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Software licensing: Are finance directors getting what they bargained for?

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What further complicates decision making for finance directors is that annual maintenance and support costs are rising while vendors seem to give discounts on licence fees. Forrester estimates that while in the past maintenance costs constituted between 18 and 25 per cent of licence fees, today the percentage is climbing towards 27 per cent.

This complexity makes it more difficult for FDs and financial controllers to make informed decisions and can also lock them into a treadmill of rising software costs.

How can they determine which technologies will deliver the best return on their investment if they don’t even know exactly what they’re paying for? For example, if a business is being charged ‘per CPU’ instead of ‘per socket’, it may end up paying up to four times as much for the software.

The increasing consolidation within the enterprise software market means that there is less of a drive for the increasingly monopolistic vendors to review their licensing. As a result, FDs are forced to simply pay up, under the impression that there’s no choice, which in turn helps maintain the monopoly and keeps prices high. To get out of this vicious circle, FDs need to understand that there are alternatives out there.

With the increasingly uncertain global economic outlook, FDs and financial controllers under increasing pressure to find ways to minimise the potential impact on their business. An obvious solution is to cut overheads wherever possible, including a reduction in IT costs.

One option is for FDs and financial controllers to explore the option of swapping their high-cost and confusingly priced proprietary technologies for lower-cost, open source based alternatives. Thanks to companies such as Novell and Red Hat, open source technologies are no longer associated with instability or unreliability.

Instead, when supported by private enterprise, open source solutions allow businesses to reap the benefits of enterprise-class software at a fraction of the cost.In fact, this approach has been known to save businesses up to 50 per cent in IT costs annually over a typical five-year period.

By combining the cost advantages of open source  with commercial support, businesses are able to achieve the best of both worlds as performance, scalability, security and reliability of IT systems are not compromised.

FDs and financial controllers may struggle to keep track of what they are paying for because of overly complex and continually changing software licensing models.  Yet, some are realising that open source backed by private enterprise can be a viable means to moderate IT spend.

Swapping their established, high-cost proprietary technologies for lower-cost, clearly licensed, open source based alternatives allows them to reduce IT costs without jeopardising the reliable and scalable delivery of IT systems to support the business and to know exactly what they are paying for.

* David Mugenyi is financial controller for EMEA at EnterpriseDB

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