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Flexera Software/IDC Survey Reveals Enterprises Unprepared for Software License Compliance Risk from Virtualization

Tensions between application producer and enterprises likely to heighten as software license non-compliance penalties increase due to virtualization

Itasca, IL - July 8, 2014 Tensions between application producers and enterprises around virtualization are likely to heat up. As software vendors and intelligent device manufacturers change their licensing rules to profit from virtualization, many enterprises are not implementing prudent best processes and technology to track and manage their virtualized applications. This will likely increase tensions between buyers and sellers of enterprise software as more organizations are found to be out of compliance with virtualization licensing rules, resulting in steeper "true-up" penalties.

This is the conclusion of a new Flexera Software 2013-14 Key Trends in Software Pricing & Licensing Report, prepared jointly with IDC, the ninth annual assessment of key issues and trends on the minds of software vendors, intelligent device manufacturers, and enterprise IT executives and managers. The report reveals, among other things, that 42% of application producers plan on changing their licensing/compliance policies for virtualization. Yet at the same time, a large percentage of enterprises - 39% -- either don't manage their software licenses at all in virtual environments, or they do so manually.

"Virtualization adds great complexity around software licensing and creates new compliance challenges for customers," said Amy Konary, Research Vice President - Software Licensing and Provisioning at IDC. "We've seen instances in which the savings that organizations anticipate through virtualization disappear, and costs actually increase due to higher licensing fees. Smart organizations should be aware of the licensing cost implications of virtualization and implement software license management best practices and technologies to help reduce that risk and make more informed decisions."

According to the survey report, application producers are rapidly evolving their software pricing and licensing strategies - but they are largely unaware of the difficulties their enterprise customers have managing software entitlements. 33% of application producers said they've changed their software pricing and licensing models in the past 18-24 months. 48% said their primary reasons for making these changes were to generate more revenue. Yet in assessing the impact of those changes on their customers, almost two-thirds of application producers - 59% -- say it is not difficult for enterprises to determine which products they are entitled to use.

In fact, enterprises experience tremendous difficulties managing their entitlements and staying in compliance. As reported in the previous Key Trends in Software Pricing and Licensing Survey on Software License Audits: Costs & Risks to Enterprises, 85% of organizations are out of compliance with their software license agreements. With 39% of enterprises in today's survey reporting that they either don't manage their virtualized software licenses, or they do so manually - software vendor audits will likely yield increased findings of software license non-compliance - fuelling tensions between application producers and their customers.

"There is already some strain on the producer/enterprise relationship. No organization enjoys the disruption of having to defend against a vendor's software license audit or paying a true-up fee," said Jim Ryan, Chief Operating Officer at Flexera Software. "Application producers need to understand how challenging it is for their well-intentioned customers to remain in compliance with their licensing terms. And prudent enterprises must understand that virtualization adds a whole new layer of license compliance risk exposure, requiring them to be proactive about implementing industry best practices and technology to manage those risks."


Access the 2013-14 Key Trends in Software Pricing & Licensing Survey: Virtualization, License Compliance and the Application Producer/Enterprise Relationship

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About the 2013-2014 Key Trends in Software Pricing & Licensing Survey
Since 2004, Flexera Software has produced the Key Trends in Software Pricing and Licensing Survey in conjunction with several industry partners. The 2013-14 Key trends in Software Pricing and Licensing survey was conducted by Flexera Software with input from IDC's 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. The survey is made available to the industry at large each year. In total, 1,828 respondents participated in the survey, including 430 enterprise executives and 1398 application producer executives.

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