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Cloud Model In, Upfront License Fees Out

Date: May 15, 2013

Category: Blog

Guest Blog: by Manish Desai,
Aerohive Senior Product Marketing Manager.

The model in which software can be delivered to customers is going through a fundamental shift. Traditionally, organizations had to purchase, deploy, and operate software on-premise and invest in the appropriate hardware infrastructure to support the software. Many vendors that have been charging upfront software license fees and the associated maintenance fees thrived under this model in the past.

However, this upfront license fee model is proving to be unfeasible with customers. As demonstrated by Oracle’s disappointing Q3’13 results, customers are moving away from procuring upfront perpetual licenses toward a lower-cost model of getting software delivered through the cloud.

Cloud is in, upfront licenses are out

In today’s economic climate, organizations are searching for ways to reduce expenses while continuing to improve profits, agility, and competitive advantage. Purchasing expensive upfront licenses do not help organizations achieve these goals.

On the other hand, cloud services such as SaaS help to eliminate substantial upfront and ongoing costs found with licenses. In addition, the cloud helps organizations grow cost-effectively. Cloud services allow IT departments to instantly scale without having to purchase additional licenses to meet their growth needs.

The trend towards using cloud services increasingly is clearly happening and there is no turning back. In fact, according to a recent article by Forbes, more than half of U.S.-based businesses are using cloud computing for their IT needs.

Let’s examine how this trend of moving towards a cloud SaaS-based model relates to what’s occurring in the Wi-Fi space. Today, many Wi-Fi vendors sell and require a hardware controller to be deployed along with their access points. There are also upfront feature licenses required with these controller-based solutions.

Depending on the vendor, upfront feature licenses could include a license for each access point, a license for each controller, a license for each redundant controller, and a license for each remote controller. Also, there are support costs for the feature licenses as well.

All of these upfront licenses lead to higher CAPEX which is misaligned with the needs of organizations today for them to stay competitive. The need to lower costs and becoming more agile are no different when it comes to companies looking to increase their Wi-Fi deployment. Companies will consider Wi-Fi vendors that offer cloud-enabled services instead of upfront licenses to reduce their capital expenses, reduce their time for deployment, and easily manage wireless LAN networks in many locations from the cloud.

Since Aerohive provides a controller-less (Cooperative Control) Wi-Fi solution, there are no upfront feature licenses that customers have to pay for or worry about. All features are included with the access points without buying any upfront feature licenses because these features are simply part of the network and not something you’d expect to pay for.

Also, with Aerohive’s cloud-based SaaS network management system, HiveManager Online, costs are further reduced as well as the complexity of deploying and managing network services.

In summary, the days of purchasing expensive upfront licenses along with its maintenance fees seem to be fading with the growing trend of companies moving to the cloud. Organizations simply cannot afford the upfront license software model to stay in business and will increasingly look to the cloud’s lower cost and increased business agility as a more viable alternative.

Vendors, including those in the Wi-Fi space, that continue to demand upfront license fees will likely experience similar future earnings results like Oracle.

CLICK HERE for more information on our cloud-managed wireless LAN service.

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