New Cool Subscription Licensing Model from Siemens Enterprise Communications

As background, Siemens Enterprise Communications is jointly owned by The Gores Group and Siemens AG and is part of a company that also includes SER, Cycos and Enterasys Networks. This joint venture was announced in July 2008.First, I am not being paid by Siemens or any other vendor, company, or organization to write this article. Just wanted to make that point clear to all of the cynics who believe that some or most of us are simply shills for the manufacturers.

Now that that's out of the way, I had an interesting conversation last week with Nigel Trueman (VP, Product Management) at Siemens Enterprise Communications about their new optional software licensing model; Subscription Licensing. The key word here is "Subscription".

What Nigel and Siemens have done is take their software model originally designed for hosted or "cloud" solutions and bring it down to "earth" for the enterprise market. So instead of enterprise communications software licensed as a "perpetual" product, it is now offered as a subscription service. This software subscription model may not be new for IT technology but I believe will be a new licensing trend for the major enterprise telephony players and represents an alternative sourcing model worth consideration.

Siemens Subscription Licensing Program Overview

Announced in January 2010, Subscription Licensing is being released as Generally Available in 3 phases:

Phase 1--Available January 2010 for hosted/service provider environments Phase 2--Pilot availability February 2010 for enterprise customers in US and UK from Direct Sales Phase 3--Availability TBD for Indirect Sales and other global regions

The model is composed of two parts:

1. OpenScape Subscriber Access License (OS SAL). Here's what you get:

--The "right to use" (RTU) Siemens EN software product(s)

--OpenScape Software Assurance which means access to new versions of the SW without an upgrade fee

--Software Support updates for bugs, patches

2. OpenScape Product Instance--Think of this as the product instance license "key" to confirm the user is a legitimate subscriber and entitled to use the software. This key is also used to track the customer's subscription term.

The following table shows the different types of OpenScape Subscription licenses offered:

*Unified Communication Packaged--VM, UM, audio conference, CTI, IM & Presence *Unified Communication Integrated--UC including customizable integration options *Unified Communication Third Party--Integrate any UC solution with OpenScape UC Server

Other key points about Subscription Licensing:

--No server license costs

--OpenScape Subscriber Access Licenses are not version specific--they can be used with any system version. Hardware costs are not included in the software subscription price

--Voice licenses are sold as concurrent licenses which allows a pre-defined fixed number of users access to the product at any one time

--There is only one voice user license, which is based on a unique extension number for any type of device (analog, IP, SIP, 3rd party SIP). Again, just one license regardless of the type or model phone that is used.

--You can mix "perpetual" and subscription licenses

--No tiered licenses--there is only one tier with the price negotiated with the local sales team

--Contract terms are flexible with one year or multi-year agreements available

--You can migrate older "perpetual" licenses to Subscription Licensing (and avoid costly CapEx upgrade costs); credit for original investment in software licenses is negotiated with local sales team.

--Customers may still buy perpetual or Subscription licenses; choice is up to the customer's financial needs.

--Billing is calculated automatically based on the maximum # of users for the month. The Subscription model is highly elastic and can accommodate staff peaks and seasonal fluctuations without penalty.

--Siemens will have their fully automated reporting and invoicing system running in 4Q 2010.

Conclusion

Based on my review, I would describe Subscription Licensing as a relatively simple consumption model that offers customers an interesting and flexible financial option for technology acquisition.

To be clear, Siemens Enterprise Communications is looking for subscription licensing to create a new recurring revenue stream and reduce top-line revenue "valleys" seen with CapEx projects. They also want to ensure new versions do not cause customers to delay purchasing decisions.

With this program, software assurance service is included so their sales people no longer need to sell system upgrades. In addition, by keeping customer systems at the most current software version, it simplifies service support and enables the deployment of more advanced enterprise communications applications. Lastly, it creates a new marketing opportunity for Siemens as SWSL gives sales people a good reason to reach out to existing customers they haven't "touched" in awhile.

If you're wondering about license costs, I've intentionally omitted the list pricing so as not to distract from the discussion around the concept. Readers who are interested in understanding more about pricing can contact their local Siemens or business partners for these details. All in all, a very interesting idea that the competition can't ignore. I'll be interested in seeing how the other major players respond and how fast.