Post on 25-Dec-2015
Cloud Computing & Its Impact on Software Licensing 1
Cloud Computing and its Impact on Software Licensing
Presented By
Tom Crawford & Gretchen KwashnikMay 15, 2012
Cloud Computing & Its Impact on Software Licensing 2
What You Will LearnWhat You Will Learn
• Evolution & Characteristics of Cloud Computing
• Cloud / Virtualization Models• Cloud Deployment Models• Key Considerations & Agreements
When Moving to the Cloud
Cloud Computing & Its Impact on Software Licensing 3
What is Cloud Computing?What is Cloud Computing?
• Model for enabling:
– On-demand network access
– A shared pool of configurable computing resourcese.g., networks, servers, storage, applications, and services
– Rapid provisioning
– Less management or service provider interaction
Source: National Institute of Standards and Technology (NIST)
Cloud Computing & Its Impact on Software Licensing 5
Evolution of Cloud ComputingEvolution of Cloud Computing
Cloud Computing & Its Impact on Software Licensing 6
Changing CharacteristicsChanging Characteristics
Need collaboration for service
Some network access
Multiple resources
Broader scalability
Optimization tools
CloudCloud
On-demand self-service
Broad network access
Resource pooling
Rapid elasticity
Automatic optimization
MainframeMainframe Client ServerClient Server
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Cloud / Virtualization ModelsCloud / Virtualization Models
Packaged Packaged SoftwareSoftware
Applications
Data
Runtime
Middleware
O/S
Virtualization
Servers
Storage
Networking
Infrastructure Infrastructure (as a Service)(as a Service)
Applications
Data
Runtime
Middleware
O/S
Virtualization
Servers
Storage
Networking
Platform Platform (as a Service)(as a Service)
Applications
Data
Runtime
Middleware
O/S
Virtualization
Servers
Storage
Networking
SoftwareSoftware(as a Service)(as a Service)
Applications
Data
Runtime
Middleware
O/S
Virtualization
Servers
Storage
Networking
You
Man
age
You
Man
age Yo
u M
anag
eM
anaged By Vendor
Managed By Vendor
Managed By Vendor
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Cloud Deployment ModelsCloud Deployment Models
PublicPublic
Off premiseat provider
General public
Users’ concernsand purposes vary
CommunityCommunity
On or off premise
Multiple, related organizations
Users share the same concerns
PrivatePrivate
On or off premise
Limited to asingle organization
Used by variousbusiness units
HybridHybrid
On or off premise
Determined byeach cloud
Users’ concernsand purposes vary
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DiscussionDiscussion
• Who has participated in procuringor deploying applications to a cloud?
• What level (IaaS, PaaS or SaaS) andtype (public, private, community or hybrid)of deployment models were utilized?
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ForecastForecast
Approx. 1/3 of U.S. organizations are using cloud computing
21% avg. annual savings for applications moved to the cloud
It was predicted that 20% of businesses would not own IT assets by 2012, a trend driven by cloud computingNo hardware. No licenses. No networks. No security software.Just a browser with an internet connection
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1. Cost Reduction 1. Cost Reduction | Why Move to the Cloud?| Why Move to the Cloud?
• Reduced cost of building andmaintaining IT infrastructure
• Specific use scenario should be analyzedto determine whether or not a cloud deliverymodel may result in greater cost avoidance
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2. Speed & Flexibility 2. Speed & Flexibility | Why Move to the Cloud?| Why Move to the Cloud?
• Reduction of complex procurementand deployment cycles
• Self-service provisioning for addingfunctionality and new users
• Ability to scale up and down as needed
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3. Greater Mobility 3. Greater Mobility | Why Move to the Cloud?| Why Move to the Cloud?
• Access your software and inherent data fromany device that has access to the Internet
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4. Easier Collaboration 4. Easier Collaboration | Why Move to the Cloud?| Why Move to the Cloud?
• Pre-established application programminginterfaces (APIs)
• Integrates popular applications for sharing of information to drive results
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5. Heightened Security 5. Heightened Security | Why Move to the Cloud?| Why Move to the Cloud?
• Provider’s often have cutting-edge,secure, and traceable data access trails
• Most cloud servers will be hosted in physically secure data centers with strict access control for their own staff and no access for unauthorized personnel
• Some question the heightened security
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DiscussionDiscussion
• Explain your experience with deploying applications results in a cloud:
– Cost savings
– Speed and flexibility
– Greater collaboration across entities
– Security
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Traditional Licensing vs SaaSTraditional Licensing vs SaaS
TraditionalTraditional
One-time upfront payment
License to use inperpetuity (no term)
Customizations maybe supported
Ability to have custom code
More influence to ask for a specialorder from their menu items
Normally hostedon-premise by organization
SaaSSaaS
Subscription-based pricing
License to use only whilesubscription is current (term)
Customizations normallynot acceptable
Focus on standard offering
Little to no influence to order items noton the menu (only their standard items)
Normally hostedoff-premise by provider
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Example: MusicExample: Music
Hosted: iTunes®Hosted: iTunes®
Off premise
Use provider’s portal to play music
Accessed from anywhere there is internet access
License to listen in perpetuity
SaaS: Pandora®SaaS: Pandora®
Off premise
Use provider’s portalto play music
Accessed from anywhere there is internet access
License to listen only while subscription is current
Traditional: CDTraditional: CD
On premise
Need your ownequipment to play music
Accessed only if in possession of CD and onsite
License to listen in perpetuity
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Rights to Use the Service Rights to Use the Service
• Subscription-based
– Normally includes the right to use the service plus support and maintenance, hosting and storage fees
• Extend the “internal use only” definition
– Ensure third party contractors can use the service
– Contract example: Users may include but are not limited to employees, consultants, contractors and agents of Organization,or third parties with which Organization transacts.
• No hidden fees
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Payment TermsPayment Terms
• Monthly or annual payment schedule• Locked in for an extended term
– Achieve greater discount by locking in longer
• Minimum number of user commitments– Payment usually starts upon contract signing even for a
sandbox or other non-production use
– Negotiate 2+ user types: read only and full
– Ensure you have the administrative ability to add and remove users without provider’s assistance
– Fees are not based on actual usage
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Future FeesFuture Fees
• More users– Volume tiered pricing
• Pure tiers and not step-through
• More storage– Per user or instance
• “New” functionality – Substantially similar or enhancement– Part of core product or provider’s original intent
• Energy surcharge
Cloud Computing & Its Impact on Software Licensing 24
DiscussionDiscussion
• Who has entered into a SaaS or other subscription-based license agreement?
• Were the applications hosted by thePublisher or a third party?
• Were the applications deployed in acloud with virtualization or a traditionalhosting environment?
Cloud Computing & Its Impact on Software Licensing 25
Application Capabilities MatrixApplication Capabilities Matrix
Contract example:
1. Standard: Included in current version or a configuration
2. Custom: Needs to be developed
3. Future: On current 1-2 year roadmap
4. NA: No plans to develop
In the “3rd Party” column, please designate whether or not such IP for the functionality is owned/controlled by a third party.
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Application Capabilities MatrixApplication Capabilities Matrix
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Key Agreements
Establishing the Groundworkfor Moving Forward
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Underlying SaaS AgreementUnderlying SaaS Agreement
• Information Security & Confidentiality
– Multi-tenant vs. single tenant environments
– Perform an onsite risk assessment upfront
– Secure code development standards—ability to test
– Who can access your data—user permission roles
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Underlying SaaS AgreementUnderlying SaaS Agreement
• Data Rights & Responsibilities
– Data at rest and data in transit (Government data always belongs to the government)
– Obtain data flow diagram and levelsof encryption upfront
– Destruction and return of data requirements
– Data will be in usable format
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Underlying SaaS AgreementUnderlying SaaS Agreement
• Intellectual property indemnification
• Rights to request software customizations:Cost and ownership of any such software customizations (work product)
• Disaster recovery and business continuity
• Termination conditions and cooperation
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Addendums: Master AgreementAddendums: Master Agreement
• Support & Maintenance Agreement– Levels of support available and severity of issues – Response and resolution times – Remedies
• Service Level Agreement– Uptime and performance levels– Remedies
• Professional Services Agreement– Terms & Conditions for engagements with provider– Training options
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Support & Maintenance: ProductSupport & Maintenance: Product
• Identify:– Severity levels– Response and resolution times – Provider’s escalation process and contacts
• Notice period before all releases or ability to “opt-out”
• Ensure support for third party integrations are included
• Define remedies for failed turnaround times– How to submit a claim for a refund or credit– Ability to terminate the entire agreement without further
liability under certain circumstances
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Examples: Response Time for Support CallsExamples: Response Time for Support Calls
Issue SeverityIssue Severity Response Time toResponse Time toAcknowledge IssueAcknowledge Issue
Response TimeResponse Timeto Fix Issueto Fix Issue
Level 1 (LOW) Does not have significant
impact on users
Return call or email within 8 hours
Provide fix within 30 days
Level 2 (MODERATE)Causes some user issues,
but most processes are functional
Return call or email within 4 hours
Provide fix within 5 days
Level 3 (HIGH)Significant impact
on system use
Return call or email within 1 hour
Provide fix ASAP(24 hours or less)
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Service Level Agreements: HostingService Level Agreements: Hosting
• Define uptime calculation and planned maintenance– Identify the provider’s standard maintenance window– Request at least 48 hours’ notice
• Define performance level and testing mechanism– Content load ping test– Third party tools
• Confirm what monitoring and alerts are available
• Define remedies for failed uptime or performance– How to submit a claim for a refund or credit– Ensure refund or credit for every hour or day of delay– Ability to terminate the entire agreement without further liability
under certain circumstances
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Measuring the SLA for MaintenanceMeasuring the SLA for Maintenance
Criteria Measurement Comments
Minutes in a 90 day period 129,600 minutes
Planned down time (assume 18 hours) 1080 minutes This is a standard amount of time
for system maintenance
Remaining minutes forscheduled up-time 128,520 minutes.
SLA 99.9% This is a moderate standard;5 nines (99.999%) is very high
Minutes of expected up time 128,391.5 minutes.
Allowable minutes ofunplanned downtime
128.52 minutes ~ 2.1 hours over 90 days!
Little time for unplanneddown time
Penalties Varies Usually a credit is given for missing the SLA
System Availability Example – 99.9%
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Importance of Uptime PercentageImportance of Uptime Percentage
95.00% =
98.00% =
99.00% =
99.90% =
99.96% =
107 hours of downtime
43 hours of downtime
21 hours of downtime
2 hours of downtime
51 minutes of downtime
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Example: Termination LanguageExample: Termination Language
• If Customer experiences:
– More than 6 unexpected downtime hours resulting from 3 or more non-consecutive service interruption events during any rolling 30 calendar day period
OR – More than 24 consecutive unexpected downtime
hours due to any single event
Customer shall be allowed to immediately terminate the Agreement and any Order Forms with Provider, and shall not be liable for any future committed fees beyond the termination date.
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DiscussionDiscussion
• Who has experience managingresponse time and uptime SLAs?
• Discuss variations you have seen onSLAs, penalties, termination rights, etc.
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Wrap-UpWrap-Up
Cloud computing is a broad and evolving term
Each software application and use has different contractual concerns, including data risks and ownership rights
Include a Applications Capabilities Matrix as part of your selection process and final contract
Ensure the Service Level Agreement has teeth
Document escalation process with the provider
Plan for the worst—ensure cooperation during a data breach or termination
Cloud Computing & Its Impact on Software Licensing 40
ResourcesResources
• DoD ESI SaaS Toolkit– www.esi.mil/saas_toolkit
• DoD ESI White Paper: Best Practices for Negotiating Cloud-Based Software Contracts
– http://www.esi.mil/contentview.aspx?preview=true&id=273&type=1
• CIO Council Guide: Creating Effective Cloud Computing Contracts for the Federal Government: Best Practices for Acquiring IT as a Service