Software Business Impacts from Machine Virtualization

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Software Business Impacts from Machine Virtualizat ionProtect ing Monet izat ion in a Virtual World

Software Business Impacts from Machine Virtualizat ionProtect ing Monetizat ion in a Virtual World

OverviewMachine virtualizat ion has swept through enterprises, big and small – creat ing significant issues for both software producers and enterprise customers – and a wide “vendor-customer gap” in customer desires and applicat ion vendors’ pract ices. Specifically, the way that enterprise IT organizations install, provisions administer and use applicat ion software is likely decoupled from how applicat ion vendors build, license and support their software. Applicat ion vendors tradit ionally have placed the burden on customers to close this gap; today it is shift ing back to applicat ion vendors.

Some application vendors have addressed tactical issues that have arisen from machine virtualization, but the industry has not, for the most part, recognized the transformation that is underway. Leading software providers are now recognizing the vendor-customer gap that exists between the way enterprises want to use software in their virtualized environments, and the way application vendors want to derive revenue in this new world. Many application vendors are closing that gap and using their progress as a means to increase their value, create competit ive differentiation and grow revenues – all the while driving down costs.

This whitepaper reviews the current market situation, outlines at the events that created it, and details steps – with an emphasis on new consumptive licensing models – that application vendors can take to create posit ive outcomes in today’s virtualized software environments.

Introduction: The Virtualization Landscape The topic of virtualization covers many different technologies. A quick review of the space sets the stage for discussion on the specific impact that Virtual Machine solutions are having both on application vendors and the customers they serve.

The most common virtualization technique is virtual machine technology. However, there are other types. Below is a partial inventory of related virtualization types, and the vendors that supply the technology.

Virtual MachinesWith virtual machine technologies, each operat ing system instance on a physical machine funct ions as if it is the only operat ing system running on that physical machine. These technologies do this by virtualizing (abstract ing) the machine’s hardware components, one virtual machine instance per operat ing system instance. This type of virtualizat ion technology is the focus of the remainder of this whitepaper.

Application Virtualization / Application IsolationWith application isolation technologies, each application instance running on an operating system instance functions as if it’s the only application running on that operating system. These technologies do this by virtualizing the operating system’s file system (and registry on Windows), one virtual file system (and registry) instance per application instance. Some application isolation technologies also isolate the operating system’s global namespace, so objects like semaphores are not shared between application instances. All other operating system services are shared between isolated and non-isolated application instance.

Presentation VirtualizationWith presentation virtualization (also known as terminal services), one terminal server machine supports mult iple user sessions. Each user session encapsulates the desktop environment of one remotely logged-in user. The user experience is such that each user believes they are the only user on that machine.

Remote ControlWith remote control (also known as KVM over IP), one person can control the host computer at any one time. The keyboard and mouse connected to the host computer and to each of the guest computers can be active simultaneously and thus compete to be the source of input. Keystroke and mouse events from these different input sources can be interleaved. Also, the video of each computer displays the same single desktop. Therefore, these solutions are not intended for mult iple guest computers to share the resources of the host computer at the same time.

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Software Business Impacts from Machine Virtualizat ion

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Fully Embraced in the Back OfficeMachine virtualizat ion is today widely used in back office environments. The numbers published by mult iple organizations reveal that there are strong drivers for use of the technology within the back office. The reasons for the broad acceptance become clear when one examines the benefits that IT organizations can receive from machine virtualizat ion.

IT BenefitsIT organizations have moved rapidly in adopting machine virtualizat ion in the back office. The most visible and oft-cited motivat ions to adopt virtualizat ion are tremendous costs savings, operat ing flexibility, improvements to governance and the importance of green init iat ives within corporat ions.

At the end of 2009 Gartner reported that 18% of all server workloads were running on virtualized servers -- a remarkably high penetrat ion1. However, Gartner’s forecast for 2010 illustrates that virtualizat ion technology is today fairly low on the adoption curve. Gartner predicts the share of server workloads running on virtualized servers to jump to 28%, a fifty percent increase over the 2009 number. In 2012, Gartner’s research has half of all workloads being virtualized. The rapid adoption of machine virtualizat ion stems from three areas: • IT execut ives seeing real, easily verified cost savings

from their peers • Support for governance and compliance measures • Delivering results to corporate efforts for green

init iat ives.

Cost savingsStories of 10:1 server consolidat ion and server ut ilizat ion moving from 20% to 60% or higher have been published for years. In 2008 and 2009, enterprise IT organizations saw a remarkable shift in the acceptance and use of machine virtualizat ion. The technology quickly moved from something that had targeted use, to became widely acceptable for most back office applicat ions. In the lead up to 2008, virtualizat ion vendors cont inued to expand the capabilit ies in their plat forms, analyst recommendations strengthened, and competit ive pressure improved pricing. But the strongest push to general acceptance came from conversat ions.

The seeds for this accelerated acceptance were almost certainly planted in 2006 and 2007, when IT execut ives shared from success anecdotes with their peers. These word-of-mouth market ing conversat ions focused on the dramatic cost savings that adopters were driving to their bottom line, compounding the advocacy of this technology and result ing in dramatic increases in adoption in 2008 and 2009.

FlexibilityMachine virtualizat ion allows IT organizations to flexibly configure resources to adjust for variat ions in computing requirements, across t ime periods, departments and geographies. The ease with which computing resources can be allocated in virtualized environments allows IT organizations to flexibility allocate computing power, and thus maximize resource ut ilizat ion.

1 Gartner: Server virtualizat ion now at 18% of server workload - Ellen Messmer, Network World, October 20, 2009

Figure 1: Part ial List of Virtualizat ion Technologies

Virtualizat ion Technology Vendor/Products Software Licensing Issue?

Virtual Machines VMware: Workstat ion, ESX;Microsoft: Hyper-V, Virtual PC/Server;Citrix: Xen Server, Desktop;Parallels: Desktop and Server (Mac), Server (Linux), Workstat ion (Windows and Linux); Sun: Zones;IBM pSeries: LPARs;HP: VPars, Integrity

Affects licensing

Applicat ion Virtualizat ion Microsoft: App-V;VMware: ThinApp;

Affects licensing

Terminal Services Microsoft: Terminal Server;Citrix: Presentat ion Server;Sun: Secure Global Desktop

Affects licensing

Remote Control GoToMyPC, PCAnyWhere, VNC No affect on licensing



Governance and ComplianceOperating system (OS) and hardware diversity within an IT organization’s back office great ly complicates the governance and compliance requirements placed on enterprises. A single enterprise IT organization may be required to comply with over 100 regulatory and agency bodies (e.g., HIPPA, PCI, SOX, ISSA, ISO 17799 & 27001, and many more). The result is the rise of efforts such as the Unified Compliance Framework (UCF) that allow IT organizations to more effect ively meet their governance and compliance requirements.

Used in combination with emerging standards like UCF, machine virtualizat ion is used by IT organizations to provide an effect ive framework for compliance and governance. Machine virtualizat ion allows IT organization to standardize the native OS and hardware in a back office with no changes to the applicat ions or impact to the end users. Machine virtualizat ion also great ly simplifies patch and OS management. Using the management tools available from VMware, Microsoft, Citrix and many others, OS and applicat ion updates can quickly be applied in a sandbox environment, validated, and then merged into product ion.

Green Init iat ivesGreen init iat ives are delivering cost savings to the bottom line, as well as creat ing goodwill with customers, employees and business partners. Earlier this whitepaper referenced the immediate cost savings from 10:1 server consolidat ion that an IT organization might receive; the cost savings also includes a mult i-year green annuity that yields an immediate return. The annuity starts with the reduct ion in the electricity used by IT to service the enterprise, but in fact comprises much more.

For example, the recommended temperature range for a data center is between 65F and 81F, while most run at 68F. With power density increasing every year from more blade servers, faster processors, and more networking gear shrinking in size; virtualizat ion is the single biggest factor to reducing data center cooling demands. Over a period of years, the green annuity payout cont inues into the future by lowering equipment ret irement costs.

Furthermore, the hazardous materials and the disposal impacts of IT are tremendous. Reducing the amount of equipment needed to service enterprise IT needs also lowers the impact fees that enterprises pay at the t ime of purchase to offset the municipal burden when a CRT, server or switch is disposed.

Finally, carbon credit offsets are widely available. When an enterprise can reduce it environmental impact, it can sell that reduct ion on the open market. For many organizations, machine virtualizat ion can easily result in the ent ire deployment being paid for in just a few months from selling the carbon offset credits, in addit ion to the improved

“green” brand image, and increased profits from lowering yearly operat ing costs.

In sum, machine virtualizat ion simply makes good business sense for small, medium and large organizations.

Exceptions are now the ExceptionThere are exceptions that may preclude enterprises from adopting virtualizat ion, but as t ime passes there are fewer and fewer. The most commonly cited examples of applicat ions that should not be virtualized are databases and transact ion systems. Applicat ions with intense interact ions with storage also have been historically been excluded, due to perceived performance delays caused by machine virtualizat ion.

The reality is that many large-scale, real-t ime financial systems are running today ent irely on machine virtualizat ion. With each release, vendors are closing the performance and management gaps in machine virtualizat ion; without exception, all applicat ions can be viable candidates for their technology.

Many applicat ion vendors believe their applicat ion is an exception that their customers would not virtualize because the nature of the applicat ion would be a barrier. The published data, conversat ions that Flexera Software has held with thousands of software provider customers, and reports from many analysts strongly indicate the contrary. In fact, very few applicat ions are excepted from virtualizat ion. The likelihood that any applicat ion vendor would not have a significant port ion of their customers using machine virtualizat ion is extremely low. In the present or in the near future, no applicat ion vendor will be excluded from the shift in the market.

The Vendor-Customer GapThe way in which IT organizations are installing, administrating, and using applications are, in many cases, inconsistent with the way the application vendor had designed, tested, defined support or licensed the application. This gap between application vendors and their customers creates additional cost to the IT organization, increases the complexity of the application, reduces the perceived value, and increases the IT organization’s governance risks. This vendor-customer gap comprises a number of issues, described below.

Product Features

ReliabilityRooted in the design tenant of cheap hardware that is easily replaced with no service impact, machine virtualizat ion allows for trivial movement and cloning of applicat ions. Planned maintenance on enclosures or emergency situat ions can be easily addressed. Commercial solut ions like VMware High Availability (HA) and Microsoft’s Failover Cluster can detect impending hardware issues and shift applicat ions to



alternat ive hardware before the hardware failure, with no impact to service availability.

In 2011, the industry will likely see offerings from major vendors in a recovery process called regenerat ive recovery. Rather than have duplicate resources standing by ready for the virtual machine to be re-instant iated, regenerat ive recovery allows the virtual machine to be dynamically regenerated on the remaining hardware resource while being act ively used. This next generat ion of reliability will help IT administrators to reduce the amount of spare capacity current ly required in data centers, allowing applicat ions to be kept running on damaged equipment, albeit at lower performance. If performance falls below defined thresholds, the applicat ion can be shifted to spare resources.

The virtual machine technology brings IT organizations a very robust, flexible and extensive foundation for highly reliable data center architecture, further driving adoption of virtualizat ion. This underscores the gap between software vendors and customers, increasing the urgency for software providers to support virtualizat ion.

ScalabilityVirtualizat ion gives IT organizations the ability to manage scalability swings that characterize today’s enterprise business environment: Accounting systems come under heavy load at the end of the month, quarter or year. Order management systems see strong spikes for the first few days or weeks with new product introduct ions. The first two months of a year have HR systems under load with employee review and goal sett ing processes.

Tradit ionally, IT organizations accommodate computing spikes by architect ing systems to handle between 70% and 90% of the expected load. However, this compromise means that most of the t ime the systems are significant ly underut ilized, yet when the demand is greatest, the system is unable to service the users. Virtual machine technology allows IT organizations to respond to demand by dynamically growing or contract ing system capacity.

In addit ion to providing a strong foundation for reliability, virtual machine technology equally establishes a robust plat form for scalability. As loads increase on a given applicat ion, addit ional virtual machines are easy brought on to service the load. The physical machines could be maintenance spares, excess capacity on other machines, or a group of systems designated to meet the capacity needs of any applicat ion.

The tool set from virtual machine vendors allows load monitoring on applicat ions and, when thresholds are exceeded, the tools automatically deploy addit ional instances to service the load. To close the gap between customer desires and tradit ional industry pract ices, forward-

thinking applicat ion vendors today are delivering solut ions that embrace virtual machine scalability.

Provisioning / Administrat ionEnterprises begin with clear and well-established virtualizat ion environment. But because machine virtualizat ion provides such an easy path for customizing and making changes, enterprises can quickly fall out of compliance. The next phase of the evolut ion of virtual machines is about control.

IT organizations current ly are faced with what is best described as “sprawl.” The core capability of machine virtualizat ion is abstract ion from the hardware. All the advantages of machine virtualizat ion spring from this key capability, but this is also the biggest complicat ion. Applicat ions can dynamically come into existence and disappear just as quickly. The focus of all the machine virtualizat ion vendors is therefore on refining the provisioning and ongoing administrat ion of the virtualized environment.

Provisioning and administrat ion is the one area where IT organizations have not seen any savings from virtual machine technology. In fact, the current studies indicate that the costs have increased. An IT organization that is in compliance can just as quickly become non-compliant. Applicat ion vendors delivering solut ions that complement virtual machine provisioning and administrat ion solut ions are clearly desirable to IT organizations.

Software LicensingSoftware is a unique enterprise purchase because the value the software delivers can be increased by simply increasing the organization’s use of it. The role of software licensing is to match the value between the applicat ion vendor and the enterprise. Creating the alignment in value allows the enterprise to extract the maximum value from the applicat ion, while at the same t ime giving both the enterprise and the applicat ion vendor assurance that the software is not being used in excess of the agreed-upon value.

Tradit ional methods to measure or cap software ut ilizat ion have been t ied either to the capacity of the hardware the software employs (hardware capacity licensing), the number of users accessing the applicat ion (user licensing), or to the number of machines that can use the software (machine licensing).

Hardware capacity licensing is based upon the idea that the software running on a more capable machine is able to perform more work. From that addit ional work, the enterprise gains addit ional value. With user- / machine-based licensing, the more users who are able to access the system, the more value is being delivered to the enterprise from the applicat ion. All the tradit ional licensing and the



subsequent pricing models are rooted in either the capacity of the system to do work (hardware) or the capacity of the workforce to do work (users / machine).

Virtualizat ion technologies have changed the landscape of hardware capacity licensing, making it very easy to create mult iple virtual machines on a single physical machine, or make a very capable machine appear less capable. While the advantages of machine virtualizat ion are obvious and enticing for the enterprise customer, this technology poses challenges for the software producer using tradit ional hardware capacity license enforcement. This is because virtual machines can be configured to have the same attributes (e.g., MAC address, port number, IP address, etc.) that match the details of an exist ing license. This situat ion is depicted in Figure 2 below.

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Figure 2: License Server Instances Bound to Physical or Virtual Hardware

User-based licensing can remain intact, but machine-based licensing can be ent irely ineffect ive in a virtual machine environment. In order for a given applicat ion to quickly deploy on any machine in the data center, the technology must make any given machine appear to have all the characterist ics of the original base machine. So changes in CPU, memory, video capabilit ies, and network adapter configurat ion are reported to the guest OS as being just like the original machine. Attaching the right to run to the ident ity of a given machine is point less unless the licensing system is aware of the virtual technology and accounts for the abstract ion of the hardware.

Software vendors need to accept that hardware licensing models and machine-based licensing can breakdown entirely in a virtual machine environment if not properly addressed. User-based licensing can remain effect ive depending on the nature of the applicat ion. Tracking and approving expense reports, for example, require that the user’s ident ity be an integral part of the applicat ion. A spreadsheet applicat ion can deliver all its value without ever knowing the ident ity of the user. Virtualizing the expense tracking system would not impact a user-based licensing method, but the anonymous nature of spreadsheet users would.

While software providers struggle with historical licensing methods, virtual machine technology opens up new software licensing models that center on the idea of consumption. The software is licensed to perform a volume of work, with the enterprise paying up front (pre-pay) or after the fact (post-pay). Consumptive licensing is perceived as more attract ive to enterprises, and software vendors looking for market advantages are embracing the idea. Machine virtualizat ion makes consumptive licensing far more pract ical and is being used as a platform for this new license model.

Regardless of an applicat ion vendor’s posit ion on the topic of machine virtualizat ion, enterprises require clear rules, presented simply, that specify how many t imes an applicat ion can be installed, deployed, and used. Unfortunately, many applicat ion vendors do not have end user license agreements (EULAs), contracts and support policies that keep pace with the realit ies of today’s IT deployments.

SupportTechnical support presents part icularly delicate issues in today’s virtualized environments. When customers call with software support issues, applicat ion vendors can escalate an already stressful situat ion by trying to sort out virtualizat ion issues concurrent ly with software performance problems.

Even more off-putt ing is a stance that vendors can take when a support or engineering organization simply refuses to move forward on a support issue that involves machine virtualizat ion, since it is “not supported.” If a customer perceives that the support policy is being used as an easy method to reject or de-priorit ize their issues, then an already difficult situat ion can easily escalate into rancor.

Take Steps to Close the Vendor-Customer GapMany applicat ion vendors have realized that there is a gap between what they had been building, selling and support ing versus what their customer has been installing, using and administering. These vendors are achieving remarkable success, and effect ively closing the vendor-



customer gap, by more closely delivering what their customers need.

Answering a few quest ions is the first step in determining where an organization / applicat ion is and the reality of the gap that exists between customer demands and applicat ion vendor reality. However, it is easy to establish both the long-term and quick efforts that can deliver the results that can improve software providers’ customer relat ionships, and revenues.

20 Quest ions Software Producers Should Answer Based on input from applicat ion vendors attending two recent Flexera Software-hosted virtualizat ion summits, software providers should answer, at a minimum, the following quest ions:

General 1. How many of our customers are using virtualizat ion

today? At what rate is this growing? 2. What virtual plat forms are our customers using and

in combination with what OS platforms?

Software Licensing 3. Have we defined a virtualizat ion policy and has this

policy been communicated to our customers? Support statement, EULAs, contracts, customer communicat ions, etc.

4. Can we use the same policy as we do for the physical hardware environment?

5. Is there a compliance problem in our install base and can it be quantified?

6. Are there new markets or new ways to serve markets because of virtualizat ion (e.g., t ime rental via SaaS, virtual appliance)?

7. What specific problem do we want to solve? Are we concerned with intent ional overuse (piracy), unintent ional overuse (compliance), or both?

8. Should pricing be based on physical or virtual resources (sub-capacity pricing)?

9. Should alternate pricing models be defined to license in virtual environments? (e.g., consumptive models like pre- or post-paid) Should we charge more based upon the addit ional virtualizat ion test matrix involved? Is there a market to charge less for limited capability?

Reliability 10. Can the applicat ion tolerate being rapidly moved

from one machine to another? 11. The applicat ion has a strong set of reliability

features, but do those features duplicate or even worse interfere with reliability capabilit ies present in virtual machine technologies?

12. How does the applicat ion report error condit ions and can that not ificat ion be easily directed and interpreted?

13. Beyond just error condit ions, are not ificat ions for current status, applicat ion load, and applicat ion health easily directed and interpreted?

Scalability 14. Does the applicat ion manage state in a manner that

allows user and transact ion processing to float over constant ly changing applicat ion architecture?

15. Does the applicat ion allow addit ional components or ent ire addit ional copies rapidly coming into existence or just as quickly disappearing?

Administrat ion / Provisioning 16. Does the applicat ion allow for remote management

without local “super-user” access? 17. Does the applicat ion provide detailed report ing of

which users perform which administrat ive funct ions from where on the network?

18. The tradit ional roles of server, networking, storage, and applicat ion administrator are becoming blurred. Does the applicat ion account for the blending of these roles for administrat ive and provisioning tasks?

Support 19. Does our support policy include machine

virtualizat ion? 20. Though machine virtualizat ion does a remarkable

job masking hardware changes, subt le differences can leak through (e.g., hardware ID values becoming significant ly longer). Are we test ing and documenting the use of the applicat ion on the popular machine virtualizat ion packages?

These quest ions will give applicat ion vendors an accurate view of the gap between their virtualizat ion-related pract ices and market demand.

Software Producers Respond to Licensing in a Virtual EnvironmentAt Flexera Software’s virtualizat ion summits, part icipat ing applicat ion vendors responded to a survey about their virtualizat ion pract ices. The survey results below focus on the software licensing challenges a virtual environment creates; as the numbers indicate, most of the respondents’ organizations have not defined and communicated their virtualizat ion policy. While most have not quantified a specific compliance problem around virtualizat ion, they recognized the potent ial for overuse – a problem that must be solved. Finally, the results indicate that most customers intend to init ially apply tradit ional software licensing and pricing models to virtual environments.



The Gap Widens - New licensing models are appearingStill, the vendor-customer gap is growing larger. Several new software licensing models are being talked about in enterprises. Stories of enterprises select ing vendors based on their ability to provide applicat ions in these new models are being published. The virtualizat ion trend will cont inue to grow and gain momentum.

At the heart of the new licensing models is the idea of consumption. Enterprises are increasing request ing the ability to either pre-pay or post-pay for a quantity of work from the applicat ion. While similar to paying for user access, the core of the concept rests with the idea that as work is performed; some metric is consumed or used up. There are strong advantages for both the applicat ion vendor and the enterprise for these license models.

Software as a service (SaaS) licensing models present useful lessons that can be easily replicated in addressing virtualizat ion issues. The two core value proposit ions of SaaS to an enterprise are: 1) the software is not on-premise,

but is instead installed, maintained, and administered by the vendor,, and 2) most SaaS solut ions are based on consumptive license models. Enterprises have realized that consumptive licensing is easily applicable to tradit ional software and, in a difficult economic and business environment, presents many advantages.

Consumptive licensing makes it is easier to clearly ident ify and report the value an enterprise receives from a software applicat ion. For example, an expense report ing applicat ion that is licensed by the number of expense reports processed clearly art iculates the software’s value.

Consumptive licensing allows the enterprise to purchase in a way that better addresses the level of price risk they are willing to take. By making no commitment to the volume, the enterprise pays a premium; when the same enterprise is willing to commit to a minimum or floor, it receives a discount. Applicat ion vendors also can receive a number of benefits as well.

Quest ion 3: Have you defined new ways to monet ize your software around virtualizat ion?

% of Votes

No, we will use exist ing licensing and pricing models. 64%

No, but we have started to discuss this. 14%

Yes, we have defined new models to better match our software usage within virtual environments.

7%

I don’t know. 14%

Quest ion 1: Has your company defined and communicated your virtualizat ion policy? % of Votes

Yes 21%

We are in process of creat ing a policy, but it is not complete. 21%

We have not started on a virtualizat ion policy. 42%

I don’t know. 14%

Quest ion 2: Have you quant ified a compliance problem around virtualizat ion? % of Votes

We have quantified a compliance problem and need to solve this problem. 20%

We have not quantified a compliance problem, but we want the ability to enforce our license policies in virtual environments.

60%

We don’t care about enforcing or monitoring compliance around virtualizat ion. 6%

I don’t have an opinion at this t ime. 13%

Survey Results



Using the same example from above, an expense applicat ion that is priced simply by user would be subject to debate and price erosion. In the past, applicat ion vendors have attempted to deal with this issue by creat ing different user roles and pricing them accordingly. The roles start simple but over t ime the roles get more granularly defined. It becomes more difficult to determine which features should be available to which role. There can even be a disagreement as to who in an enterprise should be in what role. In the end, applicat ion vendors end up discounting heavily to address the perceived disconnect. Consumptive licensing addresses the disconnect between how value is measured and how value is delivered.

Machine virtualizat ion brings the topic of consumptive licensing to the foreground. Licensing the software to perform an amount of work is a very attract ive license model when applicat ions are dynamically deployed, run for a period of t ime, and then disappear as quickly as they came. It does not matter if: • the applicat ions run on one or fifty machines • the applicat ion can run once on a given machine or

ten copies can run on the same machine • the machine has a single core / processor or the top

of the line latest eight cores / sixteen processors.

The desire at enterprises for consumptive licensing is growing rapidly, driven both by SaaS and by machine virtualizat ion. Applicat ion vendors can reduce discounting and simplify their product by embracing consumptive license models. The role of consumptive license models is increasing and all indicat ions are that this trend will cont inue.

ConclusionVirtualizat ion technology is now firmly entrenched in many aspects of enterprise data centers; popular techniques range from virtual machines and applicat ion virtualizat ion, to presentat ion virtualizat ion and remote control. Machine virtualizat ion, in part icular, is widely used in today’s back office environments. The cost savings and flexibility (and IT, compliance and “green” benefits) of virtualizat ion technology are strong drivers for its use within the back office.

Today, however, the ways in which IT organizations are installing, administering and using applicat ions are frequent ly inconsistent with the way the applicat ion vendor had designed, tested, defined support or licensed the applicat ion. This gap between applicat ion vendors and their customers creates addit ional cost to the IT organization, increases the complexity of the applicat ion, reduces the perceived value, and increases the IT organization’s governance risks. Fortunately, this “vendor-customer gap” affords new opportunit ies for software vendors to evolve their licensing pract ices, and thus enhance revenues while improving customer sat isfact ion.

Specifically, virtual machine technology opens up new licensing models that center on the idea of consumption. The software is licensed to perform a volume of work, with the enterprise pre-paying or post-paying. Machine virtualizat ion makes consumptive licensing far more pract ical and is being used as a platform for this new license model.

Consumptive licensing is perceived as more attract ive to enterprises, and software vendors looking for market advantages are embracing the idea. Software providers can follow a straightforward decision path to determine whether consumption-based licensing models are appropriate for both customers and the provider. This new licensing approach makes it is easier to clearly ident ify and report the value an enterprise receives from a software applicat ion. It also allows enterprise customers to purchase in a way that better addresses the level of price risk they are willing to take. As a result, consumptive licensing effect ively addresses the disconnect between how value is measured and how value is delivered.

For more information about how consumptive licensing can benefit software providers and their customers in today’s virtualized IT world, please visit www.flexerasoftware.com.

About Flexera SoftwareFlexera Software is the leading provider of strategic solut ions for Applicat ion Usage Management; solut ions delivering cont inuous compliance, optimized usage and maximized value to applicat ion producers and their customers. Flexera Software is trusted by more than 80,000 customers that depend on our comprehensive solut ions- from installat ion and licensing, ent it lement and compliance management to applicat ion readiness and enterprise license optimization - to strategically manage applicat ion usage and achieve breakthrough results realized only through the systems-level approach we provide. For more information, please go to: www.flexerasoftware.com

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Software Business Impacts from Machine Virtualization

Technology

Transcript of Software Business Impacts from Machine Virtualization