Four Things to Know About Cloud Software Licensing

Written by Joe Kozlowicz on Wednesday, May 7th 2014 — Categories: Cloud Hosting, Cloud Hosting

You signed the SOA, logged in to your cloud provider web portal, and spun up some servers. You’re ready to get to work, but one thing is missing: the apps! Raw infrastructure is all well and good, but without software running in the cloud, you’re not going to get much work done. The days when companies could buy a single license or the rights to 200-odd users and use that software for life are disappearing quickly.

When assessing software licenses for the cloud, make sure to evaluate how many users will access the software and how many physical and virtual processors might be involved. Here are the top factors to consider for software licensing in the cloud.

Checking the Agreement for Hardware Ownership Provisions
Some software vendors have usage rights that are specific to virtualization or cloud computing. Previously owned licenses being used on owned hardware are particularly likely to have provisions that prohibit installing that software on hardware that isn’t owned by the licensee—making it illegal to install that software in an IaaS environment. Others might allow virtualized installations, but only with very heavy use fees. Make sure you read the fine print in your software agreements to check for these provisions.

Licensing Per CPU or CPU Core
Good thing you checked how many processers, physical and virtual, you might be using in your cloud environment, right? Software vendors frequently sell per-CPU core, but once you install in a virtual environment, the concept becomes much more malleable. Virtual CPUs can move from machine to machine along with the VM or they can change in processing power. In some agreements, you are billed by the number of cores that the software could potentially run on, not the number of cores that are currently running it. That means in an environment with 20 vCPUs and only two software instances, you might still be billed for 20 instances. Licensing per core or CPU can still be cost effective if you have many users and you know every machine will run that software.

Subscription and Pay-Per-User vs. Perpetual
Besides processor license (PL), other options are perpetual licenses or subscriber access licenses (SAL), based on the number of users. A subscription model can be a per-user model, where you pay for X number of users monthly or annually. They can also be subscription based on metered usage alone, with a per-hour, per-week, per-month, or per-year license available. This model is often bundled with IaaS agreements: get X CPUs, X GB of RAM, X storage, and X licenses for which you pay monthly. Pay-per-user can vary as well, billing named users with login credentials or else allowing a certain number of concurrent users.

Perpetual licenses are not ideal for the cloud unless they were paid for prior to migration. As VMs are powered on and off, the full amount of licenses may not be used, leaving money on the table. For providers, the software usage has to be estimated and paid for up front. Perpetual licenses may run into the per-CPU or hardware ownership problems mentioned above. However, if your company has virtualized perpetual licenses successfully in house, a hybrid cloud solution could work out, where all use of the existing software stays in the legacy data center, and new projects and software are placed in the public cloud.

Moving Existing Licenses to the Cloud
More and more companies have modified their agreements to allow users to move licensing into the cloud, sometimes with additional fees for more users/machines. When a cloud provider allows Bring Your Own Software or License, users can transfer existing licenses. For example, Microsoft allows license mobility with SQL, SharePoint, and Exchange, among others. These agreements should still be examined for the issues previously discussed as moving licenses to the cloud will depend on each individual software vendor’s agreement.

Most cloud providers can help you select the ideal license agreement for your cloud environment, and most new deployments will be set up with a subscription model that allows the most flexibility. Where the complications arise is using legacy software or licenses with hardware provisions. Diligence, planning, and reading the fine print of agreements can go a long way when dealing with cloud software licensing.