Pricing Models for Grid Application Deployment

Recent press release from the 451 Group:

Current Enterprise Software Licensing Models; Are a Major Obstacle to Increased Grid Application Deployment
NEW YORK--(BUSINESS WIRE)----

Evolving enterprise requirements and experimental, alternative purchase models will have a cumulative and disruptive impact on software licensing policies and practices; the results will extend beyond grid computing and affect licensing for all enterprise software. The 451 Group believes current enterprise software licensing models are throttling grid computing deployments and that these models, which have been built around legacy concepts of enterprise application use, are presenting an increasing problem for enterprise IT managers as they pursue implementations of grid applications. Enterprise IT departments are finding that they can't afford to buy software licenses for every processor or device in a grid for each application they intend to run on that grid - a necessity, under current licensing schemes. Grids, by their nature, consume resources dynamically, and this is a concept that is not well addressed in the majority of software user licenses. This reality is skewing the potential return on investment (ROI) from grid computing programs - posing a formidable obstacle to grid application deployment. These findings are contained in a report - released today by New York-based The 451 Group, a technology industry analyst company focused on the business of enterprise IT innovation - which analyzes the role of enterprise software licensing models in early commercial adoption of grid computing technologies. 451 analysts have found that some enterprises have managed to avoid these software licensing challenges through tactics such as: -- Using in-house-developed applications, often based on open source software -- Negotiating customized deals with vendors -- Paying a premium for one or two critical applications As the volume of grid deployments increase, demands for enhanced license models will increase, as well as demands for instrumentation and management to support new license models. Conventional license management models and pricing structures are problematic and extremely expensive for users seeking to run commercial applications on grids; thus enterprise IT departments will require more flexibility in the way software is bought and used. The 451 Group also believes emerging, alternative purchase models - just coming to the marketplace - suggest a change is underway that will have a cumulative and disruptive impact on vendor licensing policies and practices. Software licensing for grids must be seen within the context of other dynamics: the ability to proactively manage the use of software licenses based on business objectives and in dynamic, virtual environments is not a grid-only issue. Grids are an important inflection point in this transformation, but the issue is a broader one for enterprise IT. "The most that early adopters can hope for is an evolution of license models to achieve software licensing based on business objectives that balance customer needs and vendor business models," said William Fellows, Principal Analyst for The 451 Group and lead author of the report. "The challenge will be to offset the potential vendor loss of revenue on one side with greater value/lower cost and more flexibility on the other side. Customers will need to consider licensing issues when they make purchasing decisions, while the vendors will need to provide an abstract resource model that accommodates applications being run on virtual resources as in the case of grid computing." The report, 'Grid Computing - The Impact of Software Licensing,' is the fourth report in the 451 Grid Adoption Research Service (GARS), an investigation into user experiences and vendor strategies. The 77-page report was written by William Fellows, Principal Analyst with The 451 Group, together with Steve Wallage, Director of Research, and Martin Schneider, Analyst, Enterprise Software. The report includes user case studies, plus detailed comparisons of user experiences and views on various licensing issues. The report also analyzes the strategies and positioning of more than 20 vendors, from grid computing companies to license management, in electronic design automation (EDA); business intelligence (BI); extract, transform, load (ETL) software and other major software areas. Key Companies Covered The report includes in-depth competitive assessments of the following vendor companies (although this is not a complete list of companies covered in various sections of the report): Data Synapse, Hewlett-Packard, IBM, Platform Computing, Runtime Design Automation, United Devices, Cadence Design Systems, Macrovision, ManageSoft, Synopsys, Business Objects, Fair Isaac, Informatica, SAS, Computer Associates, Chordiant Software, Citrix Systems, EDS, Engineous Software, Novell and Searchspace. User case studies include the following early adopter companies: ABN AMRO, ARM, Acxiom, Boeing, Freescale Semiconductor, Intel, Micron Technology, Novartis and T-Systems. Report Orders To learn more about this report, or to discuss developing a client relationship with The 451 Group, contact Simon Carruthers, Vice President of Research Services, via phone at 212-505-3030 x-103 or via e-mail at: simon.carruthers@the451group.com. About The 451 Grid Adoption Research Service (GARS) The 451 Grid Adoption Research Service (GARS) - an investigation into user experiences and vendor strategies - extends The 451 Group's proven expertise in analyzing the grid technology market. This service analyzes the track record as commercial enterprise users introduce grid technologies to their core IT operations, and it examines the effectiveness of the strategies of vendor companies whose technologies early adopters are deploying. It is an extension of The 451 Group's analytical program on grid computing, which provides an assessment of customer demand, looking at the opportunities and challenges facing early adopters and covering adoption within key industries. It also presents the unique opportunities and challenges in specific vertical market segments. About The 451 Group The 451 Group is a technology industry analyst company focused on the business of enterprise IT innovation. The company's analysts provide critical and timely emerging-technology insight to clients at vendor, investor, services and end-user organizations - insight that aids both strategic and tactical decision making for competitive advantage. The 451 Group is headquartered in New York, with offices in key locations, including San Francisco, London and Boston. For additional information on the company or to apply for trial access to its services, go to: www.the451group.comThe 451 Group / Boston Kim Kent, 617-548-3602 kim.kent@the451group.com03/17/2005 09:01 ET