Ready, fire, aim. Full speed ahead with virtualization.

I’ve had the opportunity over the last couple of weeks to speak to a lot of press, analysts, customers and prospects.  And, in all of those conversations, one common theme keeps coming up.  EVERYONE is talking about virtualization.  This is true of both vendors and their customers.  It seems everyone you talk to is doing SOMETHING related to virtualization.

I say something because what they are doing varies greatly.  There’s application virtualization, tons of discussion about virtual desktop infrastructure (VDI) and many other variants.  The benefits seem straightforward to most – you gain compatibility and reliability through isolation, you can resource efficiencies through consolidation and better utilization of resources and you gain flexibility.

It seems like the technical folks are doing a great job of learning about this (one IT focused publication I spoke to in Germany this week indicated they just held a virtualization focused seminar for their readers and it was packed – the editor said he missed his train there were so many questions) so they know which vendor to select and how to successfully deploy and optimize the implementation.

The problem seems to be on the business side.  It is quite apparent that there is a ton of confusion about what virtualization means in terms of software licensing – and this is not unique to enterprises.  Many vendors don’t know.

I had a fascinating discussion with one very smart customer in Australia who talked about conversations he’s had with peers in the industry about the impact of virtualization on software licensing.  Of course, one key topic is what type of discount you can get when you buy this stuff.  The problem, as he sees it, is that you may negotiate a great discount, but if you don’t understand your actual software usage, you can’t know if you actually realize the discount you negotiated (posed as a question, which is the better deal; getting a 30% discount with 80% actual usage or getting a 25% discount with 90% actual usage?).  One of the tricky things here is the terms of the software license agreement.  If the terms don’t accurately reflect the realities of using the application in a virtualized environment, you are at risk.  In fact, many companies in their quest to get the best discount, negotiate out critical terms that could come back to haunt them later.

The vendors are not without fault here.  Many don’t understand the way their customers intend to use their products in a virtualized environment – so they don’t know the proper language to put in the software license agreement either.  Some may think that leaving this exposure in the agreement benefits them later since they’ll be able to realize more software license revenue at true-up time.  This may, in fact, be true, but this comes at the expense of customer satisfaction and isn’t the best long-term strategy.

The lesson here is that most of the discussion and focus around virtualization is about the technology.  But, when it comes to the equally, if not more important, commercial terms, too many people are taking a ready, fire, aim mentality that is going to cost them in the long-run.

We’ve discussed the impact that virtualization has on software licensing theme many other times.  For more information, please read the following blog posts:

What strategies, policies and business models have you implemented to address software licensing in the virtual and cloud world?

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