License to trap: The potential pitfalls of cloud software licensing

I’m old enough to remember friends of mine exchanging a CD-ROM of Microsoft Office to use on their various desktop computers. The disc included a little yellow Post-it on the inside with the license number—that magical code they needed to unlock all that word processing and spreadsheet power.

That minor misdemeanor notwithstanding, the basic licensing system back then had some pretty obvious loopholes big enough to throw a giant tube monitor through. Not long after that, we were introduced to seat licenses and then subscription licenses as the cloud moved into our collective atmosphere.

Licensing is fairly simple if you’re just an individual user, but as many of our enterprise clients can attest, the licensing process can not only get complicated but also pricey if you’re not paying attention.

A cloudy licensing world

Cloud services get a lot of attention, but despite the well-documented benefits, many enterprises are still waiting to make the leap. Much of that is related to the time commitment. After all, finding the right fit, looking at your portfolio and retooling your company mindset are not quick processes.

Also, while we’re seeing consistent savings of 30 percent or more for companies moving from on-premises to cloud, many clients underestimate the value of migrating. Much of that has to do with trying to compare apples to apples, especially when it comes to items like staff productivity, app refactoring, and others.

Emerge reports that software licensing is an additional issue that can be hard to analyze and predict:

“Another major factor that can be really opaque in these analyses is software licensing. For example, are you going to bring your existing Microsoft licenses to the cloud or buy new licenses from the cloud provider? … Not every instance supports license movement, and there is often more than one way to do it. For some workloads, you actually end up saving more by buying new licenses.”

That “opaque-ness” can also lead companies into traps, however—especially those that aren’t looking at the fine print. Some software companies have been known to surprise customers with additional fees for certain features—even if the customers aren’t even using them. Clustering machines can also cause problems.

Much of the time, it simply comes down to the innate difficulty of tracking a particular software’s use across the company and fully understanding the licensing terms.

Respect the license fine print

Just like ignorance of the speed limit doesn’t keep you from getting a ticket, not understanding licensing terms won’t nullify that big invoice. Here are some common mistakes companies make:

• Outside access – Access to your software by third-party partners might be forbidden and may incur additional costs.
• Sneaky license use – Just like that yellow Post-it license number, you might have employees finding their own loopholes. Maybe sharing one license through a generic email? An audit that discovers these violations might bite you.
• Lack of attention – Licenses are easy to forget about, but that doesn’t mean every cloud provider is looking out for your best interest while your attention is elsewhere. We recently saved a client $250,000 after a cloud provider audited them and attempted to charge them for additional licensing. We reviewed the licensing and configuration and did our own assessment to verify the number of actual licenses in use. We proved our findings were accurate and luckily saved our client a large chunk of money.

Bottom line: You’ll never be able to eliminate all the licensing pitfalls, but Julie Machal-Fulks, a partner with law firm Scott & Scott, offers some good advice in Computerworld:

"People will often say, 'We don't think things have changed that much, so we'll just renew.' … [But] periodically review your environment to see what, if any, changes have been made. If there are changes, there's a good chance there are licensing implications.”

Cloud services can be wildly beneficial to your company’s productivity and bottom line, but make sure you’re not falling victim to any licensing traps you may not even see. The stakes are now much higher than getting caught with a pirated CD-ROM, so let us know how we can help!

Amy Krohn is vice president and chief information officer at Veracity Consulting, a tech consulting team of problem-solvers and truth-tellers who deliver customized IT solutions for commercial and government clients across the U.S. Learn more at veracityit.com, and share your thoughts on Facebook or Twitter @engageveracity.