Will The Future Include Feature Licenses?

One of the challenges(I mean that in a good way.) of working at a VAR that sells for so many vendors is keeping track of the various solutions. If it were as simple as being familiar with the products from a technical perspective only, that would be great. However, anyone who has ever built a bill of materials knows that knowing the products alone isn’t enough. You have to know how they are licensed as well. Multiply that times a dozen or so and you can see my dilemma.

As my company continues to partner with vendors, I am always interested in a few things. First, I want to know how I can get access to their product without my company having to fork over a pile of money for “lab/demo” gear. Second, I want to know what differentiates them from their competitors. Third, I want to know how they license their product.

Although licensing is the least exciting of the three things I just mentioned, it can make a difference in winning deals with customers.

Are Feature Licenses A Big Deal?

Yes and no. For some companies or individuals, they will always pick a certain vendor no matter the cost. You are not going to change their mind and you are not going to be able to reason with them. They have their reasons whether you agree with them or not. For a lot of other organizations/people, cost and simplicity are important.

I could go on and on about why I think cost should NEVER be the main reason for a technology purchase, but the reality of this business is that for some, that will be the main driver. You can argue things on principle, but when it comes down to it, someone else will get the sale if you don’t give the customer what they want.

Cost

Let’s make one thing clear. Building decent technology isn’t cheap. It costs lots of money from a development standpoint. Even if you buy your technology through acquisitions, it still costs lots of money. Then you have to market it and support it. Those are additional costs and they aren’t cheap either.

Here I sit on the VAR side pitching a solution to a customer. They need the product to do X, Y, and Z. There’s quite a few vendors that can do X, Y, and Z, but each of those things require a different license. That means more line items on the quote. Now the customer has to make some tough choices. They can either scale back some of the features, or pick another vendor. Scaling back features means the solution now does less but hopefully meets their price point. Picking another vendor means the original vendor of choice just lost out on a sale.

Let’s say the customer reduces the features on the first solution. Maybe they wait a year and add the missing feature when the next budget allocation rolls around. Alternatively, maybe they resent the vendor for charging more for a feature that another vendor is giving away.

What if the customer decides to go with another vendor that offers similar functionality but for significantly less cost? Maybe they dismissed that vendor initially due to them not being familiar with them. Perhaps the first choice vendor is better at marketing. It is also possible that the first choice vendor might even have better technology. Regardless, lots of purchasing decisions happen due to cost, or the appearance of additional cost. Sometimes bundles are a good thing. People like to think they are getting a deal and bundles usually convey that image, whether the savings is true or not.

A Cost Hypothetical

How many more Nexus 7000’s would Cisco sell if OTV was free? Instead, there is a Transport Services license you have to buy for each 7000 you own to turn OTV on. Add on the Advanced Services license for each of your Nexus 7000’s since you’ll want to create another VDC for OTV. Watch the cost go up. You already bought it with the Enterprise Services license since the Base license doesn’t do much. What’s two more licenses in the grand scheme of things? Yes, I realize there are bundles you can buy, but it still costs more than a plain ole’ Nexus 7000. The OTV license give away idea isn’t mine. I stole it from @ccie22126!

When considering the complete cost of OTV, plenty of customers probably looked at other vendors, even though nobody else can offer what OTV does(that I know of). Yes, I realize it is proprietary, but I don’t think you can really compare it to something like running EIGRP instead of OSPF as your IGP of choice.

Other vendors are giving away all, or almost all, of the features of their platforms as a way to compete with the companies that nail you with the license tax for every additional feature you want. At some point, they will gain more traction with the cost conscious buyers. If all I need is a switch with a decent amount of 10Gbps ports and OSPF/BGP capability, how hard will it be to find a vendor who will do it cheaper with less licensing costs? Off the top of my head, I can name a handful.

Simplicity

Let’s pretend that cost doesn’t matter. There’s something to be said for simplicity. If a solution from one vendor requires a ton of feature licenses and the solution from another vendor requires none, how will those quotes stack up? How many of us have spent hours upon hours going over quotes making sure every license was accounted for? The last thing you want to do is sell a solution and then have to go back to the customer for more money because you forgot about some obscure license you forgot to include in the quote. The last thing you want as a customer is to have to pay more money for a solution you thought you already owned. The last thing you want as a vendor is for the customer to hate your guts and count down the days until your product is depreciated 100% off the books and they can get rid of it.

It’s an amazing thing to be able to quote something and have it take up a whopping 2 or 3 lines versus a solution from another vendor that requires a full page. I think customers appreciate that because they can understand it a lot easier than a billion different line items that may or may not contain every thing they need. I also realize that the network infrastructure side has it easy compared to some of the licensing issues you have to deal with on the systems side. I’ve seen Microsoft employees get confused over their own licensing requirements. That’s when you know you have a problem.

With most companies being understaffed(I have no hard numbers to support this. Just a lot of complaining from people on Twitter and my own personal observations out in the world.) when it comes to IT, the easier you can make it on them, the better. That doesn’t necessarily mean it is cheaper. You can include a fair amount of features in a product and still charge a premium for it. There are companies out there who are willing to pay for a particular product, provided it does what it says it can. Well, even if it can’t do what it says, some companies will still buy it.

Closing Thoughts

Some vendors are changing their licensing for the better. HP is giving away pretty much everything on the networking side. Brocade has some pretty straightforward licensing on the Ethernet side as well. Cisco brought about a welcomed change to licensing on their second generation ISR line with IOS 15 by greatly simplifying the feature set choices.

Other vendors just give it away “whole hog” as we would say here in Tennessee….or at least I do. A10 Networks gives you pretty much all functionality with their load balancers and includes global capabilities along with local(For all you F5 fans, that’s essentially GTM and LTM.). Barracuda gives you everything but AV updates and VPN/NAC with their NextGen firewall. Aerohive gives you everything with their AP’s. Meraki does the same with their AP’s and switches, but not with their MX firewalls. There are others, but I think you get the drift.

My gut tells me that feature licenses are going to be scaled down significantly in the next decade or so. It is a problem that I have seen voiced to vendors on numerous occasions. Whether or not the vendors feel the pain in their market share numbers or revenue will dictate whether or not they change. If everyone is buying and market share is growing or holding steady, I just wasted an hour or so of my night writing this. 🙂 I’d be curious to hear your thoughts on this whether they be from the vendor, VAR, or end user perspective.