One of Gartner’s top 10 technology trends for 2014, the Internet of Things (IoT) will inevitably be disruptive in forcing a chance to the way software is licensed and managed in the future. Experts are predicting that there will be upwards of 50 billion devices with Internet connectivity by 2020, which is going to result in some very interesting asset management challenges for organisations to overcome. Here are four key considerations for the IT department to be aware of in order to avoid hidden costs or unexpected licensing penalties from software vendors.
1. Have a good understanding of your current IT infrastructure
The issue of how to monitor and track devices lays at the heart of what the implications of IoT are for enterprise IT. Although some companies are still trying to maintain an asset register with spreadsheets and manual tools, the added complexity of IoT will make this task too time consuming and unwieldy to contemplate without a minimum level of automation. In licensing terms, the advent of IoT means that a vastly increased number of potential ‘users’ are going to be accessing the software controlling transactions like purchasing a train ticket or turning on the coffee machine from the park. These ‘users’ will be a combination of physical users logging onto a computer and accessing software, plus automated users logging on with readings and data updates through an IoT enabled device. The resulting compliance implications therefore present a significant risk for organizations that want to take advantage of IoT and integrate enterprise software.
2. Keep abreast of vendor licensing models and any changes introduced
Software vendors are always changing their licensing models and making them ever more complicated. It is very difficult to predict the additional impact of IoT from a licensing perspective without a detailed knowledge of how vendors are going to change their licensing models in the future. However, it is possible to make some fair assumptions. For instance, audit frequency will continue to increase, as this is already a good source of income for many software vendors. According to a 2013 report published by KPMG, 90% of software vendors admitted that their compliance program is a source of revenue, with 10% using audits as a strategy to secure 10% of overall revenues. Over half of all vendors have confirmed audits help to secure 4% of their revenues and in about 59% of cases, vendor audit specialists are incentivised using sales commission. IoT will likely expand this by another order of magnitude and users therefore need to be in a position where they understand exactly what their licensing entitlements and usage levels are for each vendor.
3. Understand the small print of licensing agreements
Indirect Usage is one tricky aspect of software licensing that repeatedly catches companies out for non-compliance. Different software vendors each have their own definitions of what Indirect Usage specifically means, but the basic premise is the same. The software in question, e.g. an Oracle application, is accessed indirectly because a user or product accesses data stored in the customer’s main Oracle system through a third-party interface e.g. a Microsoft Web portal on a smart meter installed in a home, a smart loyalty card or a sensor within a car. Although the data is owned by the organisation licensing the software, it is being processed by the Oracle and Microsoft software, hence the indirect usage implication. In an IoT era, it will be very difficult to determine how many additional licences would be required for all the potential ‘downstream’ consumers of data being processed by licensed software and this will likely become a common reason for companies to get caught for non-compliance in the future.
4. Brainstorm future business models and their likely software requirements
IoT could bring with it some pretty futuristic applications and it’s necessary to be thinking ahead about what your company’s organisational strategy and business model will be in the future. For example, if you are an energy company, installing smart meters might mean you need to factor into your pricing the extra licensing costs of each meter continually updating an Oracle database with consumption readings. Retailers should be thinking about intelligent shopping applications that can advise consumers about the suitability of products based on previous buying habits, the presence of allergic components or fast approaching expiry dates. A loyalty card company might launch a smart card that communicates with the central server about consumption levels and points awarded in real-time, with contextual offers sent dynamically to the card holder. The potential applications across every sector of industry and the public sector are endless and it is essential for every organisation to be ‘thinking out of the box’ about their future and the possible licensing implications early.
Some organisations may be thinking that these problems can be solved through purchasing an unlimited, all you can eat version of a software license. However research by analysts including Gartner suggests that this typically results in a high level of wastage because organisations over-buy software licenses which are actually never used. It is far better to have the capability of understanding exactly what your future licensing requirements will be, using an automated SAM solution. Enterprises really will need to become a lot cleverer about their SAM programmes to be equipped for the disruption and confusion – not to mention the hidden costs – that IoT is very likely to create.
*Jelle Wijndelts is a Senior SAM Consultant at Snow Software
Topics: Internet of Things
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