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What is Cloud Computing and How Does It Impact Software Licensing Practices?

March 5, 2018

Updated 03/05/18

"Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. This cloud model promotes availability and is composed of five essential characteristics, three delivery models, and four deployment models." (NIST Definition of Cloud Computing, Draft version 14)

The five Characteristics of cloud computing are:

  • On Demand Service
  • Ubiquitous Network Access
  • Location Independent Resource Pooling
  • Rapid Elasticity
  • Measured Service

The three Delivery Models of cloud computing are:

  • Software as a Service (SaaS)
  • Platform as a Service (PaaS)
  • Infrastructure as a Service (IaaS)

The four Deployment Models of cloud computing are:

  • Private Cloud - Operated solely for an organization.
  • Community Cloud - Shared by several organizations and supports a specific community that has shared needs and security concerns.
  • Public Cloud - Made available to the general public or a large industry group and is owned by an organization selling cloud services
  • Hybrid Cloud - Composition of two or more clouds (private, community, or public) that remain unique entities but are bound together by standardized or proprietary technology that enables data and application portability.

At DoD ESI, the initial focus will be placed on Software as a Service (SaaS), where a provider’s software applications run on a cloud infrastructure. SaaS is a software application delivery model where a software vendor develops a web-based software application and hosts and operates (either independently or through a third-party) the application for use by its customers over the Internet.

Examples of SaaS applications are:

  • Citizen Engagement (Wikis, Blogs,
  • Government Productivity (Cloud based tools)
  • Business Enablement (Customer Relationship Management)
  • Enterprise Applications (Core Mission & Business Services)

The most significant difference between traditional, perpetual software licensing models and SaaS licensing models is analogous to the difference between buying a car and leasing a car. The usage rights granted in a SaaS model are for a limited duration and are tied to payment of a fee (much like the lease payment for a car). The contractual structure for a SaaS offering centers on a service level agreement (SLA) that captures the services to be provided, metrics to be measured, and pricing to be paid for the level of service contracted. Adjustments in future fees are typically made where service levels are not met.

DoD ESI has drafted a Master Service Agreement (MSA) to be used to establish a DoD-wide relationship with SaaS providers and a sample SLA for use when DoD programs order services off the MSA. A sample MSA, SLA and relevant tools will be available in the SaaS toolkit to be released in FY10.