The IT industry must come clean on software licensing

Businesses are accused of software piracy if there is a licence shortfall, but software companies are making it difficult for IT departments to comply.

Software licensing is a contentious issue. Businesses are accused of software piracy if there is a licence shortfall, but software companies are making it difficult for IT departments to buy legitimate software.

 “Industry bodies such as the BSA (Business Software Alliance) and Fast (Federation Against Software Theft) tend to rely heavily on FUD (fear, uncertainty and doubt) and lopsided arguments to push their agenda.

The usual mantra is: ‘We are poor, defenceless software companies being attacked by ruthless pirates’. Many software companies could implement simpler licensing programmes while protecting their revenue and intellectual property, but choose not to,” Martin Thompson, the editor of ITAM Review, wrote in a blog post.

In defence of the software industry, Alex Hilton, CEO of Fast, says: “The pressures facing sales organisations are not really all that different from 10 or 20 years ago. We have always faced highs and lows in the economic cycle. This brings its own challenges, but Fast has not seen any evidence of changes to sales practices from software suppliers.”

Addressing the licensing complexity issue, Hilton adds that organisations buying software increasingly look for simplicity of software licensing, but they also want flexibility: “Fast supports both options, but recognise the flexibility demanded leads to increased complexity.” Julian Swan, director, compliance marketing at BSA says: “While underhand tactics probably exist, they are the exception rather than the rule. Rogue agents should be exposed and dealt with, but a wider campaign for clear licensing should also consider the bigger picture nuances.”

But when is a prying supplier acting in a less than honourable fashion? One subscriber to the ITAM Review group on LinkedIn described a letter from Adobe that began with its new subscription-based licence models, then stated that Adobe would like to arrange a meeting to discuss the new licence agreement. Further down the letter Adobe stated it would use the meeting to look at the company’s software deployment, which it would use to compile a licence position.

Lack of direction or guidelines

Adobe is not the only company where its sales tactics have come under question. IT directors have told Computer Weekly there is a lack of direction or guidelines from software publishers to enable buyers to track software compliance. Suppliers are unable to give users a clear answer as to how many licences they require.

An audit that reveals a shortfall in authorised licences, or where the organisation is found to have purchased the wrong licence, can lead to large fines and hefty excess licence charges. Writing recently on the Constellation Research blog, analyst Ray Wang warned that software publishers use the threat of running a software audit to drive customers to buy more licences: “Audits are used to start the discussion. Unsuspecting customers who no longer have context about the original contract may fear breach of contract.”

Software publishers want to sell organisations an enterprise agreement, according to James Moy, assistant vice-president for IT asset management at Bank of Tokyo-Mitsubishi. “They love to sell their software, but if you ever ask any of the software suppliers how they keep compliant on their own software, they will have no response,” he says. Moy says most software is coded with executable file and revisions. “How does a user or company actually keep count? Take into account upgrades, patch versioning, enterprise agreements and select agreements and your head is spinning,” he adds.

If you ever ask any of the software suppliers how they keep compliant on their own software, they will have no response

James Moy, Bank of Tokyo-Mitsubishi

Job site switched back from virtualisation to physical servers, because it was cheaper and easier to understand, from a licensing perspective.

 “Virtualisation was quite challenging,” says Mark Ridley, director of technology at “We were scaling virtual machines, but we reverted back to physical boxes because the [software] licences were clearer and simpler.” Running the website on larger physical boxes was cheaper than using virtualisation and licensing issues was one of the reasons opted for Google Apps over Office 365, he says. “Office 365 is a great product, but the E3 licensing [scheme] fine print stated you weren’t allowed to use it on virtual desktops,” Ridley says. The Microsoft licensing limitations did not fit with’s desktop virtualisation strategy, so Microsoft lost out. According to Ridley, part of the problem dealing with Microsoft was that each product family had its own sales rep and the different divisions often have conflicting licensing agreements. “It would be fantastic if you only needed to talk to one person instead of someone from the Office group or SQL Server group separately. Microsoft needs to ensure it is simpler to understand. To buy Microsoft [software today], you probably need a Microsoft specialist,” he says.

Challenges of SAP

Philip Adams is chairman of the UK & Ireland SAP User Group. In a survey the user group conducted last year, the biggest issues members complained about concerned inflexibility. He says: “We’d like licensing to be more flexible and it’s not as transparent as we’d like, in terms of whether we are getting the best deal from SAP.”

In the past, Adams says it used to be relatively easy for companies to measure their SAP licences. “The end-user licence model was quite easy to understand . But now there are more products – 2,000 on the SAP price list – and each one has a different [licence] metric.” So life for the IT department is now far more complex, especially if a business wants to try mobile or some cloud technology, and if the CIO cannot navigate the licensing landscape, it is hard to sell the value to a CFO.

Until recently, SAP made it difficult for businesses to change as the annual maintenance fee had to be written off over five years. So if a company lost staff during the downturn, it still had to pay for all users bought on the original system.

The change means that for those moving into the cloud, such as move from SAP HR onto Successfactors, the business can migrate users and reduce the maintenance fee on the on premise product, Adams explains. “A company can negotiate with SAP on the overall subscription fee and stop paying maintenance on the users who move,“ he says. The new policy also seems to recognise that the organisation may have acquired SAP on-premise products in the past and so may be entitled to a discount.

It is a fact of life software licence purchases will be audited. Software asset management tools can help organisations to manage licences against agreed contracts and they can, therefore, provide a buffer against rogue sales tactics that less scrupulous sales reps at software publishers may try.

Read more on Software licensing