Organisations could save millions of pounds by paying
more attention to their software licences when outsourcing their IT
to a supplier, according to a report from analyst firm
Gartner.
The licensing terms of software agreements are often overlooked by
organisations when they are outsourcing even though most licensing
contracts do not reassign the rights to outsourcing suppliers, said
the Gartner report, published earlier this month.
"Organisations that wait until the outsourcing arrangement is
completed before thinking about software could find that they are
breaching their licensing terms," said Alex Bona, research director
at Gartner Intelligence.
"To make matters worse, the software supplier's salesperson will
probably know that an outsourcing decision has been made, giving
the organisation little room for manoeuvre to negotiate a
reasonable deal. Some organisations have had to buy software
licences again on outsourcing."
Organisations have three main options for handling software
licences when outsourcing, each with their own risks and rewards,
said Gartner.
Option one is for the organisation to retain control of the
software licences but allow the outsourcing supplier to use the
software solely to process the organisation's business. The
advantage of this is that the user can maintain a direct
relationship with their software supplier and is aware of their
rights and entitlements for software licensing if the deal
ends.
However, not all suppliers allow outsourcing providers to access
licences on behalf of their users, Gartner warned. PeopleSoft, for
example, does, but SAP, Oracle and Siebel do not.
Under option two, the outsourcing supplier takes over the user
organisation's licences and becomes the licensee. This means that
the software contract must include a clause that allows licences to
be assigned to a third-party outsourcing supplier, solely for the
purpose of processing the user's business.
This approach ensures that an organisation will save by not having
to manage its software licences or the relationship with the
software supplier, according to Gartner. The risk of this is that
the user loses contact with its software supplier and may not be
able to negotiate with it when the outsourcing contract
finishes.
The final option is for the outsourcing supplier to negotiate its
own licence for software with the user's supplier, passing on any
savings to the user. However, Gartner said the outsourcing supplier
does not always pass on its discounts to its customers, who risk
paying twice for software licences.
Outsourcing licensing options
- The user organisation retains control of the software licences
but allows the outsourcing supplier to use the software solely to
process the organisation's business
- The outsourcing supplier takes over the user organisation's
licences and becomes the licensee
- The outsourcing supplier negotiates its own licence for
software with the user's supplier, passing on any savings to the
user.
Source: Gartner