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Estimated reading time: 3 minutes, 15 seconds

Confusion over Hosted Licensing

Hosted artThere is a lot of confusion in the market when it comes to the cloud and hosting and software licensing. Particularly with new mobile devices adding to the mix, software developers are recognizing that the additional machine licenses they used to sell aren't being purchased any longer.



Rather, consumers are using remote access solutions to gain use of their applications while working remotely, and thus are avoiding the purchase of additional software licenses for the remote device. For software providers who have, um, control over their software licensing (e.g, an "ET phone home" validation model), or who deliver their software as a service, perhaps a move to a rental or subscription model is the way to go. We just won't talk right now about how difficult it is for a business to transition from a purchase to a subscription revenue model.

For the bulk of that software which typically installs on your PC and network, however, no so much. For software developers stuck in that "tweener" world, with one foot on the desktop and another on the web, the licensing models tend to get pretty murky, and a lot of software license revenues are being lost.

Consider the rules around Microsoft Office, for example. With the variety of licensing models currently available, it would seem that having your Office licenses hosted with a third-party service provider would be pretty straightforward. However, such is not the case. For those of you considering having your MS Office licenses hosted by an ASP, you need to know that many of the current Office licensing models do not represent a qualification for hosting.

OEM versions of Office of any version (comes installed with your shiny new computer) aren't good for anything but accessing on and from that purchased computer. You're not even supposed to access that license remotely (RDP,etc.), and it certainly doesn't qualify to be hosted with an application service provider or hosting company.

Office365 subscriptions are essentially a license for your computer and license to use the web apps. These subscriptions are not valid for remote access, nor are they qualified for hosting.
Office 2010 falls under most of the rules of Office 365, so there's no grant for remote access or for hosting qualification.

VLA purchases, which are volume license programs from Microsoft, may or may not grant remote use or hosting qualification, depending on the nature of the license (per device or per user -not both), and whether or not the license has a mobility grant. If you own VLA purchased licensing, your hosting provider or ASP may be able to provide that mobility "addendum" to your VLA license, preventing you from having to rent a license from the host.

Hosting almost always means you need to also rent the license from your provider, even if it's to err on the side of caution. There are very few circumstances where a mixture of customer-owned and provider SPLA-subscribed licenses actually works to enforce the license terms, and the software companies are getting just a smidge smarter about figuring that out. Asking the customer to indemnify the service provider is certainly one way to try to mitigate the risk (for the provider), but business owners need to take head-on the responsibility for knowing what they can and cannot lawfully do with the software they purchase.

After all, most software products are not actually sold, and the purchaser doesn't end up "owning" the product, only a right to use it - and under the terms and conditions of the End User License Agreement or Software Products Use Rights document.

Joanie Mann
Joanie Mann is a recognized authority in the areas of ISV cloud enablement and ASP service delivery.  Her extensive work with accounting professionals worldwide has positioned her as an expert consultant and adviser to practitioners looking to leverage cloud accounting solutions, web-based applications and Internet technologies in their firms and with their clients.
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