Could the Internet of Things create an explosion in software license costs?

Software license management is already highly complex and potentially about to get even more so, as the Internet of Things (IoT) starts to take hold. The concept behind IoT is not particularly new and been around in various forms since 1991. It is based around the idea that living things and inanimate objects can be provided with a unique identifier and the capability to transfer data automatically across a network, without interaction from humans or computers. Last year, the city of Bristol conducted a fantastic experiment, called ‘hello lamp post’ to illustrate how IoT could touch our lives, using lampposts and other every day objects.

Since its earliest days, IoT has continued to evolve, thanks to converging wireless technology, electronic systems, the Internet. The numbers of ‘things’ that can potentially be ‘connected’ is growing exponentially and by 2020, there could be as many as 30 billion devices with wireless Internet connectivity, based on forecasts by ABI Research. Other experts, for example Cisco, believe their estimate is on the low side and that there will be in excess of 50 billion. Whichever way you look at it, the result will be a lot of devices to be monitoring and tracking. It is also going to become mainstream quite quickly. According to Forrester Research, over 50% of senior business executives were planning to implement an IoT solution in 2014, primarily thanks to the proliferation of cloud technology which makes it more accessible and cost effective.

The issue of how to monitor devices, specifically tracking how they communicate and with what, lies at the heart of what the implications of the Internet of Things are for enterprise IT. In licensing terms, it means that a vastly increased number of potential ‘users’ are going to be accessing the software controlling transactions like purchasing a train ticket or turning on the coffee machine from the park. In financial terms, it will generate big revenues for the likes of Oracle, SAP, IBM and other enterprise software publishers. These software vendors are already getting a healthy additional revenue stream from their software auditing activities. Imagine the multiplying effect once the Internet of Things starts to become mainstream.

The compliance implications therefore present a significant risk for organizations that want to take advantage of IoT and use enterprise software. Returning to the Forrester study, if half of organisations and implementing a solution this year alone, that’s likely to be the majority of organisations by the middle of the decade. If you are a consumer goods manufacturer looking to allow customers to remotely control your products, what will your future licensing model be, taking into account the many different applications, databases and middleware tools behind each implementation? The problem is as real for fridge makers as it is for motorbike manufacturers wanting to introduce functionality to forewarn the rider of mechanical faults and book service appointments.

Software asset management (SAM) will play an crucial part in the solution. Already an essential IT discipline in its own right for the capture, tracking and reconciliation of software licenses in use, it is potentially going to be even more important, as over complicated software licensing models become more complex and the financial stakes of additional licensing costs and penalties increase beyond today’s rates. SAM will need to expand its current coverage remit to track and license absolutely everything, from mobile devices, remote users, transient connections and one-time transactions.

Depending on the existing software architecture in place, some organisations have already made initial steps in this direction. For example, Oracle or SAP users need to take Indirect Usage (the way databases and applications are accessed from outside the organisation) into consideration. Getting caught out by vendors for failing to appreciate Indirect Use licensing entitlements is a very common pitfall. Herein lies the challenge with IoT, as it could potentially become a giant explosion for Indirect Usage licensing. No wonder some of the bigger software vendors are hyping its arrival. It’s a great new way for them to make more money. Enterprises need to become a lot cleverer about their SAM programmes to be equipped for tomorrow’s challenges.