6 software license terms to consider before moving to the cloud

Some 95 percent of IT professionals have taken to the cloud, according to a recent survey. And if you’re one of them, you might want to check your licensing – you could be breaking your contract.

Many organizations aren’t aware that their existing software license terms may include obstacles to migrating applications to a public cloud. If you’re considering a move, be careful with what you transition—your intentions may not line up with what’s allowed by your contract. The older the agreement, the more likely it will lack clarity on the subject; however, newer agreements can be just as vague.

Typically, there are six different license terms that could cause you trouble. While some are easier to negotiate than others, all six should be reviewed and discussed with the assistance of your legal counsel before you migrate to the public cloud.

  1. Outsourcer rights: These terms usually speak specifically to a software user’s right to have software run by a third party on the user’s behalf. A cloud provider will usually qualify as an outsourcer, so you’ll need to make sure that such usage is permitted by your agreement.
  2. License movement rules: This clause defines the minimum time periods or other restrictions before licenses are allowed to be moved between devices. Some agreements may specify that software can only be moved after a certain number of days; yet a cloud provider may regularly move your software among hardware based on its own infrastructure requirements. You’ll want to make sure the terms of your agreement allow for this.
  3. Geography: Publishers may limit the use of software outside certain geographies, which would be difficult to control with some cloud service providers that distribute resources across borders.
  4. Audit provisions: Publishers typically have audit clauses that require on-site verification of software usage. A cloud provider may not allow such verification, obstructing an audit and causing a potential contract breach.
  5. License grant: Of particular importance here is the license metric being used. One-to-one license metrics such as “per server” or “per seat” may be easier to manage than more complex metrics like “per core” or “per processor,” unless the cloud provider allows you to control such usage.
  6. License true-up rules: These terms describe the permitted time periods between license deployments and purchases. This may be important in some cloud deployments, especially in non-production environments, where there is volatility in the number of licenses needed at any given time.

After analyzing each of these terms, you can create a table that designates the cloud readiness of each clause with a yes, no, or caution. “Yes” means that cloud deployment is clearly permitted, “no” means it is blocked, and “caution” means that there could be obstacles under certain circumstances. A blank field means there were no contract terms to review. Here’s an example:

By making such a table, you can more easily see which vendors may work better under your current software licensing terms, as well as which terms you might need to renegotiate. Note that an omission of language around a particular clause isn’t an explicit affirmation, nor a condemnation of a move to the cloud, but should still be evaluated as part of a risk analysis. No matter what the case, make sure you’re clear to move to the cloud, so that software providers don’t come knocking about broken contracts.

It’s also worth noting that some publishers will release cloud policies separately from their software license agreements. These policies may resolve some of the obstacles above, but make sure they are legally binding, not just a set of informal guidelines. Otherwise, you may be at the discretion of policy changes by the publishers.

SHI has the ability to help with contract reviews and negotiations like the above. Contact your SHI account executive for more information.

Kerrin O’Connell contributed to this post.

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