Gartner Research

Digital Business Requires a Change in Software Licensing Models or Higher Costs Will Prevail

Published: 24 April 2014

ID: G00262031

Analyst(s): Alexa Bona, Lori Samolsky

Summary

IT procurement professionals must adapt their contracts and ways of working to new digital business requirements driven by the Internet of Things, wider use of mobile devices and digital innovation projects. Use of older software procurement methodologies will increase cost and project risks.

Table Of Contents
  • Impacts

Analysis

Impacts and Recommendations

  • Digital innovation projects will require IT procurement professionals to negotiate much shorter contract terms and increase their ability to switch providers quickly and easily
    • Software contracts for digital innovation must have the potential to be shorter
    • Software contracts for digital innovation should anticipate much more frequent switching of products and services and even of providers
  • To contain software costs for digital innovation projects, IT procurement professionals will have to improve their skills in managing increasingly prevalent nonperpetual subscription models and demand genuinely usage-based pricing
    • Subscription licensing growth will continue to accelerate
    • Renewal terms will impact future prices and usage terms in subscription models
    • Subscription models are not automatically usage-based
  • Digital innovation based on the Internet of Things will substantially increase software costs if software is licensed by device, so IT procurement professionals need to negotiate alternatives proactively now
  • Mobile computing requirements driven by digital projects will cause duplication of software costs because of overlaps in mobile technology bundles
    • Existing software licenses might not cover mobile device usage, so additional fees might be charged
    • Mobile app development and deployment options are growing rapidly, making it more likely that you will be charged twice for the same capability in different bundles or deployment options

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