Creating a stronger focus on user needs in the drawing
up of software licences, an end to any hint of sharp practice in
applying the terms of the contract, and greater clarity in the
wording of contracts were the main aims of Computer Weekly's Stamp
Out Stiffing campaign, which ran for two years from the summer of
1998.
That was a boom time for IT suppliers as dotcom start-ups were
flying high and IT departments were preparing for the millennium
bug. This created a bullish attitude from certain suppliers in
applying the terms of their licences.
In particular, businesses began to notice that small changes in
their use of software could be used as an excuse for a massive
price hike from the suppliers.
There were plenty of examples of how this worked in practice. A
major critic of such behaviour was Roy Hunt of IBM's software
business, who publicly attacked the practice of "stiffing" or sharp
practice in the software industry.
Although they kept strictly legal, he pointed out, some
suppliers would fail to play fair with users by taking a minor
change in software use or business circumstances as a pretext to
create a massively disproportionate price increase.
Hunt cited real-world examples, including a 400% price increase
for software run on new hardware, even though it was within the
performance parameters of the licence terms. He also detailed a
seven-figure price hike when a company was sold - even though the
use of the software was unchanged.
After the launch of Computer Weekly's Stamp Out Stiffing
campaign, users became more open about their dissatisfaction with
how they were treated over software licences. A Computer Weekly
survey showed that among companies that had been stiffed:
- 59% lost up to £10,000
- 20% lost between £10,000 and £100,000
- 1% lost between £101,000 and £250,000
- 2% lost more than £250,000.
User group leaders also became more vocal on the topic. Geoff
Petherick, then chief executive of the UK Computer Measurement
Group, said the bills may start arriving when a company
restructures or is involved in a merger. He revealed one case of a
company being charged £1.6m "just for changing names".
But users could also fall prey to something as simple as loading
software onto new hardware, or allowing contractors access to the
software.
Petherick acknowledged that users had to share some of the blame
for signing the agreements in the first place, but he pointed out,
"If you badly need that software, frequently a licence is signed
very quickly. It may be particular software that you need for which
that is the only supplier on the market."
Another problem was "legacy" contracts, where licences had been
drawn up several years ago and incorporated terms inappropriate for
the contemporary marketplace. Today, new technologies such as
multicore processors are drawing fresh attention to this issue
(see
Technology advances add to licensing).
By the time Computer Weekly brought its Stamp Out Stiffing
campaign to an end in 2000, 12 suppliers had signed up to a
Software Licence Code, created with the help of law firm Hammond
Suddards (see box). Participants included IBM, Tivoli, Amdahl,
Compuware and Bull.
And in September last year, a range of large IT user groups
created the Strategic Supplier Relationship Group to improve
understanding between software companies and business users.
However, as our focus on licensing in this issue of Computer
Weekly shows, problems over the clarity and suitability of software
contracts persist. And with the promotion of software as a service
rather than a product, and the licensing dilemmas posed by
technologies such as multicore processors and virtualisation, how
users pay for essential software in a cost-effective fashion will
remain a challenge.
How Asda led the charge for users
In August 1998, retailer Asda lashed out at software companies
using the impending Millennium Bug deadline as an excuse for
stiffing users.
"We have a couple of examples of software companies asking for
excessive payment for a new version of the software to make it
millennium-compliant," said John Lister, then IT procurement
director at Asda. "This type of behaviour is unethical and we will
resist it very fiercely."
Asda had already reacted strongly to one of its software
suppliers which originally told the supermarket chain it would have
to buy a new Y2K-compliant version of its product, which was vital
to Asda's operations, costing the company several hundred thousand
pounds.
"The supplier has now substantially modified its position and
come back with a far more palatable offer," said Lister at the
time.
How much has changed?
Software licensing remains a major concern for many user
organisations, but the ground has shifted since Computer Weekly's
successful Stamp Out Stiffing Campaign.
Our investigations and interviews with IT directors from across
the board of UK business show that the proliferating complexity of
different licensing models and the management administrative
burdens they impose have become the prime sources of concern,
rather than the sharp practice of some suppliers at the start of
the decade.
Some of the insights and advice Computer Weekly carried during
the original campaign are available again online. Many things have
changed, but these articles offer as many insights and useful
pointers today as when they were first published.
www.computerweekly.com/sos
Computer Weekly's anti-stiffing guidelines
Below is an abridged version of the Software Licence Code drawn
up in 1998 by Computer Weekly and law firm Hammond Suddards. Twelve
major IT suppliers signed up to these anti-stiffing guidelines in
2000.
Plain English
All software licences should be written in plain English,
particularly the restrictions on the scope of use and any schedule
or order form in which the software is listed.
Restrictions on location
Provided the software is being used within the European Union, the
supplier's consent should not be required and there should be no
charge to change the physical location of the use of the
software.
User restrictions
Where the use of software is restricted to a number of users, the
supplier should make it clear whether that is concurrent users or
named users (see full guidelines at www.computerweekly.com/sos for
definitions). Where it is named users, restrictions (if any) on
changing named users should reflect normal staff turnover within an
organisation.
Employee restrictions
Use of the software should not be limited to employees only, as
many companies "employ" contractors who should be entitled to use
the software for the benefit of the business.
Outsourcing
If a business outsources its IT services, the supplier must agree
to the assignment of the licence to the outsourcing supplier unless
the outsourcing supplier is a direct competitor of the software
supplier or if the outsourcing supplier has in the past committed a
serious infringement of the software supplier's intellectual
property rights.
Term and termination
Software suppliers should only terminate the licence for serious
infringements of the software supplier's intellectual property
rights or non-payment of licence fees which are undisputed.
Price structure
Whether the price structure depends on number of users (named or
concurrent) or hardware sizing, the pricing structure should be
clearly set out so that the user is aware at which point they will
be liable to pay additional licence fees.
Testing
Where testing of the software is necessary on a separate platform
(for example, Y2K or regulatory compliance) such testing shall be
permitted subject to the software supplier being notified.
Maintenance
The continuation of a licence should not be dependent upon the
continued payment for maintenance. Where maintenance is provided,
the supplier should explain in advance what the maintenance service
is, the structure of maintenance payments and how maintenance fees
may vary over time.
How do your suppliers measure up to these guidelines? Let us
know at
computer.weekly@rbi.co.uk
Campaign milestones
- August 1998
Computer Weekly launches Stamp out Stiffing campaign after a senior
IBM executive explains the tough practices used by some software
suppliers to squeeze more cash from users. Law firm Hammond
Suddards produces software licensing fair practice code for
Computer Weekly. - November 1998
Computer Weekly/Banner survey highlights the cost of software sharp
practice to UK IT users. It finds that nearly a third of user
companies with 500 or more staff believe they have fallen foul of
sharp practice. - November 1999
First group of leading software suppliers sign up to fair dealing
code of practice, including IBM, Lotus, Tivoi, Amdhal, Bull,
Compuware, Intentia Software and Beta Systems. - May 2000
Twelve major software suppliers have signed up to the licensing
code of practice initiated by Computer Weekly.
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