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Software license to ill

• By Jack Vaughan
• January 1, 2004

This technology recession was painful for software vendors and software users alike. But if vendors think climbing out of the hole means returning to software licensing practices as they were before the storm, they are probably mistaken.

Outright forced upgrades, sneakier end-around updates, automatic maintenance billings and expensive -- and at the same time inept --  support are all practices that must go if the software industry is truly to move forward again.

This notion was bubbling beneath the surface of a generally upbeat program AMR Research conducted in November. The event emphasized the idea that we are on the brink of a ''post-technology'' age when how effectively you use technology for business advantage is a more telling metric than how much technology you use. IT budgets, AMR head Tony Friscia said, have begun to show some momentum upward. But budgets are people and technology. What you pay for technological innovation remains an issue, a point made repeatedly by the  high-profile end users at AMR's confab.

A new approach to licensing is called for, they said. ''We will not move innovation ahead without a new model,'' said Ray Barnard, CIO at Fluor Corp. But what kind of new model would work? Barnard, like others, could not be immediately specific. Removing support from licensing updating fees was a first step, he suggested.

''Everything we are doing is because of the software,'' said the information chief at the noted global engineering/construction concern; but, he added, a new model is needed for licensing software.

Barnard's efforts to define a new playing field go beyond established players who have gotten far enough to have licenses to renew. They extend as well to would-be giant-killers, who are selling their first licenses. ''We need less risk,'' Barnard said simply. Spending $3 million to see if software works -- not unheard of in the past -- is not an option, he chided. Of course, the new players know this. A not-so-dissimilar message is filtering up to the incumbents.

To rein in IT spending, said Barnard, upgrades are reviewed carefully at Fluor. Barnard and crew scrutinize an upgrade to see if it is ''real'' or not; remember, it is expensive to upgrade.

Because Microsoft's reach is most extensive, it must be most selective when it leads its users to upgrades. It must un-learn some of what got it to where it is now. Bill Gates may have cut a lot of classes at Harvard, but he did glean a lot from My Years with General Motors by Alfred Sloan (New York: Doubleday, 1964). The book described the concept of the Model Year, which defined the auto industry sales cycle, for GM and others, for a long time. Gates and company benefitted from applying similar approaches in software, but the concept is not bottomless. Users may not mind replacing, say, Exchange. But they do mind having to, as a result, replace Active Directory, Windows NT and so on.

The bad news is that no one seems to have a picture of what a better arrangement for licensing would be. But there are views of the future that provide some pictures. Linux, which is open but not entirely free, is, for many, a beacon.

The license issue plays out in the upsurge of Salesforce.com and the scrambling by sales-force automation behemoth Siebel to adjust. You can be sure Oracle's 10g database update gambit will need to prove it is meat and not just sizzle if it is going to move.

No doubt the issue plays out in the upsurge of the Linux operating system. It's got a great price point. And it is stable. Linux forms the vanguard for other disruptive software technologies that will loom at the low end, and move up the food chain. It is being held out by end users to put pressure on Microsoft -- and Sun, IBM, HP and so on -- to reduce costs.

Users know that there is more to software than just installing it, and that ''Free Linux'' costs in not unsubtle ways. It is not all about money. It is mostly about competitive advantage, and getting a fair shake.

''My budget can go up as well as I can build a business case about competitive advantage,'' said one CIO at AMR's event. With the smoke of tech recession hopefully cleared, that notion will become more common. Plenty of users owe their advances vs. competitors to software and the vendors that made it. If customers feel they have been treated fairly -- and that companies are not out to gouge them with licenses, maintenance and support -- they will be more ready to work to find a happy medium.