Johannesburg, 27 May 2005
Software licensing methodologies are not expected to hold up to the changing fundamentals of the IT industry and tend to break under variable computing, delegates at the METAmorphosis 2005 conference were told yesterday.
Gartner research VP Will Cappelli argued that a significant power shift, from the software vendor to customer, is taking place, as subscription licensing provides no protection for customers, and utility, grid and adaptive computing paradigms are stonewalled due to licensing restrictions.
He commented that economics are the true driver behind new IT environments, which has not been the case with software licences, which are developed to protect vendors` intellectual property (IP).
The "arrogance of licensing" and software commoditisation are some of the critical issues that underpin the breakdown of software licensing, Cappelli explained.
In terms of "licensing arrogance", he maintained that IP protection is not based on an economic model, thus preventing rational business decisions, as vendor business models are predicated on preserving revenue stream and IT business decisions are driven to become more efficient or more effective.
"Licensing is taking the control out of the hands of customers and placing control in the hands of vendors," Cappelli said.
Meanwhile, regarding commoditisation of the software market, he argued that as technology matures, product feature/functionality suffers price erosion, but premiums will always exist for best-in-class and "new" features and functionality.
"Infrastructure software costs will become effectively invisible and costs will not be worth discussing, while commoditised products will enable more turnkey solutions."
Cappelli predicted that, in terms of the future of vendors, a vendor "revenue squeeze" is occurring, as the balance of power has shifted to customers and vendor aggressiveness has been tempered compared to the 1990s. He also suggested that infrastructure vendor consolidation is inevitable.
"We project a reduction by more than 35% (of individual vendors) by 2008, while offshoring will help reduce vendor support costs and innovative and well-integrated vendors will be best suited to survive," he pointed out.
He added that analytics and integrations will command premiums through 2008, application vendors will need to find new markets to sustain growth and innovative vendors may not be the same as integrated vendors.
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