BI Licensing & Lawsuits: A Sure Sign of Failure

Software licensing is never an easy topic, for either the buyer or the seller. For buyers, it's so much easier to discuss features and capabilities and whether or not the product is a good fit. For the seller, it's so much easier to highlight why their company and product is the best.

So you do your proof-of-concept analyses, confirm requirements, and capabilities, and at the eleventh hour, bring in your purchasing department to negotiate the best deal possible. Relationship doesn't matter here. Discounts do.

Buying BI software is particularly complex. Rarely can you buy the "BI suite" or "everything demonstrated"; instead, it's a plethora of unclear choices between roles and products, server-based or named-user licensing, optional modules that the unsuspecting buyer would have thought was standard, maintenance based on list versus discounted prices, and so on.

There is a big disconnect in BI buying: buyers want as much as they can get at the lowest price. They certainly don't want to be forced into the embarrassing (career-ending?) position of having to go back to the executive committee to garner more money for a BI module they overlooked. Vendors, on the other hand, want to extract as much value from the customer as their product warrants. Both sides want what's fair.

So if a customer upgrades hardware and does not increase the number of users, should the customer have to pay a fee to the BI vendor? That doesn't seem fair to me, but that is a consequence of server-based licensing that considers CPU-clock speed and power ratings. What about a report consumer who normally refreshes a report, but now wants to drill down into the details? The capability to drill may involve a higher-level, role-based license. I don't know many organizations that can track to that fine a level of detail exactly what users want to do, or that can accurately anticipate how user requirements and capabilities will evolve overtime.

I cringe at the stories I hear. One manufacturing company has a full-time equivalent tracking BI licensing compliance. This doesn't seem to be value enhancing. One health care company is in a legal dispute with its BI vendor because it didn't realize virtualization wasn't explicitly allowed. The firm also didn't immediately disable logins for employees as they left the company, so it  temporarily exceeded a named-user license count. One influential BI consultant will never again recommend a particular product to a customer because of a miscount in the way the software tracked its license usage for one of his customers. A legal dispute followed. Yet another customer is abandoning a project because of the sticker shock it faced when it explored rolling out a BI application  to more users.

I know there are some disreputable customers out there who use grey market software. But most of the situations I've encountered are honest mistakes and the fault of complicated licensing models that are out of sync with dynamic infrastructures and workforces. Once a customer and vendor entera legal dispute, any notion of a partnership in BI success is destroyed.

My recommendation to customers remains: buyer beware (see this article or BI Scorecard subscribers should view our webinar on BI packaging). Read and understand the fine print early in your evaluation process. Involve procurement early in the buying cycle. For vendors: simplify, simplify, simplify. Nickle and diming customers for a short-term profit is a recipe for longer-term failure. Beyond simplifying licensing policies, make it easier for customers to track licenses and compliance. There should be no surprizes for either side.

I could speculate on why this problem seems to be growing: a difficult economy, mega vendors who have greater account control, vendors who know BI switching costs are high. But you tell me: is this problem declining or increasing?

How clear are you on your vendor's licensing policies? Post a comment here, or if you are worried about a back lash, e-mail me confidentially at [email protected].

Regards,

Cindi Howson, BI Scorecard

Comments

[Sam Horton]

In the F500, Controllership (Finance) was delegated the task of monitoring compliance and updates worldwide on behalf of purchasing, where the purchasing function reported to IT. That works because in many cases compliance is so complicated that it is itself an analytic task. (Why: Costs are allocated out by group utilization, so someone must consolidate it) As an OEM, the task fell to the commercial team and the vendor (Microstategy) was very helpful. In both cases, we had internal BI reports on license compliance a remittances for CIO/IBU review and budgeting.

[Lisa Pappas]

Cindi, do you think SaaS deployments are a viale solution to the server- and user-based licensing challenges? It does provide a utility pricing model -- Pay for what you are actually using. Or, in practice, is it just as difficult to measure ROI with an SaaS approach versus on-premises solution? Please share your thoughts.

[Cindi Howson]

Hi, Lisa, Good question. I do think SaaS and in general subscription-based pricing is both sometimes more straight forward for customers to manage but also more usage based. It's a funny thing, because when SAS first introduced its BI solution several years ago, I said that I liked the subscription pricing model. Dr. Goodnight, never to mince words, said I couldn't be a real analyst then as he had never met an analyst who liked SAS' model! What I liked then and now about subscription pricing is that it also forces the vendor to stay focused on satisfying the customer; if not, the contract is not renewed. On the down side, it means some companies can't capitalize their software and certainly the longer-term costs need to be weighed of subscription versus up-front acquisition.
Regards,
Cindi

[Norm Walters]

Buyer beware is right! I'm working on a project right now that uses one of the large BI vendors, and the cost of licenses has become a serious issue as we try to expand to thousands of users. So much so that we're evaluating other tools, such as open source ones, to find something that will meet the needs much more cost effectively. I suspect this particular vendor is going to lose a lot of revenue in the near future from this client!