructure on which the virtual server runs—for example, licenses are often based on processors and cores. Licensing rules can be complex due to the very flexibility that visualization provides, especially when virtual servers are moved from one physical server to another. What is more, different software publishers can have different rules for the same setup.

It becomes more complex when datacenter provisioning is outsourced. The customer has little influence over, or visibility of, factors that impact their software licence costs. A service provider will be focused on providing secure, reliable and scalable solutions as cheaply as possible.  This leaves little room for consideration of license costs, especially when the responsibility is retained by the customer.

Is it just limited to the software that forms part of the service?

No. The base level physical infrastructure can often impact the licensing costs of other software, such as applications.  In other words, the actions of third parties can have a large impact on software spend. What is more, the reason for the outsourcing may even drive decisions that have a negative impact elsewhere.

How can it impact my organisation?

Here are some examples which can hit the bottom line:

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  • New hosting infrastructure – Yes, the environment needs to be scalable. It needs to meet growing or potential demand. The creation of a new server farm, or the addition of a large visualized appliance, can lead to unplanned costs.
  • Shared infrastructure – Some service providers will provide hosting services on the same environment for more than one customer. This can lead to privacy restrictions resulting in the lack of visibility described above, as well as the need to license whole physical environments which are sized to provide services to several customers, not just you.
  • Lack of visibility – Not knowing about extra hosts in a server farm makes license management reactive, at best. Service providers are known to prohibit access to physical hosting infrastructure specifications. If you don’t know what it looks like, how can you calculate your license costs with confidence?
  • Function specific hosts or clusters – Licensing for virtual servers in a cluster is complex. Without total confidence and tight governance, liabilities can arise quickly and unexpectedly. For example, if two products are running in a cluster, both may require licenses for all physical hosts. There may be potential to save money by configuring virtual servers running the same software to run on the same cluster. Why license 64 processors for two products when you can license 32 processors for each one?
  • The same applies to Solaris or AIX environments. Thought should be given to which hardware partitions (Zones and LPARs respectively) should exist in the same shared processor/resource pools. If a processor is to be licensed and shared, trying to make it shared by the same products can save money.
  • Development environments – These often have specific licensing rules. Ring fencing of non-licensable or limited use licenses can be used to reduce costs. That way, valuable licensed resources are not used up by installs which may not need a license, or qualify for development licenses.
  • Strategic choices – lots of thought goes into the use of visualization technology. It does not always extend to the considerable impact on licensing. Each service provider will have different drivers for using one approach above another. The software titles and publisher rules need to be understood, especially when seeking the benefits of sub-capacity (i.e. virtual environment) licensing. This is very important when considering major publishers like IBM and Oracle.

In many cases the pain of the licensee may not be related to the cost itself, but the lack of preparedness for dealing with these complex environments and licensing rules that make budgeting difficult.

How to have a positive influence

Opening of communication channels between customer and service provider is essential. This requires awareness and support from senior stakeholders. So, to make things happen, organisations need to raise the profile of external decisions that have a direct internal impact on licensing and associated software costs. Here are some suggested actions:

  • Educate sponsors, and influential stakeholders about the direct cost impact of decisions made entirely by the third party.
  • Push for a sponsored forum, to be attended by both parties, that focuses on the licensing impacts of the service providers hosting solutions.
  • Identify licensing pain points. Look at infrastructure based solutions which will help to alleviate them. There may be both quick wins and strategic considerations.
  • Demand the creation of standard configurations which define the provisioned services in terms of both the virtual machine specification AND the hosting infrastructure. Be involved in understanding the licensing impacts of these decisions.
  • Work with the demand planners. Use licensing knowledge to inform decision makers about the hidden software cost of infrastructure changes.
  • Ensure financial planners know the scale of licensing impacts and that it is possible to control these costs through proactive license management.
  • Retain an open mind about the challenges service providers face in suppling a reliable, secure, high performance service for the lowest possible cost.

Where can I learn more?

Many organisations have learned the hard way when they have been hit with unexpected software licensing costs. For some, that pain is seen as a one-off; from experience, it rarely is. For a free initial consultation, please contact Flexera and ask to speak with a Software Asset Management (SAM) practice manager or software licensing consultant. You can also visit our website