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Failure to track virtualization licensing terms can cost you

An unnamed client of Forrester Research received a bill for $1 million from a software vendor for violating licensing terms. The problem was that the company was running its software in a virtual environment on any number of servers in its data center, versus only the servers it had originally licensed the technology for.

This isn’t the first time I’ve heard of virtualization licensing terms being violated. A systems integrator told me that a customer had to pay Microsoft $300,000 after an audit of an application virtualization project. Apparently, the company was using Symantec’s Norton Ghost disk-cloning technology to create ghost images of four different desktop models. The company had licenses for four images, but they were being used by 800 users.

So how are vendors counting licenses under the virtualization model, and how can you avoid violating virtualization licensing terms?

Duncan Jones, a licensing expert and analyst with Forrester Research, gives some background in a recent report on counting virtual licenses:

For decades, many software vendors have licensed their products by hardware-based metrics such as server, processor, or device. The definitions they have used in their license agreements assume a permanent assignment of software to physical assets. The licenses are like labels that the operations manager can attach to a piece of hardware to say “this device is licensed to run Product A.” But the lawyers who wrote these agreements never envisioned today’s virtualized data centers. Increasingly, applications now run in software-controlled bubbles, called virtual machines (VMs), which usually cannot be permanently associated with the physical resources supporting them. This makes it hard for software vendor managers to ensure that their organization has sufficient license capacity — one can’t affix a license sticker on a virtual machine. If they’re not careful, these sourcing and vendor management teams may find themselves facing a large unexpected bill after a software audit.

Jones offers a few steps you can take to avoid violating virtualization licensing terms. These include:

  • Choosing to license products based on named users rather than processors;
  • Working with your vendor to retrofit your software licenses for a virtual environment;
  • And, simply favoring vendors with more enlightened licensing policies.

Burton Group’s Chris Wolf believes it is time for those serious about virtualization to get a third-party licensing management tool. IBM offers such tools, as does ManageSoft.

ManageSoft, for example, allows you to audit the software you have in a virtual infrastructure and maintains an online database that will validate compliance for the applications and operating systems running in a virtual environment.

License compliance is no joke, as those who’ve been fined can attest. The onus is on you to figure out what you need and work with your vendors on the terms you need.

Let us know what you think. Email me at

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As a national firm specialing in software product use rights and Software Asset Management we have seen virtualization and accurate understanding of the licensing implications to be a growing area of risk for organizations. As you point out, there is the risk of unexpected software compliance costs but the other side of the coin are those companies overspending on unnecessary licenses to support their virtual environment. Not fully understanding the product use rights can cost considerably through either being under licensed or through being over licensed. Get help from an independent third party to ensure your staff, your resellers and your software publishers are providing you with full and accurate information for the current product use rights and how you are using the technology!