An Insider’s View on Software Licensing Trends for Enterprise Applications R “Ray” Wang

Senior Analyst, Enterprise Applications

Forrester Research, Inc.

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Theme

“Companies seek a balance between simplicity and complexity of license metrics; and rigidity and flexibility of licensing policies that

affect the overall software lifecycle experience.”

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Agenda

• Market Forces

• The Software Life Cycle

• Enterprises Trends

• Licensing Strategies

• Software Licensing Trends

• Recommendations

• Questions and Answers

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Market Forces

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Market Forces

• Consolidating vendor market reduces choices

• Instance consolidation creates reliance on vendors

• Existing systems require immediate modernization or replacement

• Improving market diminishes vendor discounts and incentives

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The Software Lifecycle

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Components Of The Software Life Cycle

July 2005, Tech Choices “Enterprise Software Licensing Strategies”

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Enterprise Trends

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Enterprise Trends

• Existing licenses do not accommodate new licensing metrics.

• Business is handicapped by a lack of flexibility in licensing policy

• Current systems are nearing the end of their lifecycle.

• New licensing preferences are emerging.

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Trends in user based metrics

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Trends in user based metrics

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Trends in user based metrics

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Trends in usage based metrics

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Trends in usage based metrics

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Trends in usage based metrics

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Users dislike single named user

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Users want enterprise-wide

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Users dislike processor based metrics

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Licensing Strategies

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Strategies For The Software Life Cycle

July 2005, Tech Choices “Enterprise Software Licensing Strategies”

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Software Licensing Trends

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Understand a Variety of Software Licensing Models

Source: March 19, 2004 Trends “The Future Of Software Pricing”

“How doyou currently payfor thefollowing software, and howwouldyou preferto payfor it?”

Enterprise app software (e.g., ERP, CRM)Per server

Per CPUPer named userPer site license

Perconcurrent userPer utility

OtherDon’tknow

Today Preferred

Percentagepointchange

Infrastructure software (e.g., OS, app server, EAI)Per server

Per CPUPer named userPer site license

Perconcurrent userPer utility

OtherDon’tknow

13%13%

31%21%3%3%

26%

17%

27%26%

29%15%1%1%

20%

13%

29%22%9%3%

19%

7%

13%6%

32%13%7%3%

16%

8%

22%7%

-2+1+60-7

-10

0-7

+3-2+6+2-4

-5

-5-19

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Average selling prices

Scale AverageCosts

Global Sites $250 - $350 K

Multi-Site $150 - $250 K

Single Site $10 - $150 K

Typical Number

Over 100users

50-100users

10-50users

SMB ERPvendors

Geac, SAP, Oracle-PeopleSoft,SSA Global-Baan

IFS, Lawson-Intentia,PeopleSoftEnterprise One(JD Edwards), Epicor,

Glovia (Fujitsu),Infor-MAPICS,MBS-Axapta, MBS-Navision, MBS-

Solomon, SSA GlobalMarcan,QAD

Infor-Lily, MBS GreatPlains,Sage, Sage Exact, and PSIAG

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Typical ASP pricing and options for SMB’s

• List price is usually the starting point for negotiations

» For 25 to 50 users: $150 to $250 / month

» For 10 to 25 users: $400 to $600 / month

• Contract terms vary in length and options

» Usually begin negotiations at 5 years

» Financing options exist for lease to own with 3 to 5 year terms

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Recommendations

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Include Licensing Requirements In Your Vendor Selection Criteria

• Enter licensing discussions in parallel with vendor selection

• Understand software usage

• Engage verticals early to commit to delivery of vertical functionality

• Leverage referenceability

• Partner with the vendor

• Focus on the total cost

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Evaluate Vendors Using Some Key Criteria

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Evaluate Vendors Using Some Key Criteria

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Evaluate Vendors Using Some Key Criteria

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Selected bibliography

• July 26, 2005, Tech Choices “Enterprise Software Licensing Strategies”

• June 9, 2005, Market Overview, “ERP Applications – The Technology and Industry Battle Heats Up”

• April 7, 2005, Market Overview “Midsize ERP Vendors Fend Off Newcomers”

• April 19, 2005, Tech Choices “To Be or Not to Be Single Instance ERP”

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Questions and Answers

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R “Ray” Wang

408.327.4308

rwang@forrester.com

www.forrester.com

Thank you

Entire contents © 2005 Forrester Research, Inc. All rights reserved.

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