The cloud has changed everything. But does it promise new dangers or clearer skies for your bottom line and your Software Asset Management program?
Smooth Sailing: The cloud is an easy and efficient solution for your software, platform, and infrastructure needs. And you don’t have to wait for central IT and procurement — with long approval and deployment processes — to access top-of-the-line solutions.
The cloud empowers your business units and employees to make IT decisions better and faster.
Rougher seas: But ease and flexibility come with a big price tag. Increased flexibility can cause costs to spiral quickly out of control. If you don’t know what you’re using, how much you’re using, or if you’re not taking advantage of benefits included in your licensing, in short, if you’re not managing your environment, your cloud investment could turn into a money pit. With cloud license management, navigate your way past the dangers of high costs to the safe havens of increased revenue.
The cloud offers a variety of options for your business. It’s flexible, easy to access, and demands fewer in-house resources. You don’t have to host, maintain, install, or even deploy most of your services. Just log into a local or web-based client, and you’re ready to go.
There are three main types of cloud services: Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). Each comes with its own licensing types, benefits, and challenges. And then there’s the hybrid cloud, which combines the best of cloud and on-premises services. Let’s look at these options and how they are licensed.
SaaS is a browser-based application that you might use for normal daily work. You log in to the vendor’s website and use software that is hosted remotely by that vendor.
Examples: WebEx, HubSpot, Salesforce, Google Apps, SmartTrack
Benefits: Low initial costs, continuous upgrades and support, easy customization.
IaaS gives you a virtual server OS environment or raw computing capacities. You rent offsite servers and monitor them with applications as if they were on-premises.
Examples: Amazon EC2, Microsoft Azure, Rackspace Cloud
Benefits: Easily scalable, enhanced flexibility, better disaster recovery infrastructure.
PaaS gives you an environment to run custom applications without having to maintain the underlying platform.
Examples: Microsoft Azure, Oracle Cloud, Force.com, Google AppEngine, Kubernetes
Benefits: Enhanced agility, maximized uptime, easily scalable.
Hybrid cloud is a blend of SaaS usage and physical installation. Some hybrid products are subscription licenses, some are a cloud workspace.
Examples: Microsoft Office 365, Adobe Creative Cloud
Benefits: Can be used on-premises and on-the-go.
The cloud’s flexibility and ease can be paid for in different ways depending on the service you need, the contract’s duration, or the capacity. The different payment models are an essential part of making “as a Service” solutions responsive to your organization’s needs. Instead of buying a one-size-fits-all solution, you can adjust the speed, size, and terms of service as you go, so you can keep pace with your changing business needs.
You pay monthly or yearly for access to a cloud service. You’re not tied to long-term and expensive contracts, and you can cancel at the end of a project or if you’re dissatisfied with the service.
You pay for the use of a specific instance, such as CPU capacity, memory, or storage. You’re charged only for how much you use.
You pay for each server or server instance the vendor spins up for you. These Reserved Instances are contracted for specific periods of time (1 to 3 years), and they run 24/7.
You can use cloud software for which you already have a “perpetual” license, a license that never ends. Keep the terms and conditions you know, so there are no hidden or accidental costs.
Cloud providers know what you’re using. Everything is hosted on their servers, so they don’t need to do invasive and costly audits. The benefit is your organization saves time and money in audit preparations and associated costs. But it’s not because cloud vendors want to be nice. Your servers are their servers, and they can see your consumption and configurations without leaving their office chairs. The cloud is also a steady source of revenue, so providers don’t need audits to generate more profit.
SaaS growth will be 19.3%, and can be expected to reach $76 billion by 2020.
According to Gartner, between 2015 and 2020
And that’s just for Software as a Service (SaaS). That’s serious money for cloud providers, and a significant investment for your organization. Protecting that investment means going back to the basics of SAM: Know what you have, how you’re using it, and how it’s configured.
Are there no compliance risks in the cloud? Many people believe there aren’t. After all, if your software, platforms, and infrastructure are all hosted by the vendor, then how could you possibly violate the terms and conditions?
But it’s just a myth!
In order to ensure continued flexibility, cloud service providers don’t always build in hard technical restrictions. This means it can be just as easy to over-consume in the cloud as it is on-premises. Many other compliance risks, such as indirect access and unauthorized usage, are still risks in the cloud. It’s just as important to know your licensing terms and conditions and monitor usage in the cloud as it is on-premises. At the end of the year, your vendors will send you a bill for any usage not covered by your licenses. And because cloud vendors know exactly what you’re using and how, it can be harder to defend against non-compliance claims.
Choosing the right licensing model requires knowing your goals and needs in the cloud. Each model comes with certain risks and benefits, so the most important thing is to know what those are and whether your organization can shoulder the financial burden if things don’t go as planned.
Let’s compare two infrastructure licensing models to see what the options are:
Deciding how to license your cloud assets can be tricky. Take too much, and you waste money on unused capacity and subscriptions. Take too little, and you can miss out on volume pricing and other hidden benefits. To get the best pricing on your services, take only what you need. Otherwise, your cloud costs will encourage license waste and eventually drive down revenue. As always, your goals are to get the licenses that meet your organization’s needs but also to keep costs down.
Moving to the cloud can be a tricky, complicated process, but with a license management tool, you can make the transition a smooth one. Monitor your progress and identify trouble spots early on:
Use it to track which users have moved into the cloud and remove their on-premises software access.
As users move to the cloud, you might discover they no longer need the licenses assigned to them. Track usage and re-harvest unneeded licenses.
By storing them in one central location, your SAM tool gives you quick and easy access to your contracts, so you can ensure you’re sticking to the letter of the law.
Compliance issues don’t disappear in the cloud. Use your SAM tool during the migration to make sure you don’t end up with unplanned costs, fines, and fees.
SAM is your best strategy for navigating cloud licensing choices. Follow these seven to-dos to decide which license model best fits your business needs.
Knowing how much you use can help you choose the best cloud licenses. Usage is based on many metrics such as:
Each of these usage metrics can be tracked with a SAM tool that gives you an accurate picture of current and projected needs.
Start your cloud migration by identifying the problems that cloud services can solve. Do you need more ad-hoc computing power? If the answer is yes, then knowing how much and how often you need that power can help you decide between pay-as-you-go and pay-by-instance licenses. Or do you need software programs that can be installed on-premises but are also available on the go? Then a hybrid cloud option might be the best fit.
Figuring out a business case for cloud cost management will help you analyze your current infrastructure, platform, and software concerns, and guide your organization in making the right license purchasing decisions.
Whether you’ve already migrated into the cloud or you’re thinking about it, your existing terms and conditions with a vendor might give you pricing advantages. Make sure you know exactly how to use your existing contracts to your advantage.
For example, Microsoft customers who have purchased three years of Software Assurance can move to the cloud at a lower price.
When you migrate to the cloud, make sure you’re paying for only what you will need and use. The size and number of your servers, instances, and virtual machines will vary depending on your needs. For instance, consider whether you can redistribute your cores to fit in different sized and potentially cheaper instances.
Don’t pay for 100% of a server if you’re only going to use 30% of it. Before your cloud migration, figure out exactly how much server space you’ll need, and pay just for that.
If your cloud servers and instances don’t need to be on during certain times of the day, then get a cloud license that allows you to turn them off or spin them down. Shifting consumption to off-peak hours can save money in the long run.
Capacity management can also result in refunds. For instance, Google Cloud Platform customers are entitled to a refund if their cloud resources are not available in accordance with their Service Level Agreements. Regularly reviewing your downtime logs can help to recoup costs for any violation of the SLA.
When employees leave the company, or if they no longer need regular access to a cloud program, their existing licenses should be deactivated. This is software license re-harvesting. It prevents people from gaining access, return useable licenses, and makes them available to other employees. Instead of buying new licenses, you can better manage the ones you already have.
Many organizations encounter this licensing challenge with Salesforce license management. Employees change roles or jobs, but they continue to have an assigned Salesforce license. If someone else needs a license and there are none available, then new licenses need to be purchased. By using cloud cost optimization processes like re-harvesting licenses, you save money by eliminating unnecessary license spend.
Maintain flexibility without losing financial oversight. A key factor in successful cloud cost management is having a central license overview to help track which business unit is using and purchasing licenses. Use that information to decide how to better budget for license purchasing, and to make sure licenses aren’t being wasted.
For example, Business Unit A has 15 unused Salesforce licenses, and Business Unit B needs 23. Unit B can take the 15 unused licenses from Unit A and only needs to purchase 8 more. Without a central license overview, the organization would have wasted resources on licenses it didn’t need.
The cloud gives business units significantly more flexibility in purchasing and deploying the latest solutions and apps. But if these purchases aren’t recorded and managed, they can recede into the shadows, becoming a hidden drain on your resources. Effective cloud cost management goes beyond central IT to include an overview of all business units’ spending on cloud apps.
Armed with broader stakeholder engagement, your Software Asset Management program can shine a light on the darkest corners of your cloud spend.