October 17-18, 2006 l Santa Clara, CA Software Usage Analysis An Enabler for New Licensing Models Rick Ingram, President License Tracker Inc.

October 17-18, 2006 l Santa Clara, CA 2 Outline evolution of licensing models usage analysis - technical considerations usage analysis - contractual considerations other considerations summary questions

October 17-18, 2006 l Santa Clara, CA 3 Evolution of Licensing Models Pay-Per-Use Models (Rented Access) Traditional Client – Vendor Relationship (Fixed Access, named user, floating, duration) (Unlimited Access) Remix Models (Flexible Access) Increased value to technology consumers Enhanced customer relationship for software vendors Technology Partnerships Increased risk to technology consumers Decreased commitment to software vendors Usage Analysis Enabled License Models Classification Models (Variable Access)

October 17-18, 2006 l Santa Clara, CA 4 Traditional Models Evolution of Licensing Models Pay-Per-Use Models (Rented Access) Traditional Client – Vendor Relationship (Fixed Access, named user, floating, duration) (Unlimited Access) Remix Models (Flexible Access) Technology Partnerships Classification Models (Variable Access)

October 17-18, 2006 l Santa Clara, CA 5 Traditional Licensing Models single user, single license –named user –node locked multiple users, shared license –concurrent use license manager –dongle controlled fixed duration –evaluation –annual lease –short term requirements

October 17-18, 2006 l Santa Clara, CA 6 Pay-Per-Use Models (Rented Access) Traditional Client – Vendor Relationship (Fixed Access, named user, floating, duration) (Unlimited Access) Remix Models (Flexible Access) Technology Partnerships Classification Models (Variable Access) Business Issues Driving the New Models Evolution of Licensing Models

October 17-18, 2006 l Santa Clara, CA 7 Motivation for New Models for users –balancing productivity and efficiency –long term needs are not always known when making initial purchases –mid-year requirements can be satisfied with operating budgets for vendors –competition requires licensing innovation to enhance customer relationships and increase market share –users’ needs are vendors’ opportunities Cap ExOp Ex January Cap ExOp Ex July

October 17-18, 2006 l Santa Clara, CA 8 Classification Models Evolution of Licensing Models Pay-Per-Use Models (Rented Access) Traditional Client – Vendor Relationship (Fixed Access, named user, floating, duration) (Unlimited Access) Remix Models (Flexible Access) Technology Partnerships Classification Models (Variable Access)

October 17-18, 2006 l Santa Clara, CA 9 Essentials of Classification an extension to named user licensing users are placed into categories based on usage requirements –restrictions on which features can be used –restrictions on duration of use –restrictions on number of sessions usage analysis for monitoring, compliance and “true-up” Full User Class A Class B 10 / day 10 / wk

October 17-18, 2006 l Santa Clara, CA 10 PPU Models Evolution of Licensing Models Pay-Per-Use Models (Rented Access) Traditional Client – Vendor Relationship (Fixed Access, named user, floating, duration) (Unlimited Access) Remix Models (Flexible Access) Technology Partnerships Classification Models (Variable Access)

October 17-18, 2006 l Santa Clara, CA 11 Essentials of Pay-Per-Use vendors provide non-owned copies of software to users use of all software (owned and rented) is recorded in usage logfiles once per billing cycle the logfile is sent to the vendor for analysis an invoice is prepared based on actual usage of non-owned software License Manager License Manager Logfile License Control File

October 17-18, 2006 l Santa Clara, CA 12 Time Based Pay-Per-Use technology consumers are charged for the amount of time they used non-owned copies of software on site availability of rented software ensures no lag between detection of need and use of software Standard Concurrent Use Chart Owned License Limit Times of Non-owned License Use

October 17-18, 2006 l Santa Clara, CA 13 Transaction Based Pay-Per-Use usage charges occur because a software module has been used, duration of software use is irrelevant most applicable for consistent duration functions usage of each module or function is logged and billed accordingly

October 17-18, 2006 l Santa Clara, CA 14 Remix Models Evolution of Licensing Models Pay-Per-Use Models (Rented Access) Traditional Client – Vendor Relationship (Fixed Access, named user, floating, duration) (Unlimited Access) Remix Models (Flexible Access) Technology Partnerships Classification Models (Variable Access)

October 17-18, 2006 l Santa Clara, CA 15 Essentials of Remix software purchases are viewed as purchases of a technology pool, not just individual licenses consumers have the right to “remix” their active set of licenses to satisfy current needs normally used in conjunction with pay- per-use Initial Pool Needs Change After a remix

October 17-18, 2006 l Santa Clara, CA 16 Periodic Static Remixing this model makes use of existing application software and license manager periodically (every 3 or 6 months), the license file is updated to reflect the new state of “remixing” usage analysis provides information to make informed remix decisions Under-utilized Licenses Highly utilized Licenses

October 17-18, 2006 l Santa Clara, CA 17 Continual Real-time Remixing end users purchase licenses of a token-feature not the actual software features when features are checked out the corresponding number of licenses of the token-feature are checked out Pay-Per-Use can be easily added moving a current product family to this model requires either: –modification of the application source code –using a token licensing enabled license manager Feature - X (3) Feature - Y (4) Feature - X (3) Feature - Y (4) License Manager Pool of “Token” Licenses

October 17-18, 2006 l Santa Clara, CA 18 Unlimited Access Evolution of Licensing Models Pay-Per-Use Models (Rented Access) Traditional Client – Vendor Relationship (Fixed Access, named user, floating, duration) (Unlimited Access) Remix Models (Flexible Access) Technology Partnerships Classification Models (Variable Access)

October 17-18, 2006 l Santa Clara, CA 19 Essentials of Unlimited Access multi-year contract providing unlimited access for a fixed annual fee the fee is adjusted annually based on usage during the year removes the revenue/cost uncertainty associated with pure rental arrangements

October 17-18, 2006 l Santa Clara, CA 20 Enabling New Licensing Models Technical Considerations Pay-Per-Use Models (Rented Access) Traditional Client – Vendor Relationship (Fixed Access, named user, floating, duration) (Unlimited Access) Remix Models (Flexible Access) Technology Partnerships Usage Analysis Enabled License Models Classification Models (Variable Access)

October 17-18, 2006 l Santa Clara, CA 21 Sources of Usage Data license manager logfiles software vendor proprietary logfile or database License Manage r License Manager Logfile Optional Vendor Usage Logger Vendor Proprietary Usage Data

October 17-18, 2006 l Santa Clara, CA 22 Logfile Issues - Existence is logging turned on? –ensure proper configuration overwriting or deletion of logfiles –overwrite or append on restart –encourage proper file management policies

October 17-18, 2006 l Santa Clara, CA 23 Logfile Issues - Integrity ASCII versus binary –ASCII can be edited –binary is secure, but is it availalable? –ASCII limits customer base completeness of data –license sharing –detailed session matching

October 17-18, 2006 l Santa Clara, CA 24 Logfile Issues - Access automated or manual –firewall and “phone- home” issues privacy concerns –“anonymizer” may be required multiple vendors’ data in a single file –“extractor” may be required

October 17-18, 2006 l Santa Clara, CA 25 Enabling New Licensing Models Business Considerations Pay-Per-Use Models (Rented Access) Traditional Client – Vendor Relationship (Fixed Access, named user, floating, duration) (Unlimited Access) Remix Models (Flexible Access) Technology Partnerships Usage Analysis Enabled License Models Classification Models (Variable Access)

October 17-18, 2006 l Santa Clara, CA 26 Rental Mode : Decision #1 basic time units for rentals (seconds, minutes, hours, days, weeks, months, years)

October 17-18, 2006 l Santa Clara, CA 27 Rental Mode : Decision #2 elapsed time or calendar periods –is a day midnight-to-midnight or is it an arbitrary 24 hour period from the start of first rental Is this a 1 day rental, or 2? Time Mon Tues Wed

October 17-18, 2006 l Santa Clara, CA 28 Rental Mode : Decision #3 single period or multiple period rentals –typically, smaller time units are single period and longer time periods are multiple period Is this a 1 unit rental, or 2?

October 17-18, 2006 l Santa Clara, CA 29 Rental Mode : Decision #4 simple or combination rental modes –rate capping (i.e. hourly_capped_monthly) –volume discounting $ Time Rental total climbs with usage Until it hits the cap It then resets at the next period

October 17-18, 2006 l Santa Clara, CA 30 Rental Mode : Decision #5 minimum session length –ensures that license checkouts for which no business value could be realized are ignored Should these sessions be considered? Or not

October 17-18, 2006 l Santa Clara, CA 31 Rental Mode : Decision #6 minimum overlap period –minimum period of time for a rental, shorter periods are forgiven Should there be a charge for this period? Or not

October 17-18, 2006 l Santa Clara, CA 32 Rental Mode : Decision #7 pricing –typically defined as a percentage of either perpetual license or annual license fees –optional components access fee billing period minimum –set pricing to create the desired win:win scenario provide reasonable cost access for minor use on-demand price such that high use encourages perpetual license purchase

October 17-18, 2006 l Santa Clara, CA 33 Rental Mode : Decision #8 applying rentals to future purchases –what percentage, if any, of rentals can be applied as a discount to perpetual license purchases

October 17-18, 2006 l Santa Clara, CA 34 Enabling New Licensing Models Other Considerations Pay-Per-Use Models (Rented Access) Traditional Client – Vendor Relationship (Fixed Access, named user, floating, duration) (Unlimited Access) Remix Models (Flexible Access) Technology Partnerships Usage Analysis Enabled License Models Classification Models (Variable Access)

October 17-18, 2006 l Santa Clara, CA 35 Pay-Per-Use Cost Monitoring vendors need to analyze usage data once per billing cycle end-users must monitor costs on a continual basis –ensuring budgets are not being exceeded –detecting and correcting improper license use –making mid-period purchases if rental usage is higher than expected

October 17-18, 2006 l Santa Clara, CA 36 Usage Analysis in ASP Operations in an ASP environment usage analysis of standard logs can support –accounting and invoice generation for the vendor –cost and usage monitoring by customers

October 17-18, 2006 l Santa Clara, CA 37 Summary 1. Traditional licensing models do not adequately address the needs of end-users and therefore of software vendors. 2. Usage analysis enables license models that address these needs in a win:win relationship. 4. Pay-per-use models provide on-demand access for peak periods, or in support of ASPs. 5. Remix models meet changing users’ needs while protecting overall investment. 6. Technology partnerships provide maximum value for long-term commitments. 7. Usage data characteristics and the capabilities of the analysis tools must be considered when drafting contract terms. 8. Monitoring of costs must be done by end users to maintain the win:win scenario. 3. Classification models provide the revenue model of named users with discounts for restricted user access.

October 17-18, 2006 l Santa Clara, CA 38 Questions? Rick Ingram er.ca (403) “You can only optimize - what you understand… …and you can only understand - what you track!”