26 November 1998: The cost extent and likely targets of software stiffers have been uncovered by a Computer Weekly/Banner survey. The evidence, writes Joia Shillingford, highlights the importance of our Stamp Out Stiffing campaign
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Stiffing costs UK businesses many millions of pounds according to a Computer Weekly/Banner survey of sharp software practices. Such practices have helped unscrupulous suppliers squeeze additional revenues out of unsuspecting customers who often only want to make minor changes like moving their software on to a new machine.
Andy Mulholland technology markets director at European computer services company Cap Gemini welcomes the Computer Weekly campaign. He says "Most businesses are spending between one- third and two-thirds of their IT budget on operational costs including software licences.
"It has got to the point where maintaining licences for legacy systems is so expensive it is stopping companies from investing in new projects. The industry should ask itself whether it is really in its best interests to take money away from innovation – it is cannibalising its own future revenues."
Larger firms The Computer Weekly/Banner survey found that nearly a third (31%) of user companies with 500 or more staff had been stiffed by a software supplier. For smaller firms the figure was just under a fifth (18%).
However, only one in 10 of the smallest companies with fewer than 50 employees had been stiffed – perhaps showing that large companies are more fertile ground when a software supplier wants to generate extra cash. Overall 13 of the 506 organisations surveyed (weighted to reflect the composition of all UK IT users) had suffered from sharp practices. Of these the public sector was most affected with 22% having been stiffed. The distribution sector was least affected at 7%.
John Sidman IT director at West Middlesex University Hospital NHS Trust says "Public sector organisations are often badly affected by these practices because they have so many disparate systems. In hospitals this is because there aren't really standard systems in use. And if you are running Unix on several different manufacturers' servers you may have to licence your 300 concurrent users four times over – once for each server.
"I tried to get a single-site Unix licence and it wasn't feasible," adds Sidman. "The cost benefits of client/server are being offset by expensive licences."
Judging by the survey the kind of organisation most likely to be stiffed has international interests (18%) multiple sites (16%) is networked (16%) and has an employee with a computer-related job title in charge of managing IT contracts. Sites using Apple Macintosh or Unix computers are also more likely to have been stiffed than PC users perhaps reflecting a greater difficulty in going elsewhere if they don't like the supplier's terms.
Price Stiffing comes at a high price. Almost one in five (19%) of those organisations which had been stiffed put the figure at between £10,000 and £100,000, 59% said it was less than £10,000, 1% said it was between £101,000 and £250,000 and 2% said it had cost them a staggering £250,000-plus.
"I'm convinced that this problem is significant and it runs into millions of pounds a year," says Roy Hunt who has worked in the IBM software business for many years.
Businesses with 500 or more employees and public sector organisations were most likely to have been stiffed for £250,000 or more. Large businesses were also worst affected in the £10,000 to £100,000 category.
However, only middle-sized companies with between 50 and 499 staff faced pay-outs of £101,000 to £250,000 but half of all affected companies in this sector reported having to find up to £10,000 for greedy software suppliers
By contrast 69 of affected small businesses were hit for less than £10,000. Companies operating in the distribution sector were among the least hard hit - with 71% of the firms harmed getting off lightly with less than £10,000
Revealing. Given the sums involved if things go wrong the survey uncovered some revealing attitudes among software purchasers.
• Only 61% feel a supplier's reputation for treating its customers fairly is "very important" in selecting a software source. This may be because in some areas of IT the user has very little choice of supplier. However, an additional 28% regarded the supplier's reputation as "quite important".
• The supplier's reputation seemed slightly less important to the public sector with 58% rating it "very important" compared with 71% of companies in the manufacturing sector. Could this explain why public sector organisations often suffer from stiffing?
• Is it in fact fair to blame suppliers for everything that can go wrong with a software contract? Respondents to the Computer Weekly/Banner survey did not think so.
• They were asked: "When a user company is a victim of sharp practice where do you believe the responsibility mainly lies? Do you consider it to be with the supplier for carrying out the sharp practice? Or the user for allowing it to happen?"
• Just 59% blamed the supplier while 15% said it was the user's responsibility and 18% said responsibility should lie equally with both user and supplier.
Yet two of the groups most likely to have been stiffed – big companies and the public sector – were also the two most likely to put the responsibility for stiffing squarely on the shoulders of the supplier. And they should know.
The rise and rise of stiffing Highlighting the need for Computer Weekly's Stamp Out Stiffing campaign rather more respondents (17%) felt that sharp practices were on the increase than felt they were decreasing (9%). However the largest group of those surveyed (40%) felt sharp practices were at the same level as they had always been.
In Computer Weekly's view this is unsatisfactory and we will continue to put pressure on software suppliers to accept our software licensing code. Our goal is for 10 of the top software suppliers to sign up. Major firms like IBM Lotus and Tivoli have already done so. Intriguingly the question about the rise or decline of stiffing attracted more "don't know" answers than other questions in the survey.
In Roy Hunt's view the problem is spreading. "One or two suppliers are becoming involved in sharp practice who you would not normally associate with the problem," he says. Computer Weekly plans to seek out examples of unethical practice and share them with its readers.