2012 Key Trends in Software Pricing & Licensing Survey: Sponsored by Flexera Software

2012 Key Trends in Software Pricing
& Licensing Survey

Sponsored by Flexera Software

2012 | Key Trends in Software Pricing and Licensing Survey 2

Contents
Overview of Survey Findings ................................................................................................... 4
Software Licensing, Pricing, Flexibility & Value .................................................................... 4
Software Usage Tracking, Optimization & Compliance ........................................................ 5
Software Compliance Enforcement ...................................................................................... 5
The Cloud and Virtualization ................................................................................................ 6
Survey Background ................................................................................................................. 7
Methodology and Sampling ..................................................................................................... 8
Enterprise Demographics .................................................................................................... 8
Application Producer Demographics .................................................................................... 9
Software Licensing, Pricing, Flexibility & Value ....................................................................... 9
Application Producers Offer A Wide Array of Software Pricing Models: ............................... 9
Enterprises Demand a Variety of Pricing Models ............................................................... 12
Application Producers Predominantly Deliver Licenses via Email ...................................... 13
Producers Prefer Node Lock and Network Licensing Technologies ................................... 13
Enterprises Prefer Network Licensing for Enforcement ..................................................... 15
Considerable Application Producer Dissatisfaction Found with Software Pricing & Licensing
Strategy ............................................................................................................................. 16
Enterprises Evaluate Price-to-Value Software Satisfaction ................................................ 17
Pricing & Licensing Strategies in Flux ................................................................................ 18
Producers Shifting Away From Perpetual Licenses............................................................ 20
Software Usage Tracking, Optimization & Compliance .......................................................... 22
Application Producers Dont Know What Products Their Customers Are Actually Using .... 22
Most Producers Dont Believe Enterprises Manage Entitlements ....................................... 23
Enterprises Software Investments Are Growing ................................................................ 24
Software License Management Is Critical to Enterprises ................................................... 26
Many Enterprises Are Not Optimizing Their Software Licenses ......................................... 28
Maintaining License Compliance Is Challenging for Enterprises ........................................ 30
Licensing Complexity Challenges Translate to Shelfware and Non-Compliant Software Use
.......................................................................................................................................... 31
Enterprises Turning to Automation to Manage Software Licensing ................................... 33


Software Compliance Enforcement ....................................................................................... 34
Software Audits Gaining in Frequency, Especially for Large Software Vendors ................. 34
The Cloud & Virtualization ..................................................................................................... 40
Virtualization and the Cloud Are Prompting Changes to Licensing & Compliance Policies . 40
Server Virtualization Has the Greatest Penetration within Enterprises and Its Growing .. 41
Desktop and Application Virtualization Gaining Momentum ............................................... 42
Enterprises at Risk in Their Virtual License Management Practices ................................... 43
Software Licensing and Provisioning Research at IDC .......................................................... 45
About Flexera Software ......................................................................................................... 45


2012 Key Trends in Software Pricing
& Licensing Survey
Sponsored by Flexera Software

Overview of Survey Findings

The 2012 Key Trends in Software Pricing and Licensing Survey of 334 participants, prepared with
assistance from IDC, found that:
Software Licensing, Pricing, Flexibility & Value
New ways to consume and pay for software abound: A growing diversity of software pricing
models are being demanded by enterprises and provided by application producers, signaling a
market trying out new software consumption models.
o Node locked (40%) and feature concurrent user (floating or network license) (39%) are the
most prevalent pricing models being offered by producers. Device-based pricing (23%) and
feature-based concurrent user (floating or network license) (19%) are the most popular pricing
models with enterprises.
Application producers feel theyre delivering more value than theyre getting paid for,
enterprises say theyre receiving less value than theyre paying for: A significant proportion of
application producers feel their licensing and pricing strategies are not effective in capturing the
value their software provides. In contrast, a good percentage of enterprises register varying levels
of dissatisfaction with the price-to-value they receive from their software.
o Nearly one quarter (24%) of application producers believe their licensing and pricing
strategies are either ineffective or very ineffective. Enterprises indicated most frequently
they were either unsatisfied or very unsatisfied with the price-to-value of their ERP software
(25%), database software (22%) and CRM software (20%).
Producers trying to close the value-to-satisfaction gap: Application producers are changing
their licensing and pricing strategies in order to strike the difficult balance between simultaneously
increasing revenue streams and increasing customer satisfaction.
o 42% of application producers report that over the past 18-24 months, their software pricing
and licensing strategies have changed in order to increase revenues, improve customer
relations and enter new markets. Over the next 18-24 months, application producers said
they would add subscription/term licensing (26%), better enforcement or security (24%),
pay-as-you-use (24%) and add temporary/evaluation/ try-before-you-buy licensing (19%).


Software Usage Tracking, Optimization & Compliance
Application producers dont know what products their customers are actually using: Most
application producers do not have technology in place to know whether their customers are actually
using their products. Without this type of data feeding the product development and marketing
process, making decisions such as when to end-of-life a product, when to stop support for an
operating system, etc., can be challenging.
o 48% of application producers (up from 40% one year ago) indicated that they do not have
technology in place to know what product version or platform their customers are using and
13% do not know.
Most producers dont believe enterprises manage entitlements: Application producers seem to
have a general lack of awareness around whether their customers manage their software licenses
and entitlements, and whether this is a difficult task.
o Almost a quarter of application producers (23%) believe their customers do not manage
entitlements at all, and almost half (49%) believe that customers do manage entitlements
but do so manually with no or only some automation. In actuality, only 29% of enterprises
surveyed said they actually manage their entitlements manually.
Enterprises recognize growing risk of failing to adequately manage their software licenses:
Enterprises overwhelmingly recognize the importance of software license management yet they
are failing to optimize their license estates, which they recognize is increasing their costs and risks.
o Compared to other objectives, 82% of enterprise respondents (up from 72% a year ago)
indicated that managing software licenses and usage is either important or very important.
33% of enterprises indicated they are either dissatisfied or very dissatisfied with their
current method for managing software licenses and usage. 30% of respondents familiar
with their companies practices in this regard, do not optimize their software estates by
reconciling software usage data with product use rights. Only a minority of respondents
answered no difficulty when asked to rate the difficulty of maintaining licensing
compliance for the various types of applications they run.
License management challenges resulting in shelfware and out-of-compliant software use;
enterprises turning to automation for help: Because of the difficulties enterprises face managing
their software licenses, increasingly they are over-using software they have (out-of-compliant use)
as well as purchasing software they dont need (shelfware).
o 38% of enterprises indicated that 11% or more of their application spend is associated with
applications that are overused, and therefore out of compliance, up from 26% one year
ago. Likewise, this year 56% of enterprises say that 11% or more of their application
spend is associated with applications that are under-used (shelfware), up from 49% last
year. 67% of enterprises said theyre using some sort of automation to manage their
software licensing and usage today.
Software Compliance Enforcement
Software license compliance audits continue unabated; large enterprises are the most likely
targets of audits: As application producers seek new revenue sources, and acknowledge they
have poor visibility into customer software usage, software license audits continue to be a popular
tool by which they enforce their license agreements.


o 64% of enterprises reported that they have been audited (or had a license review) over the
last 18-24 months. 36% report having experienced at least two audits over that time period,
and 10% report that theyve been audited more than 3 times. Large enterprises those
greater than $1B in revenue -- were significantly more likely to be audited three times or
more in the last 18-24.
Multi-million dollar audit true-ups are common: Enterprises, especially large ones, report that
multi-million dollar software audit true ups are common, validating findings that application
producers remain aggressive about enforcement as a source of revenue-leakage recovery.
o 24% of enterprises said their total true-up paid over the past year was $1 million or more.
5% said theirs was between $5-10 million. And $4% said their total true-up costs were
more than $10 million.
Microsoft is the most aggressive auditor: For the second year in a row, enterprises report that
Microsoft has been the most frequent auditor.
o Enterprises say that over the last year, theyve been audited most frequently by Microsoft
(51%), followed by Oracle (27%), IBM (24%), SAP (22%) and Adobe (19%). 24% say they
were audited by other vendors.
Enterprises are not practicing continual license compliance: While organizations are
conducting self-audits they are doing so only infrequently.
o 42% of enterprises indicated that they do self-audits at least once per year. 25% indicated
they do self-audits more than three times per year. Large enterprises, those over $1B in
revenue, were much more likely to have a regular self-audit process that occurred more
than three times a year, with 30% reporting this to be the case (compared to only 10% of
smaller organizations).
The Cloud and Virtualization
Virtualization and the cloud are prompting changes to licensing & compliance policies: As
new technologies take hold, application producers are thinking about how their licensing and
compliance policies must change.
o 48% of application producers indicated that their compliance/licensing policies will need to
change to adapt to cloud technology. 43% say their policies will have to change to adapt to
SaaS, 50% say changes will be required to adapt to virtualization, 47% will require changes
for mobile platforms, and 34% will change to accommodate software appliances.
Server virtualization has the greatest penetration within enterprises, while other types are
gaining hold: Among the virtualization strategies enterprises are adopting, server virtualization has
the greatest penetration.
o 56% of enterprises report that 41% or more of their applications have been virtualized
using server virtualization. 35% of respondents indicated that between 10-25% of their
applications are delivered through application virtualization. 26% say that between 10-25%
of their applications are delivered through SaaS, and 24% say that between 10-25% of
their apps are delivered though desktop virtualization (VDI).
Virtualization adds license compliance risk: Tremendous focus has been placed recently on the
added software compliance risk exposure faced by enterprises due to virtualization. Some causes
include the evolving rules around virtual licenses within software license agreements, and the sheer


difficulty in tracking virtual license usage. According to the survey, enterprises are not yet fully
managing that risk.
o 43% of respondents indicate that either they dont manage their virtual licenses, or they do
so manually.
Survey Background

The 2012 Key trends in Software Pricing and Licensing survey was conducted by Flexera Software with
input from IDCs Software Pricing and Licensing Research division under the direction of Amy Konary,
research vice president - software licensing and provisioning at IDC. This annual research project
looks at software licensing, pricing and enforcement trends and best practices. The survey reaches out
to executives at application producers (Software vendors and intelligent device manufacturers) and
enterprises who use and manage software and devices. Now in its eighth year, the survey is made
available to the industry at large each year.


Methodology and Sampling

In total, 334 respondents participated in the survey, including 101 enterprise executives and 233
application producer executives (defined as software vendors and intelligent device manufacturer).

Enterprise Demographics

54% of the enterprise respondents were from larger enterprises of $1 billion or more in
revenues and almost one third (31%) were from companies with $3 billion in revenues or more.
45% of respondents were from the United States, 33% were from Europe, and 7% were from
Australia.

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31%
16%
Which of the following best represents your annual
company revenues?
Less than $100 million
$101 - $999 million
$1 billion - $3 billion
> $3 billion
Do not know


Application Producer Demographics

The largest segment of application producer respondents (54%) came from companies with
$10 million and under in revenues. 4% of the respondents were from companies with $1 billion
or more in revenues. The remainder of respondents was from companies ranging from $11
million to $500 million. 66% were from North America, 17% from Europe, 3% from Asia/Pacific,
and 3% from the Middle East.

Software Licensing, Pricing, Flexibility & Value
Application Producers Offer A Wide Array of Software Pricing Models:

Application producers offer a wide variety of software pricing models, which reflects a great
diversity in demand for how enterprises want to consume software. Node locked (40%) and
feature concurrent user (floating or network license) (39%) are the most prevalent pricing
models. Device (33%), named-user (27%), token concurrent user (floating or network license)
(24%), site (22%) and client access license (CAL) (21%) are also popular. Looking out over the
next 18-24 months, feature concurrent user (floating or network license) and node locked
licensing are expected to remain the most prevalent. However utility model (usage, time,
number of transactions) is expected to grow by 23%, further signaling increased interest in
usage-based pricing.
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Which of the following represents your annual software
license revenues (including any revenue from subscription
software and/or embedded software in hardware devices)?
Less than $1 million
$1 - $5 million
$6 - $10 million
$11 - $30 million
$31 - $50 million
$51 - $100 million
$101 - $500 million
$501 million - $1 billion
Over $10 billion
Do not know


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Enterprises Demand a Variety of Pricing Models

The diversity of licensing models offered by producers makes sense as we examine
enterprises pricing model preferences. Device-based pricing (23%) and feature-based
concurrent user (floating or network license) (19%) are the most popular pricing models with
enterprise respondents. Enterprises also prefer site-based (8%), utility model (usage, time,
number of transactions) (7%), named user (6%) and client access license (CAL) (6%). The
diversity of responses indicates enterprises place different value on software depending on
business need.

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What is the software pricing model you prefer for enterprise
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Feature-based concurrent user
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Financial metric (revenue, cost,
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Other (please specify)


Application Producers Predominantly Deliver Licenses via Email

67% of application producers indicate that they send license keys to customers via email. 35%
utilize self-service web portals to allow customers to access their own licenses. 29% favor in-
product activation, while 24% ship their software products with pre-generated licenses. In-
product activation is considered the most user-friendly of activation methods. With only 29% of
producers surveyed utilizing this method to distribute license files, demand will likely grow as
the consumerization of IT continues to take hold.

Producers Prefer Node Lock and Network Licensing Technologies

The majority of application producers utilize network licensing (58%) and node lock (50%) to
license their technology. Other popular methods include dongle (27%), and Internet licensing
(software validated against a license server on the internet provided by vendor) (23%).
Between producers that report they dont use licensing technology (14%) and those that use
only minimal licensing protections -- serial number checks during installation (27%) producers
have a significant opportunity to invest in licensing technology to enhance the customer
experience.
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If you use licensing technology, how do you distribute the
license keys/files?


Looking into the future 18-24 months, software-based solutions for licensing are expected to
increase as compared to dongles. Dongle use is expected to decline by 15%, which correlates
to the fact that 56% said dongles are their least preferred means of software license
enforcement. Producers expect their use of network licensing to increase by 29%, and Internet
licensing by 28% Vendor-compliance audit (trust based licensing) is also expected to increase
by 11% suggesting a continuation of the audit trend.

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Enterprises Prefer Network Licensing for Enforcement

Similar to last year, network licensing continues to be enterprises most preferred method (45%) of
software license enforcement, followed by product activation (24%). Their least favorite methods are
dongles (61%) and trust-based licensing with manual vendor compliance audit (15%).

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Looking forward 18-24 months, how will
your use of licensing technology change?
Don't
know
Will Not
Use
Increase
Stay Same
Decrease


Considerable Application Producer Dissatisfaction Found with Software
Pricing & Licensing Strategy

While a small majority of application producers (52%) believe their licensing and pricing strategies to be
effective, only 9% believe theirs to be very effective. Nearly one quarter (24%) believe their licensing
and pricing strategies are either ineffective or very ineffective. This suggests tremendous opportunities
for application producers to more closely align their licensing and pricing strategies to the value they
believe they are delivering to customers.

0
10
20
30
40
50
60
70
80
90
100
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If a software vendor gave you a choice, which of the following
means of software license enforcement would you prefer
most?
Product activation
(software activated
over the internet by
vendor key)
Network licensing
(software activated
by internally shared
license)
Trust-based
licensing with
manual vendor
compliance audit
Vendor-supplied
automated
monitoring
mechanism with
annual true-up
Serial numbers
checked locally
Dongle


Enterprises Evaluate Price-to-Value Software Satisfaction

Enterprises most frequently indicated they are either satisfied or highly satisfied with the price-to-value
of their desktop applications (65%), server applications (51%) and engineering/technical applications
(43%). They indicated most frequently they were either unsatisfied or very unsatisfied with the price-to-
value of their ERP software (25%), database software (22%) and CRM software (20%).
2%
22%
52%
9%
15%
Rate the effectiveness of your companys pricing and
licensing strategy in capturing all the revenue that you
think your products are worth?
Very ineffective
Ineffective
Effective
Very effective
Don't know


Pricing & Licensing Strategies in Flux

42% of application producers report that over the past 18-24 months, their software pricing and
licensing strategies have changed. The most cited reason for the change was to generate more
revenues (69%), an increase of 28% over 2011, perhaps indicating the challenges faced by producers
in this down economy. Other reasons cited for the changes were to improve customer relations (44%),
to accelerate sales cycles (35%) and to enter new markets (28%). Larger producers were more likely
to have changed their pricing and licensing policies in the last 18-24 months. Only 30% of the very
small producers (less than $5M in revenue) had done so, while nearly 60% of the larger producers did
so.
Change remains the norm for the immediate future. When asked how licensing and pricing strategies
would change over the next 18-24 months, application producers said they would add subscription/term
licensing (26%), better enforcement or security (24%), pay-as-you-use (24%) and temporary/evaluation/
try-before-you-buy licensing (19%).
0
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How would you rate your price-to-value satisfaction for the
following types of software?
Highly satisfied
Satisfied
Neutral
Unsatisfied
Highly unsatisfied
Not applicable


42%
58%
Has your company changed its pricing and
licensing policies in the past 18-24 months?
Yes No
69%
44%
35%
13%
11%
28%
17%
11%
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If you answered "Yes" to question 14, explain why:


Producers Shifting Away From Perpetual Licenses

Application producers report that the majority of their revenues still derive from perpetual licenses. But
subscription/term-based licenses and usage-based licenses also represent a significant portion of
revenue, and these are predicted to increase over the next 18-24 months. Accordingly, having the
ability to implement flexible licensing models will help application producers maximize their revenues
while maintaining operational efficiency.

24%
26%
6%
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19%
34%
6%
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In the next 18-24 months, in what ways will your licensing
strategy need to change?


Based on your total annual software license revenue, what percentage is
associated with the following software licensing or pricing?

Looking forward in the next 18-24 months, what percentage of your total annual
software license revenue will be associated with the following software
licensing or pricing types?

0% 20% 40% 60% 80% 100%
1
8
15
22
29
36
43
50
57
64
71
78
85
92
99
106
113
120
127
134
% for perpetual licenses
% for subscription/term licenses
(subscription = termed [specific
length of time] license)
% for usage-based licenses
(usage = captures actual use,
can be post- or pre-paid)
% for other types
0% 20% 40% 60% 80% 100%
1
15
29
43
57
71
85
99
113
127
% for perpetual licenses
% for subscription/term licenses
(subscription = termed [specific
length of time] license)
% for usage-based licenses
(usage = captures actual use,
can be post- or pre-paid)
% for other types


Software Usage Tracking, Optimization & Compliance
Application Producers Dont Know What Products Their Customers Are
Actually Using

48% of application producers (up from 40% one year ago) indicated that they do not have technology in
place to know what product version or platform their customers are actually using and 13% do not
know. Small producers (those with less than $5M in revenue) are less likely to have technology in
place to enable them to know what product, product version or platforms that their customers are
actually using.
Of the 40% who say they do at least 20% base this knowledge on entitlement or purchase
information, and not on actual data from the product reporting that it has been installed and is being
used. This is problematic because entitlement and purchase data alone cannot reveal whether those
products are actually in use thus reliance on this information can be misleading. By having
technology in place that indicates what products are actually in use, application producers can gain
valuable market data such as who is adopting the latest release, how many users are impacted by
end of life decisions, and when can support for a particular operating system be dropped.

40%
48%
13%
Do you have technology in place that enables you to know
what product, product version or platforms your customers
are actually using?
Yes
No
Do not know


Most Producers Dont Believe Enterprises Manage Entitlements

Almost a quarter of application producers (23%) believe their customers do not manage entitlements at
all, and almost half (49%) believe that customers do manage entitlements but do so manually with no
or only some automation. In actuality, as discussed below only 29% of enterprises actually manage
their entitlements manually.
Despite the fact that the majority of application producers believe that their customers manage
entitlements manually (50%), only 7% of the producers believe that its difficult or very difficult for their
customers. This disparity could be attributed to the relatively smaller size of the producers taking this
survey smaller software vendors offer relatively few products and versions, and straightforward
licensing models that do not changed often. Or the disparity could be attributed to a lack of awareness
of the challenges enterprises face managing their software licenses.

13%
18%
14%
28%
22%
23%
24%
31%
3%
0%
5%
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20%
25%
30%
35%
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How do you believe your customers manage their
entitlements today?


Enterprises Software Investments Are Growing

Issues of software license management and usage tracking will only get more acute over time, as
software spend increases. 44% of enterprises surveyed indicated that their budgets for software would
increase over the course of the next 18-24 months, a slight increase in the software budget growth
predictions in 2011 (43%) and 2010 (33%). 24% of enterprises report that between 11-20% of their
software budgets are allocated to new software licenses, and 21% of respondents say that 21-30% of
their software budgets go to new licenses. 12% say that more than 30% of their total software budget is
allocated to new software licenses.
Internal software development also accounts for a proportion of most enterprises software budgets.
18% of organizations responding to the survey allocate 1-10% of their budgets to internal development;
18% allocate 11-20% of their budgets to software development, and 14% of companies allocate 21-
30% of their budgets to it. 25% of enterprise respondents say that more than 30% of their software
budget is allocated to internal development.

60
39
5
3
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40
50
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Answer Choice
How difficult is it for your customers to determine which of
your products they are entitled to use?


1%
16%
24%
21%
8%
2%
0%
1%
1%
26%
What percentage of your total software budget is allocated
to new software licenses?
0% 1-10%
11-20% 21-30%
31-40% 41-50%
51-60% 61-70%
> 70% Do not know


Software License Management Is Critical to Enterprises

Compared to other objectives, 82% of enterprise respondents (up from 72% a year ago) indicated that
managing software licenses and usage is either important or very important. Only 8% indicated that it
is unimportant. For those managing their software licenses, 52% said their reason for doing so was to
reduce software costs and minimize shelfware. The second most frequently cited reason was to ensure
compliance with vendor agreements (and reduce cost and risk of an audit) (40%).
33% of enterprises indicated they are either dissatisfied or very dissatisfied with their current method for
managing software licenses and usage, while 32% are neutral. Only 35% report being satisfied or very
satisfied with their current method which suggests significant opportunity for providers of software
license management and optimization solutions. A cross tabulation of the data based on respondents
organization size indicates that enterprises larger than $1B in revenue are much more likely (over
twice) to be dissatisfied with their current method of managing software licenses/usage, than
companies with less than $1B in revenue. Almost half (45%) of all of these companies are either
dissatisfied or very dissatisfied with their current methods.
2%
18%
18%
14%
12%
6%
2%
4%
1%
23%
What percentage of your organizations software budget is
allocated to internal development (applications,
middleware, etc.) ?
0% 1-10%
11-20% 21-30%
31-40% 41-50%
51-60% 61-70%
> 70% Do not know


6%
27%
32%
27%
8%
If you are currently managing your software
licenses/usage, how satisfied are you with the current
method?
Very dissatisfied
Dissatisfied
Neutral
Satisfied
Very satisfied
0
5
10
15
20
25
30
V
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r
y

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s
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d
If you are currently managing your software licenses/usage,
how satisfied are you with the current method?
Less than $100
million
$101 - $999 million
> $3 billion


Many Enterprises Are Not Optimizing Their Software Licenses

Simply understanding the number of licenses within the license estate tells only a partial story when it
comes to software license optimization. Product use rights (i.e. upgrade rights, downgrade rights,
secondary use rights, etc.) contained in the software contract detail how software licenses can be used,
by whom, in what circumstances and on what devices. Only by optimizing the software license estate
reconciling product use rights with actual usage can enterprises hope to buy only what they need and
use what they have. Accordingly, whether enterprises take into account product use rights in the
management of their licenses is an indicator of their ability to remain in compliance and avoid
purchasing shelfware.
According to the survey, 30% of respondents familiar with their companies practices in this regard do
not optimize their software estates by reconciling software usage data with product use rights. 53% do,
but only for key, high value vendors. Only 17% practice software license optimization across the entire
software estate.
52%
41%
7%
5%
10%
80%
5%
3%
2%
95%
0% 20% 40% 60% 80% 100%
Most
Important
Semi-
important
Least
If you are currently managing your software licenses/usage,
what is the most important reason for doing so?
Reduce software
costs/minimize
shelfware spend/cost
avoidance
Ensure compliance
with vendor
agreements (and
reduce cost and risk
of an audit)
Prevent downtime
due to denials in the
middle of critical
projects (concurrent
licenses)
Do not manage
software
licensing/usage


12%
37%
21%
30%
Do you apply product-use rights to optimize your
organizations software license position?
Yes, for all vendors
Yes, for key high-value vendors
No
I don't know


Maintaining License Compliance Is Challenging for Enterprises

41% of respondents indicated that maintaining license compliance for database software, and 40% of
respondents said maintaining license compliance for server software was either difficult or very
difficult. Only a minority of respondents answered no difficulty when asked to rate the difficulty of
maintaining licensing compliance for the various types of applications they run. This indicates general
consensus among enterprises that maintaining license compliance presents difficulty.
Licensing complexity is the most frequently cited reason (32%) enterprises give for their difficulties in
maintaining licensing compliance. Lack of automated tracking mechanisms (27%) and the complexity of
their IT environments (24%) also contributed to the reasons for their difficulty.
The smaller companies, those less than $100M, were much more likely to highlight the complexity of
the licensing or IT environment, doing so 80% of the time. Very large companies, in contrast those
greater than $3B in revenue highlighted the lack of automation tools most frequently (44% of the
time). The greater focus of large enterprises on lack of automation may be due to their expectation of
high complexity and their focus instead on the need for a technical solution to the challenge.

0
20
40
60
80
100
120
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For which types of software is it difficult to maintain license
compliance?
No difficulty
Somewhat
difficult
Difficult
Very difficult
Not Applicable


Licensing Complexity Challenges Translate to Shelfware and Non-
Compliant Software Use

38% of enterprises indicated that 11% or more of their application spend is associated with applications
that are overused, and therefore out of compliance, up from 26% one year ago. Likewise, this year
56% of enterprises say that 11% or more of their application spend is associated with applications that
are under-used (shelfware), up from 49% last year. It is important to note that when looking across the
entire software estate the same organization can, and usually does, simultaneously have shelfware and
software use that is out-of-compliance. The increases in non-compliant software use as well as
shelfware point to increasing waste and audit risk for companies that do not proactively manage and
optimize their software license estates.
32%
24%
14%
27%
4%
If you checked "difficult" or "very difficult" to any
software type in the previous question, what is the
primary reason why?
Licensing policy is too complex
IT environment is too complex
IT management is too
decentralized
No automated tracking
mechanisms in place


11%
32%
19%
10%
6%
1%
2%
19%
What percentage of software license spend within your
organization do you estimate is associated with
applications that are overused and therefore out of
compliance?
0% 1-10%
11-20% 21-30%
31-40% 41-50%
> 50% Do not know
3%
23%
25%
14%
10%
2%
5%
18%
What percentage of software license spend within your
organization do you estimate is associated with
applications that are underused (shelfware) and therefore
over-licensed?
0% 1-10%
11-20% 21-30%
31-40% 41-50%
> 50% Do not know


Enterprises Turning to Automation to Manage Software Licensing

67% of enterprises in the survey indicate that they use some sort of automation to manage their
software licensing and usage today, with 41% indicating they use automation software thats part of
their asset management system. 15% use vendor provided software, 29% use manual systems, and
12% use a homegrown system. None of the respondents said that they do not track their software
licensing and usage).
For enterprises using software asset management software, 88% of those systems are installed on
premises, 6% are hosted/cloud based solutions, 5% are delivered via a managed service provider, and
only 1% are hosted via a SaaS provider.

41%
15%
12%
29%
0%
4%
How do you primarily perform tracking, management and
reporting of your software licensing/usage today?
Automated (commercial) software
Use software provided by the vendor
Automated (homegrown) software, our own
system used only for license management
Manual methods, including the use of
spreadsheets
Do not currently track


Software Compliance Enforcement

Software Audits Gaining in Frequency, Especially for Large Software
Vendors

39% of application producers responding to the survey who are aware of their companys audit
practices indicated that their companies conducted at least one software audit over the last
year. 13% said they audited customers more than 11 times. And 3% indicated that they
conducted more than 100 software audits.
Total audit true ups that producers reportedly collected within the last year ranged between $1-
$50,000 (6%) and $1M to $5M (2.4%). It should be noted that 35% of the respondents did not
know their companies total true-up revenues. Moreover, these audit figures clearly reflect the
practices of smaller application producers, given the demographics of the respondents of the
application producer survey. They do not reflect the audit practices of larger vendors such as
Microsoft, IBM, SAP, Adobe, Oracle, Symantec and others.
88%
1%
6%
5%
If you have a Software Asset Management system in
place, how is it being delivered?
Software installed on premise
Software as a Service (SaaS)
Hosted solution / Private Cloud
Managed Service Provider
(MSP)


For example, in the enterprise survey, which skews towards large enterprise customers, a
different story emerges of application producers audit practices. In that survey 64% of
enterprises reported that they have been audited (or had a license review) over the last 18-24
months. 36% report having experienced at least two audits over that time period, and 10%
report that theyve been audited more than 3 times.
Large enterprises those greater than $1B in revenue -- were significantly more likely to be
audited three times or more times in the last 18-24. This was reported by 25% of the
companies in that group.
Enterprises say that over the last year, theyve been audited most frequently by Microsoft
(51%), followed by Oracle (27%), IBM (24%), SAP (22%) and Adobe (19%). 24% say they
were audited by other vendors. Enterprises elaborating in the survey about who those other
auditing vendors were most frequently sited Attachmate (5 respondents) and Autodesk (2
respondents).
Microsoft was the leading auditor reported across all organization sizes. The other application
producers favored performing audits of the large organizations (over $1B revenue), to a greater
degree than Microsoft did.
In addition, the size of the audit awards varies greatly between the application producers
claims, and enterprises claims. Again, this disparity is likely due to the disparity between
application producers taking this survey (mostly smaller vendors), and those reported by
enterprises as being the most enthusiastic auditors. For example, more than half of
respondents said their total audit true up over the last year was more than $100,000, and 36%
said their total true up was $300,000 or more. 24% said their total true up was $1 million or
more. 5% said theirs was between $5-10 million. And $4% said their total true up costs were
more than $10 million.
Given the significant frequency with which enterprises are facing software audits, its not
surprising that they are building safeguards into their internal processes. 42% indicated that
they do self-audits at least once per year. 25% indicated they do self-audits more than three
times per year. Large enterprises, those over $1B in revenue, were much more likely to have a
regular self-audit process that occurred more than three times a year, with 30% reporting this to
be the case (compared to only 10% of smaller organizations).


48%
6%
2%
5%
1%
2%
35%
What is the total true-up revenue from compliance
audits your company received within the 12 months?
$ 0
$ 1 - 50k
$ 50k - 100k
$ 100k - 500k
$ 500k - 1m
$ 1m - 5m
$ 5m - 10m
$ 10m - 20m
$ 20m - 50m
$ >50m
Don't know
2%
22%
52%
9%
15%
Rate the effectiveness of your companys pricing and
licensing strategy in capturing all the revenue that you
think your products are worth?
Very ineffective
Ineffective
Effective
Very effective
Don't know


10%
6%
20%
28%
28%
8%
How often have you been audited (or had a license
review) by your vendors within the last 18-24 months?
More than 3 times in the past year
3 times
2 times
1 time
We have not been audited or had a
license review within the past year
We have never been audited
0
5
10
15
20
25
30
M
o
r
e

t
h
a
n

3

t
i
m
e
s
i
n

t
h
e

p
a
s
t

y
e
a
r
3

t
i
m
e
s
2

t
i
m
e
s
1

t
i
m
e
W
e

h
a
v
e

n
o
t

b
e
e
n
a
u
d
i
t
e
d

o
r

h
a
d

a
l
i
c
e
n
s
e

r
e
v
i
e
w
W
e

h
a
v
e

n
e
v
e
r
b
e
e
n

a
u
d
i
t
e
d
How often have you been audited (or had a license
review) by your vendors within the last 18-24 months?
Less than $100
million
$101 - $999
million
$1 billion - $3
billion
> $3 billion


19%
24%
51%
27%
22%
12%
24%
0%
10%
20%
30%
40%
50%
60%
A
d
o
b
e
I
B
M
M
i
c
r
o
s
o
f
t
O
r
a
c
l
e
S
A
P
S
y
m
a
n
t
e
c
O
t
h
e
r

(
p
l
e
a
s
e

s
p
e
c
i
f
y
)
If you have been audited within the last year, which
vendors have audited you?
0
5
10
15
20
25
30
35
A
d
o
b
e
I
B
M
M
i
c
r
o
s
o
f
t
O
r
a
c
l
e
S
A
P
S
y
m
a
n
t
e
c
O
t
h
e
r

(
p
l
e
a
s
e
s
p
e
c
i
f
y
)
If you have been audited within the last year, which vendors
have audited you? (Crosstabulated based on company size)
Less than $100
million
$101 - $999 million
$1 billion - $3
billion
> $3 billion


4%
5%
15%
13%
19%
45%
What was your total software audit true-up cost within the
last year for your organization?
More than $10 million
$5 million to $10 million
$1 million to $5 million
$300,001 to $1 million
$100,000 to $300,000
< $100,000
25%
3%
20%
42%
9%
How often does your organization perform a self-audit
of its software estate?
More than 3 times per year
3 times per year
2 times per year
1 time per year
We do not perform self-audits


The Cloud & Virtualization
Virtualization and the Cloud Are Prompting Changes to Licensing &
Compliance Policies
As new technologies take hold, application producers are thinking about how their licensing and
compliance policies must change. For instance, 48% of respondents indicated that their
compliance/licensing policies will need to change, to adapt to cloud technology. 43% say their policies
will have to change to adapt to SaaS, 50% say changes will be required to adapt to virtualization, 47%
will require changes for mobile platforms, and 34% will change to accommodate software appliances.
Looking at the data another way, of all the application producers that are planning changes in the next
0
5
10
15
20
25
30
35
40
M
o
r
e

t
h
a
n

3

t
i
m
e
s

p
e
r
y
e
a
r
3

t
i
m
e
s

p
e
r

y
e
a
r
2

t
i
m
e
s

p
e
r

y
e
a
r
1

t
i
m
e

p
e
r

y
e
a
r
W
e

d
o

n
o
t

p
e
r
f
o
r
m
s
e
l
f
-
a
u
d
i
t
s
How often does your organization perform a self-audit of its
software estate?
Less than $100
million
$101 - $999 million
> $3 billion


24 months for these different technologies, between 58% and 68% (depending on the technology) said
that it will require changes to their licensing policies.

Server Virtualization Has the Greatest Penetration within Enterprises
and Its Growing

Among the virtualization strategies enterprises are adopting, server virtualization has the greatest
penetration, according to enterprise respondents. 56% (up from 51% in 2011) report that 41% or more
of their applications have been virtualized using this server virtualization. While there is no clear
dominant leader among desktop virtualization, application virtualization and hard partitioning those
technologies have also taken firm root within organizations.
0
20
40
60
80
100
120
C
l
o
u
d
c
o
m
p
u
t
i
n
g
S
a
a
S
V
i
r
t
u
a
l
i
z
a
t
i
o
n
M
o
b
i
l
e
p
l
a
t
f
o
r
m
s
S
o
f
t
w
a
r
e
A
p
p
l
i
a
n
c
e
s
In the next 18-24 months, my company's compliance (licensing) policy
for _________ will need _________ in order to adapt to the requirements
of this technology. (Please choose the appropriate licensing strategy
for each option below)
Stay the same-no
change required
Moderate
changes
Significant
changes
Dramatic changes
Does not apply-
already done


Desktop and Application Virtualization Gaining Momentum

75% of enterprises surveyed indicate that more than half of their enterprise applications are delivered
through traditional installed software. 35% of respondents indicated that between 10-25% of their
applications are delivered through application virtualization. 26% say that between 10-25% of their
applications are delivered through SaaS, and 24% say that between 10-25% of their apps are delivered
though desktop virtualization (VDI). These figures reflect that while currently there is no clear winner
between application virtualization and desktop virtualization, some companies are using these
technologies to deliver a large number of applications.
0
20
40
60
80
100
120
S
e
r
v
e
r
v
i
r
t
u
a
l
i
z
a
t
i
o
n
-
V
M
w
a
r
e
,

M
S
H
y
p
e
r
-
V

(
%

o
f
s
e
v
e
r
s
)
D
e
s
k
t
o
p
v
i
r
t
u
a
l
i
z
a
t
i
o
n
/
V
D
I
(
%

o
f

d
e
s
k
t
o
p
s
)
A
p
p
l
i
c
a
t
i
o
n
v
i
r
t
u
a
l
i
z
a
t
i
o
n
-
A
p
p
-
V
,

X
e
n
A
p
p

(
%

o
f
d
e
s
k
t
o
p

a
p
p
s
)
H
a
r
d

p
a
r
t
i
t
i
o
n
i
n
g
-
L
P
A
R
,

v
P
a
r
,
S
o
l
a
r
i
s

Z
o
n
e
s

(
%
o
f

s
e
r
v
e
r
s
)
What virtualization technologies has your organization
adopted?
< 20%
20-40%
41-60%
61-80%
> 80%


Enterprises at Risk in Their Virtual License Management Practices

Tremendous focus has been placed recently on the added software compliance risk exposure faced by
enterprises due to virtualization. Some causes include the evolving rules around virtual licenses within
software license agreements, and the sheer difficulty in tracking virtual license usage. According to the
survey, enterprises are not yet fully managing that risk. 43% of respondents indicate that either they
dont manage their virtual licenses, or they do so manually.
0% 10% 20% 30% 40% 50% 60% 70%
Traditional installed software
Desktop virtualization (VDI)
Application Virtualization (App-V,
XenApp, etc.)
Software as a Service (SaaS)
>75%
51-75%
26-50%
10-25%
<10%


32%
15%
6%
32%
11%
3%
How do you manage software licenses in your virtual
environments?
Automated commercial license
management software
Software provided by the (virtualization)
vendor
Automated homegrown software
Manual methods, including spreadsheets
We dont manage software licenses in our
virtual environments


Software Licensing and Provisioning Research at IDC
IDC's global Software Licensing and Provisioning research practice is directed by Amy Konary. In this
role, Ms. Konary is responsible for providing coverage of software go-to-market trends including volume
license programs, evolving license models, global price management, and licensing technologies
through market analysis, research and consulting. In her coverage of software maintenance,
subscription, electronic software distribution and licensing technologies, Ms. Konary has been
instrumental in forecasting future market size and growth. Ms. Konary was also the lead analyst for
IDC's coverage of software as a service (SaaS) for eight years prior to focusing exclusively on pricing,
licensing, and delivery. International Data Corporation (IDC) is the premier global provider of market
intelligence, advisory services, and events for the information technology, telecommunications, and
consumer technology markets. For more information about IDC, please see www.idc.com
About Flexera Software
Flexera Software is the leading provider of strategic solutions for Application Usage Management;
solutions delivering continuous compliance, optimized usage and maximized value to application
producers and enterprises. Flexera Software is trusted by more than 80,000 customers that depend on
our comprehensive solutions- from installation and licensing, entitlement and compliance management
to application readiness and software license optimization - to strategically manage application usage
and achieve breakthrough results realized only through the systems-level approach we provide. For
more information, please go to: http://www.flexerasoftware.com.

Flexera Software, LLC.
1000 East Woodfield Road,
Suite 400
Schaumburg, IL 60173 USA
Schaumburg (Global Headquarters),
+1 800-809-5659
United Kingdom (Europe,
Middle East Headquarters):
+44 870-871-1111
+44 870-873-6300

Australia (Asia,
Pacific Headquarters):
+61 3-9895-2000
For more locations visit:
www.flexerasoftware.com

2012 Key Trends in Software Pricing & Licensing Survey: Sponsored by Flexera Software

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