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11/12/2015

The evolution of licensing model of engineering software products

Sia Partners had the opportunity to interview Dario Paolozzi, Software Asset Manager at Alstom Power and Renewable Energy in Baden, Switzerland.
Dario has a remarkable 10-year experience in Software Asset Management, in particular in engineering software products.  His work and efforts in managing and optimising software licenses is well known in Alstom. Here are just a few pills of his proved and extended experience about Software Asset Management: 

 

What are for you the “hot topics” today regarding licensing of engineering products?

Today the licensing of engineering product is a very dynamic and constantly changing topic. Products and license models are constantly changing, which forces clients to follow those evolutions and update even if sometimes there is no real need. License models are changing in terms of features bundling within the same license, moving from “1-to-1” relation license to “1-to-n” relation with the so-called “token model”. For example, in the past you had 1 floating license that you could share with many users, but it was focused on only one product (with different versions). Today you have 1 license with different tokens that correspond to different features and functionalities. So the vendor proposes different offers with licenses with bundled tokens. The main benefit of this new model is to be able to optimize your license costs. The new “token-based” license is a bit more expensive than the traditional license but it is cheaper than buying different “one-product” licenses like in the past.  However there are a few risks: for example it is difficult to estimate the exact need of bundled licenses based on the current vendor offers. Main software vendors that propose this new model are Ansys and Autodesk.

Let’s explain the token-based model in more detail: each software product is valued in terms of number of tokens. The number of tokens may vary according to the type of product you need. For example, AutoCAD requires 6 tokens to be used. The upside of this mechanism is that it is an on demand model, based on the consumption of users. The price per token can be negotiated, based on the consumption forecast. The downside is that clients have to sign a 3-year contract and that the license model is not perpetual, it is a leasing model. For past perpetual license the vendor may give a credit note.

 

Many software vendors are changing their license business model from perpetual to subscription. In your opinion, what are the strengths and weaknesses of this new model considering engineering license users?

Let’s start with the strengths: with the subscription model you can adjust the license demand on a regular basis, it is more flexible. Usually you might even adjust every year, but it depends on the contract conditions and leasing duration.

Concerning the weaknesses, the subscription model might be more expensive if you do not need this flexibility. In terms of business case, a 3-year horizon has a positive balance for perpetual licenses because after 3 years (considering depreciation) you achieve breakeven. So, if you have a quite stable demand, it does not really make sense to pass to lease.

At the moment software vendors are still allowing their clients to choose between the perpetual and the subscription model, sometimes even in the same contract. But the trend is to move toward the leasing / subscription model. More and more vendors are ending their traditional perpetual models in favour of the leasing / subscription model. This model includes also services, like consulting for example.  

 

In terms of monitoring tool for engineering products, how would you describe the current market? Do you think a significant investment in those tools is legitimate and it will bring high value?
 

If you asked me that question 1 year ago, I would have said that a tool in a lower price segment would have covered the current need. But we have been testing with high-end monitoring tools and now I strongly recommend to perform a detailed analysis in terms of added value vs. price. High-end tools enable you to customize reports (because they usually include high level BI capabilities) which might be parametrized on your business case requirements (which for me it is very important) while low-end tools do not. Other important features of high-end tools would be the possibility to create group users based on utilization, …

 

What are the key recommendations and best practices in terms of License Management of engineering products that you would share with the community of Software Asset Managers?
 

I think I have three main recommendations for my peers out there:

  1. In terms of organization, it is very important to have a central team dedicated to Software Asset Management and to avoid having isolated or decentralized people across the organization. The SAM team must be legitimate and officialised in the company organisation

  2. It is also very important to identify software license experts per vendor within the company (or alternatively people who would agree to increase their knowledge on particular software vendors), who have deep knowledge about license models, contracts conditions and user community / stakeholders of those products

  3. Last, but not least, software asset managers must build a good relationship with the Vendor Account Manager, and be able to position themselves as the single point of contact from the company side, in order to better leverage the license demand

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