And if you're using the software for evaluation or development purposes, you'll likely pay much less for a license than if you need it for production. "Nearly all vendors have licensing programs for internal testing and development," says Servoy's Aleman. "Yet you still see companies buying commercial licenses for their development servers. They can save up to 90 percent by entering their vendors' development programs."
The key is understanding not merely what you're using but also how you're using it and how the license terms apply in each instance. "Companies have to be cognizant of how they are using these licenses," cautions NPI's Muscarella. "If some users only need access to an application for limited use, then full professional licenses aren't needed, or sometimes customized user definitions can be negotiated. Vendors want to sell the highest value license available, so don't let them decide for you."
Maintenance: Mind your wallet
Even customers that play hardball on licensing costs often pay too little attention to annual fees for support and upgrades. As software vendors try to squeeze more revenues from their existing customer base, maintenance fees can be a far bigger money sink.
"The initial licensing spend will feed into the annual maintenance and support costs, which is approximately 22 percent per annum of the total licensing purchase," notes Rosenberg. "Therefore, by year four or five, your maintenance and support will exceed the initial purchase cost."
The good news? Tough economic times have spurred enterprise vendors to cut deals on maintenance fees to keep their customers. Last May, Oracle announced it would trim license fees on some of its older products, while SAP said it would slow down price hikes on its annual fees.
Jim Shepherd, senior vice president of AMR Research, says maintenance agreements are a huge pain point for many enterprises. "People tend to focus more on the license price than on maintenance fees," he says. "They end up spending far more on maintenance over the life of the software than they ever did on the license price."
They might also be getting less than they bargained for. "In some cases, companies are paying maintenance to get product enhancements, only to find the enhancements they want have been repackaged as a new product the vendor wants to sell them," says Shepherd.
Muscarella advises companies to negotiate the rights to use repackaged or remarketed versions of the same product, so they don't have to pay again for software that's only marginally different.
Assignments: Anticipate change
In today's economic client, the only constant is change. Companies acquire and become acquired; they downsize divisions and spin off subsidiaries; they contract or expand to new markets. Don't assume your licensing agreements are flexible enough to weather all the changes.
"We recently worked with a major U.S. media company that decided to expand its North American online publishing arm to Europe and Asia," says Rosenberg. "There was no merger or acquisition. The company had assumed its Oracle Unlimited License Agreement meant that any usage by the company was covered. However, the Terms and Conditions limited the media company's use of its Oracle products to North America."
The solution? The company revised its licensing agreement by adding the new regions, as well as the option to assign up to 10 new regions within a specific time period.