Until recently software vendors such as Microsoft, IBM, HP and others evolved by locking customers into long-term licensing agreements for which customers received incremental improvements to their products, while the vendors grew fat. With virtualization transforming the data center, however, software vendors have had to find ways to change their tune.

So let’s take a look at how that change may pan out as we move to the software-defined data center (SDDC) and how, if those models fail, the SDDC could be delayed or even derailed.

Defining SDDC
At VMWorld 2012, VMware CTO Dr Steve Herrod coined the term the software-defined data center. He meant an IT data center where all the elements of its infrastructure such as networking, storage, servers and security are virtualized and delivered as a service – the entire infrastructure being entirely automated by software.

The bandwagon promptly sagged in the middle with the weight of fellow-travellers. This was probably a reaction to the uneven development in the enterprise software market up until then, as SAP and Oracle went one way with licensing and Microsoft went down the simplification route.

After Herrod’s statement, software-defined networking (SDN), software-defined storage (SDS) and the ultimate goal of the software-defined data center were seen as feasible. At the same time Microsoft was taking on Cisco in unified communications – and VMware in hypervisors. Its ‘good-enough’ innovations were beginning to give the market leaders cause for concern. In the most basic terms, SDDC and all the other ‘software-defined’ services and concepts are a virtualization of the elements of their infrastructure and then, in the case of the data center, increasing accessibility of functions through an Application Programming Interface (API). The data center, specifically, includes all the concepts of software-defined networking, storage, automation, security and more.

If the data center is software defined it means if there is ever a technical issue, the IT manager can control, fix or respond to it without having to be physically present or have to deal with multiple hardware issues. In essence, the SDDC is driven by software, creating a more flexible and agile computer system to address the ever-growing needs of the modern business environment.

But the SDDC has a few hurdles to navigate. One of them is the complex nature of the software licensing arrangements in the average data center. Clive Longbottom, service director at UK analyst Quocirca, says there are still some major issues that  many organizations need to get right around cost models. “The vast majority are licensed on a per-named-user per-month subscription basis,” Longbottom says. “The rest are on an enterprise model where you pay for users per thousand. But for many vendors their licensing models are still too complex – at least Microsoft has learned a lesson and their model is now simple.”

Recently industry leaders with feature-rich products – such as SAP, IBM, Cisco, Microsoft, HP and others – are being forced to defend their high prices and complex technologies. Thanks to cloud computing, bring your own device (BYOD), mobility and the need to manage mobile devices, the need for scaling data centers, backing up, deleting and recovering applications or mining data have multiplied. Customers – large and small – are wondering why they should pay big-ticket prices when they could spend a fraction for most of the same functionality in the Cloud. The market has been disrupted.

This disruption could be followed by problems for those with legacy systems in the data center which leave behind software licensing problems.

Chasing the money
The very existence of virtualization has caused a problem since the very notion that a data center can be abstracted into smaller units that can then be priced and sold as a utility has changed the way many companies are dealing with their networking and storage. And the big vendors in enterprise applications, data center computing, virtualization and networking have all been keen to develop or acquire disruptive solutions of their own. As a result, they went out shopping. For example, VMware in 2012 spent US$1.26bn for SDN start-up Nicira, and a week later Oracle bought Xsigo for an unspecified amount of money. In November 2012 Brocade bolstered its SDN knowledge by acquiring SDN start-up Vyatta. Cisco Systems has also made a number of SDN-related acquisitions. In November 2013 it spent $800m on Insieme, a SDN technology that could have challenged Cisco’s routers and switches – a truly disruptive technology. Further down the evolutionary chain Swedish-owned Snow Software recently bought software asset management company Intelligent Licensing giving it much-needed SAP functionality.

Research company IDC says SDN hardware/software/service revenues reached about $360m in 2013 and this figure is expected to grow to $3.7bn by 2016. These numbers include sales of everything SDN-related, from the associated network infrastructure and applications to control plane solutions and professional services.

Established networking vendors such as Cisco, HP, Juniper Networks and Brocade are deeply into the SDN trend, and a host of start-ups are bringing their solutions to market. At the same time, there has been some consolidation in the industry as larger players – including some with little or no presence in the data center networking space – have bought smaller vendors to augment their SDN capabilities. These include Big Switch Networks, Adara and Pica8.

Going against the grain
By virtualizing the applications the resources become more agile and flexible. This level of abstraction, however, takes managing software licenses back to the era before virtualization. Managers used to count licenses and log them on spreadsheets.

Now they can’t even find them to log them.

The reason for the problem is that the application vendors have different methods of licensing and these are not compatible with an abstracted, pooled infrastructure. Many vendors require you to have a license for all CPU cores in a host for their application. This makes it inefficient to run other applications on that server, or to license every server for every possible application, which is what would be required.

The result of these physical hardware core-based licensing policies is silos of capacity – the very problem the SDDC is aiming to prevent. It is also inefficient from a provisioning, availability and operations perspective. For example, VMware’s provisioning capability (vCloud Automation Center) – part of the vCloud Suite – does not have software licensing placement and management awareness. This means you still need humans (with spreadsheets in hand) to manage software licenses. There are ways you can do it at the moment using dedicated clusters which are right-sized and can save millions of dollars but it goes against the very concept of the SDDC – logic says that the license awareness should be built into the SDDC platform itself.

With SAP and Microsoft it is relatively easy to build a real SDDC that is abstracted, pooled and automated while remaining in compliance with their software license policies in a very simple way. You also get the flexibility of running your systems in a private, public or hybrid cloud or hosting environment. But you pay for the privilege.

Some users work with IBM WebSphere Application Server with sub-capacity licensing (by vCPU), which makes it easier to run in a SDDC (with the IBM License Metric Tool used for compliance management). Because licenses are based on Processor Value Units (PVUs), however, it is hard to use in a cloud environment when the customer may not know the hardware specifications and therefore PVU’s of the underlying servers. This could create a licensing compliance issue.

Longbottom says he is all for abstraction “as long as you have enough intelligence down at the server level which the hardware manufacturers are fixing at the moment”.

“The network functions virtualization (NFV) model had to be created to deal with the level of abstraction built into the silicon. Now the same is being done with SDDC, so SDDC is definitely on course and will happen. But the reality for the moment is a hybrid model. We have all the technology to run a SDDC but the software licensing reality is way behind the times,” Longbottom says.

“In an ideal world the vendors would provide the tools to manage the licenses in a fully virtualized SDDC. And ideally it would be provided free. Now, since that has never happened before and is unlikely to happen in the future, it is more likely that SDDCs will have to bite the bullet and buy an asset management tool. Not one like Flexera, which is expensive, a bit long-in-the-tooth and stuck in the past but ones such as Snow Softwares’ license Manager, 1E or Centrix’s solution.” There are, of course, others in the market and I’m sure some start-ups in the pipeline worth checking out.

Managing the licenses
Carel Gouws, services director at Snow Software, says with the data center comes the virtualization environment such as VMware, Hyper-V and Citrix XenServer. “For us to manage a software license position within those spaces we have to manage the visibility of cores. We have connectors (agents) which plug into the VMWare Vcenter, pull that information out and it tell us the full data center details such as the host associated and the virtual servers,” Gouws says.

“These connectors also monitor Vmotion – so we can even tell when servers move across the data center farm and where they move to.” Gouws says Snow’s solution is priced according to end-points. “The connectors give us an overview which tells us how the data center is configured,” Gouws says. “Snow license Manager then associates the software for each level; 1) data center or cluster level; 2) host level; or 3) individual virtual server level. Snow’s solution can also inventory the individual virtual servers – detailing the associated apps installed; the resources allocated against a local agent; the resources allocated at server level; and the complete data center.” This can be done by Snow’s software for the Windows, UNIX and Linux operating systems.

Gouws says he believes the need to manage licenses and have visibility of the estate as organizations go to cloud or entirely virtualized environments is key. “This includes managing Oracle licensing where under-compliance is common. We can get all Oracle’s data into license management and find out what is being used or under-used. Oracle scripts are usable, and organizations do use them, but we can give them a better, constantly updated feed of their Oracle estates. Our acquisition of Intelligent Licensing has given us the ability to support SAP which means that Snow can now manage the software of all data centers,” Gouws says.

Paul Burke, VP of product development at Centrix says his company works to help organizations minimize the number of instances of deployed software. “The traditional licensing method of paying per user or per device is now obsolete for the world of the SDDC. Every time a data center creates a new virtual image they are creating a potential license cost or risk. Centrix’ tool can tell data center managers whether they have too many or too few software licenses for the number of desktop images they have,” Burke says.

The question is what you do when you find out that you’re running too many licenses – a situation Burke says he sees all too often. “I’ve seen research studies about the incremental costs which can be incurred by not managing virtual licenses properly which show incremental costs of licensing for virtual environments exceeds any cost savings from virtualizing the hardware. If you look at the typical organization our experience shows that 80% of instances of installed software are never used. That means four out of five pieces of software are never used – that is typical across all industries, commercial or government,” Burke says. Centrix’s experience shows how expensive the SDD will be if it is not properly managed.

The software buffet
Tony Lock, program director with research outfit Freeform Dynamics, says there are two sides to the problem and they occur mainly for the smaller organizations. “The first is knowing what software is running and where it is running in a virtualized environment. The software tools are developing so that side is improving. The second problem is with the license conditions of the Independent Software Vendors (ISVs) themselves because that is really where the biggest challenge is. Their licensing models don’t work well in virtualized environments or even really dynamic environments. Unless you are one of the really huge enterprises which has the money to pay for large numbers of licenses, you will have to come to some agreement with your ISVs and most of the ISVs are way behind the curve,” Lock says.

“We are nowhere close at the moment to most data centers being software driven. But the end-users don’t know what licensing models they want and the ISVs don’t know which models would make business sense for them. Businesses like predictability in software costs but the ability of the SDD to ramp up capacity quickly would have a large financial cost unless you have an ‘eat-as-much-as-you-like’ enterprise buffet which would be far too expensive for the smaller organization. They will have to sit down soon and solve this problem.”

Unhealthy licensing
So the SDDC is technically feasible, according to Lock, but the licensing model is definitely not fit for purpose yet. Enterprises work to fixed IT budgets and not managing licenses could mean yo-yoing costs. As Lock says: “They don’t even have pay-per use telephone costs anymore – they have big buckets – so how can you have flexibility while ensuring that the ISVs don’t feel they are being ripped off? Variable costs for software licenses are feasible only when your customers pay for the extra licenses but few enterprises operate on that model.” Both Lock and Longbottom put the first truly SDDC at least five years in the future.

IT budgets will either have to start dealing with more variability or the bean counters will have to use a more evolved budgeting process. Lock says he believes there is going to be a truly ‘Darwinian’ process of trying out and disposing of the IT budgeting strategies which don’t work if the SDDC is to evolve from today’s data center. As Oracle’s recent case of European litigation with Usedsoft over second-hand software licensing shows, software licencing is on the news agenda. If old-fashioned restrictive licencing agreements are not going to be allowed to delay progress on technology which is ready to use, we may miss out on a number of new developments soon, and one of them could be the SDDC.