Hybrid licensing

Hybrid licensing is a solution that combines the benefits of on-premise software and cloud solutions.Companies apply hybrid solutions due to their benefits such as reduced expenses, more flexibility and increased  scalability and security. This article also presents the different types of Hybrid Licensing together with the challenges companies might face applying them and ways to optimize the hybrid solutions.

What is Hybrid Licensing?

Hybrid licensing refers to the combination of on-premise software applications and cloud-based services This licensing strategy is used by many companies as the hybrid environment offers flexibility and can meet the organization’s scalability requirements. Overall, hybrid licensing is a strategic approach to software license management through which companies can optimally use their software in a flexible and cost-effective way. 

What are the types of Hybrid Licensing?

Hybrid licensing can contain different licensing models dispensing on the needs of the organization. Some of these models are subscription-based licensing, perpetual licensing, and consumption-based licensing. 

Subscription-based licensing

Subscription-based licensing, as the name suggests, allows companies to pay a certain recurring fee in exchange for accessing the software services. Usually, subscription-based licensing is used by bigger corporations in need for 24/7 technical assistance or companies that value using software as a service. 

Perpetual Licensing

Perpetual licensing is any software that is purchased once and can be used indefinitely. The user owns the right to use the software for long-term without additional fees. Perpetual licenses are a great solution when the company intends on using the software in the long run, as this licensing model proves to be cheaper than subscription-based equivalents. Additionally,   companies might tend to continue using perpetual licenses due to privacy reasons, as it might be safer to store sensitive data locally compared to the cloud.

Consumption-based licensing 

The consumption-based licensing model allows users to pay for the actual license consumption. Also called metered licensing or pay-as-you-go licenses, consumption-based licensing charges the consumer based on their products/service use. This licensing model is mostly attractive for end-users, as they pay for the actual use rather than the full ownership of the software. Consumption-based licensing offers a high level of flexibility especially when used as a part of hybrid licensing solutions. 

Complexities of Hybrid Licensing

Hybrid licensing is often considered as complex. This is due to a few factors such as scalability requirements, the diverse licensing models, and compliance challenges. 

Diverse Licensing Models

Hybrid environments require organizations to implement and manage different licensing models - cloud-based, perpetual, consumption-based licensing. For this reason, the overall hybrid environment management becomes more complex, compared to implementing a single licensing model. A few aspects to take into account are the model’s pricing structure, licensing requirements, terms and conditions. 

Dynamic Usage Patterns

In hybrid environments the workload between on-premise and cloud licenses can shift dynamically. It is therefore important for companies to predict and manage the overall software usage and proactively monitor it. Additionally, it is also crucial to come up with adaptive licensing strategies to regulate this fluctuating usage. 

Compliance

Every software comes with a license to be used and terms and agreements stating how it should be used. Different software (licensing models) often have different licensing requirements. It is therefore of big importance for users to ensure that their company is actively complying with the licensing requirements and regulations set by the manufacturer. This can be done through comprehensive licensing tracking and regular internal auditing. 

Deployment Architectures

The deployment architecture could be one of the biggest challenges associated with hybrid licensing. Depending on the company’s licensing needs and requirements, hybrid solutions can consist of a very complex architecture, such as multiple environments, platforms, and deployment models. This is why, creating and managing these deployment architectures would often require careful planning and execution. Due to the complexity level, companies usually need a more advanced and/or experienced partner in the deployment and future management of the hybrid environment(s).

How to optimize Hybrid Licensing?

Companies can perform some in-house actions to ensure that their hybrid licensing is up to date, correct and optimized. Some of these practices are, for example, educating and training IT staff, conducting license audits and assessments, and implementing License Management Platforms. Staff training can be beneficial long-term, however initial investment is required. By investing in in-house training or hiring someone with the knowledge and experience in hybrid licensing companies can implement and manage their hybrid environments on a budget. After an employee or a team of employees have acquired the right knowledge, they can conduct comprehensive audits and assessments of the existing software licenses. Regular checks can potentially identify gaps or opportunities in the current licensing. Last but not least, using a centralized license management platform can give insight into the compliance metrics across the different hybrid environments. With such systems, you can consolidate the processes of license purchasing, management, and usage. 

In which cases is Hybrid Licensing the best solution?

Hybrid licensing is usually the preferred solution when organizations need flexibility, scalability, and cost-efficient software licensing. The biggest reason for applying hybrid solutions is the advantage of combining the benefits of on-premise software with the ones of cloud-based services. Another reason for opting for hybrid solutions could be the organization’s goal to eventually fully migrate to the cloud. Part of this global migration could be a step-by-step migration involving a phase of using hybrid solutions. Another case where hybrid solutions are a great choice is when organizations need uninterrupted access to critical software resources. Disaster recovery is in principle easier in a hybrid environment. 

Hybrid Licensing: Costs

One of the main aspects when considering implementing hybrid licensing is the cost of the infrastructure. If a company needs to license the use of Microsoft Office, there are a few options to choose from. For example, the company can go fully to the cloud (Scenario 1) or it can choose 100% perpetual licenses (Scenario 4). A third option is to implement hybrid licensing in various proportions. The chart below takes the licensing scenarios 80/20 towards subscription and 80/20 towards perpetual licensing. The licenses used for this calculation are Microsoft 365 Business Premium and Office 2021 Professional. The time frame is 3 years and the amount of users is 1000. As illustrated on the chart below, the cost for using the perpetual licenses remain the same as initially paid, as there are no further costs required to use the software. Scenarios 2 and 3 indicate a growth in costs only for the respective subscription licenses. Scenario 1 refers to only using a subscription license for all 1000 users.