In 5 software licensing challenges in the next generation network , I noted the important role that licensing models would have in the transition to the software defined network.\u00a0 But there\u2019s a deeper linkage between the growing demand for SaaS applications, cloud technology evolution and new software-defined Wide Area Network solutions.\u00a0 What does that linkage mean for the licensing technologies that will drive monetization for the new software defined network?\nLet\u2019s start with the Q3 Forrester Wave report \u201cRecurring Customer And Billing Management,\u201d which speaks broadly to the accelerating trend of consumers and businesses using Software as a Service (SaaS) offerings via the cloud versus traditional on-premises software.\u00a0 The author states that as this takes place, software vendors invariably migrate to subscription, or usage-based monetization models.\u00a0 The report goes on to reference a Forrester 2017 SaaS adoption report that finds \u201cin 2017, we expect software-as-a-service (SaaS) spend in particular to be more than 1.5 times that of license software.\u201d\nNetwork software subscriptions: growing fast, but a long way to go\nFirst, let\u2019s be clear, network software subscription spending is growing fast, but there\u2019s a long way to go.\u00a0 In its Q1FY18 financial results released last week, Cisco reported that deferred software and subscription offers revenue grew 37% year over year, but overall recurring revenue is still only 32% of total quarterly revenues. \u00a0While this strong software growth indicates a transition taking hold, it\u2019s unlikely that spending on network services as subscription or SaaS will exceed on-premise perpetual software embedded on network devices anytime soon.\u00a0\nBut the handwriting is on the wall is clear \u2013 the network is evolving toward cloud, SaaS and the subscription business model.\u00a0 Networking software is being delayered from the hardware it runs on and sold as a subscription.\u00a0 All but one of Cisco\u2019s last 17 acquisitions have been software-centric and cloud-ready.\u00a0 And software-defined WAN (SD-WAN), one of the hottest technology solution trends in networking today, is cloud-centric and driven in large part by business demand for fast, secure and reliable SaaS application access over lower cost Internet connections.\u00a0 SD-WAN solutions are typically delivered as a service with a term subscription contract and software license agreements.\nSaaS application access, SD-WAN and the licensing implications\nOK, we know that Cloud and SaaS is growing fast, and is the clear direction for the next generation network.\u00a0 What role will software licensing play in the network transformation?\u00a0\nRemember, licensing is a key monetization driver for software and within the context of a term-based subscription contract will determine how much a vendor can charge and how much a customer will pay for on-premise software or SaaS delivered via the cloud. Got your attention now?\u00a0 Good \u2013 to illustrate licensing\u2019s role, let\u2019s take a closer look at a generic SD WAN architecture providing access to SaaS applications in the Cloud.\u00a0\nEnterprise SaaS application access via cloud and SD-WAN\nLet\u2019s assume a large enterprise use case with hundreds of branches or stores and employees or clients in those remote locations who have a need to access cloud-based SaaS applications regularly.\u00a0 The enterprise does not want to pay the transport and response time cost to backhaul this SaaS application access across its private circuits, preferring to use lower cost Internet connections.\u00a0 A service provider proposes to meet this need with a cloud-based solution providing containerized virtual network services in conjunction with SD WAN that can be flexibly deployed, self-provisioned and managed centrally in the cloud.\u00a0 With this solution the enterprise gets fast, reliable and lower cost access to SaaS applications via the Internet, and the service provider is able to deliver new high value-add services that drive incremental recurring revenue.\u00a0 It\u2019s a win-win outcome which is why Cloud, IaaS (Infrastructure as a Service), SaaS and SD WAN are all experiencing rapid growth.\nLicensing technology evolution\nWhile this solution delivers compelling benefits, there are some operational challenges.\u00a0 Licensing often doesn\u2019t come up in solution discussions, but there are some important considerations.\u00a0 The dynamic, self-provisioned and automated stand-up and tear-down of virtual multi-tenant network services in the Service Provider Cloud will require the flexibility and speed of newer pooled and call-home licensing technologies.\u00a0 With new license technologies like Cisco Smart Licensing, licensed products can be activated and entitlements redeployed without handling special software keys or upgrade license files.\u00a0 Telemetry for consumption and usage metering is provided for use-based, or Utility billing models. \u00a0Classic node-locked, perpetual licensing will not meet the requirements of this new virtualized cloud environment.\u00a0 These considerations apply to cloud-based SD WAN as well. \u00a0Service providers, network vendors and their customers will need the capabilities enabled by new licensing technologies to deliver on the promise of the intelligent, cloud-based and software-defined network and fully realize the benefits outlined in the example above.\u00a0 Customers will need to manage new pooled license entitlements in the cloud while they continue to manage legacy node-locked perpetual licenses still prevalent in their on-premise networks.\nConclusion\/takeaways Like the accelerating transition from on-premise software to software-as-a-service (SaaS), the transition to the next generation software-defined network (SDN) is taking hold.\nThe dynamic and virtualized characteristics of cloud networking will accelerate the transition from classic node-locked licensing to new pooled, call-home network licensing technologies.\u00a0 Likewise, the delayering of networking software from the hardware it runs on, combined with a shift to subscription monetization models for networking software is also accelerating the transition to new pooled licensing technologies.\nCustomers will need to manage both the new pooled term-based license entitlements and the old node-locked, perpetual entitlements as they work through this transition.