I’m only a couple of months into my own iPhone phenom, but I’ve downloaded about 25 apps so far. The fun thing about such devices is how far you can personalize them, yet when you hand it to someone at a party they know exactly how to take a picture with it.
I’d noticed that the little “App Store” button on my iPhone kept accumulating numerals in a little red circle. Remember, I’m new here, even though I’ve had smart phones for a decade. Finally my wife explained that those numbers represented how many of my apps had updates available. Big revelation. Several of the apps, free or 99 cents in the first place, improved noticeably after I updated them. No charges for the updates.
Which brings me to the Veterans Affairs Department and its recent decision to, as NextGov put it, “junk” its volume license agreement with Microsoft for desktop products. VA explained its decision in this memo.
Assistant Secretary for Information and Technology Roger Baker states that the current enterprise licensing agreement, called Software Assurance, expires and renewing it would lock VA in for the next five years.
In my opinion, this is a gutsy move for a large organization, and it’s a wake-up call to enterprise software manufacturers.
Keep in mind, no one actually buys software. You buy a license to use it. Software has no corporeal existence. It’s a manifestation of intellectual property. Individuals buy single or small multi-pack licenses, and these are nearly always perpetual, meaning you can use the software forever. Microsoft typically allows individuals to install its software on two processors, as long as only one is operating at a time.
At the enterprise level, software licensing becomes a bit of a negotiating dance between using organizations and the software manufacturer. Manufacturers are entitled to payment for each license, but they recognize that the single user price times the number of enterprise users becomes prohibitively expensive. Hence volume license agreements.
Agreements may be simple volume discounts, or they may entail charges for upgrades and automatic billing for additional licenses, as VA’s deal with Microsoft apparently did. So for an organization like VA, the challenge is to make sure the IT staff doesn’t install any more copies than the organization has licenses for. Vendors have the right to conduct audits, or have third parties come in and audit. Unpaid-for licenses can result in fines and even criminal charges.
What about upgrades? From the tone of Baker’s memo, it sounds like VA is content with versions it has now of Windows and other applications. Security patches are generally outside of version updates, and so VA has little to gain from continuous upgrades. Besides, Windows 8 is already looming on the horizon.
Most revealing in the memo is the reference to mobility and cloud and the changes to enterprise computing they portend. Baker states, “The market for desktop and server software is changing, with substantial impact from both cloud service providers and personal mobile devices.”
That’s a big wake-up call to the software industry.
A quick primer on software licensing: When subscribing to cloud apps as monthly or yearly services, current market practice has the vendor simply offering the latest version of whatever, but the monthly payment remains constant. And because mobility and cloud apps go hand in hand, and VA has been working towards getting more mobile devices to work securely on its network, Baker is looking down the road to when most users are using cloud-provided apps. Not all users will be mobile. Organizations can cut costs of supporting stationary users by replacing PCs with thin clients.
Getting back to mobile apps, I don’t see enterprise applications or enterprise deployment of individual applications getting to the iPhone model. But the software industry is likely to face a new strategy that aims for somewhere in between, if VA’s rejection of continuance of the old model is a bellwether. Technically, it’s already happening: Witness Microsoft’s online 365 cloud applications. Dollars and cents form the tougher challenge. Financially, the question is how the enterprise software industry will get its costs in line with models offering a lower-dollar option to large customers.