Click to learn more about author Franco Rizzo.

A flexible licensing model allows a company to invest more in the innovative ventures that will drive revenue, and less in core business processes.

If you ask someone to name a handful of highly innovative companies, Apple is almost certainly one of the first to spring to mind for many people. But Porsche, the car manufacturer, might not be – and yet Apple and Porsche share a business strategy that defines transformative companies: investing the profits from legacy products into new innovations.

The commercial success of Apple’s desktop and notebook computers allowed the company to funnel revenue into designing new products, and thus the iPhone was born – the product the company now sells more of than anything else by far. Porsche – for decades known for its iconic sports cars – recognized it could invest profits from those sales into the design of its own version of the latest auto trend: SUVs. Following its 2002 debut, the Cayenne, along with the smaller Macan, are now Porsche’s best-selling vehicles; in 2015, the company sold twice as many SUVs as it did its venerable 911. By using its past success to fund “disciplined innovation,” the company transformed its image from just a producer of sports cars into a high-performance luxury automaker, according to Madhavan Ramanujam and Georg Tacke.

This kind of strategy can prove successful for any company looking to accelerate innovation. Custom applications and products are the key to differentiating an enterprise from its competitors – but this requires investment, and funding core business processes is crippling many companies’ innovative potential.

Necessary Processes, Unnecessary Costs

Core business processes will differ by industry and company function, but one common to all modern enterprises is the database – the backbone of a company – as well as the Database Management Systems (DBMS) that support it.

Paying for a DBMS is not cheap, however. As private and hybrid Cloud infrastructures become more popular, CFOs are paying more attention to the operational costs of the database tier, because licensing and support expense of DBMS can be a substantial line item on many IT budgets. Users can get caught in a spiral where support and maintenance prices rise year after year.

In addition, existing DBMS licenses might be required based on the server’s maximum number of server cores, not the cores actually being used. As the industry moves toward software-defined data centers (SDDC) and hyper convergence (the ability to consolidate multiple applications onto one piece of hardware), the realities of virtualization mean that many companies only use a percentage of the available processing power of their servers – but still pay for the full server capacity, plus the ancillary hardware required to run workloads.

This may result in a database expense disproportionate to the benefits received, consuming precious dollars that could be better spent on IT innovation.

Solution: Flexible Licensing

Companies need not feel bound to their current methods of paying for a Database Management System. A popular new option – the flexible licensing model – is much more aligned with the realities of modern database consolidation.

A flexible licensing model for database workloads is attractive to many companies because they don’t need to buy software tied to a specific size hardware; they can simply license the database software based on true utilization, and scale over time, completely decoupling application from hardware. This model allows enterprises to maximize their virtualization investment by only licensing the computing power associated with a given virtual machine, rather than a 100 percent licensing model, regardless of amount of resources the database consumes.

With flexible licensing, companies only pay for the cores actually used in the server, not the total number of cores in that server – a distinction that is critically important for the virtualization component of private and hybrid Cloud usage.

Many companies are ideal for this type of model, including:

• Data-intensive enterprises, especially financial services, retail, healthcare, payment processing and manufacturing organizations
• Enterprises looking to migrate their Relational Database Management System (RDBMS) to the cloud and replace their current costly infrastructure
• Enterprises that want to reduce the overall cost of running a business-critical application, while adding elastic capacity, with assurance of code and schema integrity
• Enterprises that want to experience significant CapEx and OpEx savings, and drastically lower total cost of ownership (TCO)
• Enterprises with custom applications
• Enterprises with Data Warehousing applications and Data Ponds
• Enterprises requiring highly available clustered applications
• Enterprises requiring high-security database encryption
• Enterprises requiring active or passive standby database features

In a flexible licensing model, the major benefit is how a company pays – it gets all of the same features of legacy DBMS options, but under a much more rational pricing structure. This allows a company to invest more in the innovative ventures that will drive revenue, as opposed to the base processes that simply allow the business to function.

Navigating DBMS Payment Options: What the C-Level Needs to Know

Not all Database Management System licensing structures are created equal. When exploring options, there are three key things to keep in mind:

1 – Be cognizant of licensing models and potential hidden costs (e.g., needing extra hardware to run workloads in the database). Some solutions advertise themselves as open, but digging into the specifics may reveal a restrictive model that does not favor the customer.

2 – Open source isn’t the solution for every company; these types of solutions can work well for a niche audience, but for others, they create other issues. It’s important to consider the support model of any database solution, because open-source databases require a substantial amount of time and resources.

Additionally, open-source databases do not have a clear roadmap; their very nature is to be loosely structured, and that can be challenging on some levels.

3 – Know the true cost of running a custom application or workload. The unfortunate truth is that it may be far higher than what a company originally projected.

A New Model

To become truly transformative while increasing profits:

“Organizations must establish a new strategy for business applications that responds to the desire of the business to use technology to establish sustainable differentiation and drive innovative new processes, while providing a secure and cost-effective environment to support core business processes,” according to Gartner.

As enterprises continue to move toward virtualization, successful companies will have more money for innovation by reducing their database costs. Powerful servers are meant to run not just one application, and companies should only pay for what its database actually uses, not its potential processing power. A flexible licensing mode can be a strategic asset by helping a company to redirect software license savings into innovation.