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The Financial Conduct Authority (FCA) spent £3.2m more than it needed to on software licences with Oracle because some projects that would have required the software did not go ahead.
Like the finance firms it supports, the FCA is struggling to get the best out of complicated software lincensing.
The FCA revealed the losses related to software licences in its annual financial accounts but did not name the supplier. "In May 2014, the FCA entered into a one year contract to purchase a number of software licences," said the FCA in its annual statement.
"The contract involved the FCA making a prepayment to secure the licences at a significant discount to the list price. Utilisation of these licences by the FCA has not materialised as originally anticipated and thus £3.2m of the prepayment has been written off as a constructive loss. The contract expired in May 2015 and is not being renewed."
According to This is Money, the FCA responded to a recent Freedom of Information Act inquiry on the matter. It said: "The value of the licences that the FCA estimated it would require during this one-year deal proved to be incorrect for three key reasons.
“The assumptions underpinning the agreement did not anticipate that some projects that originally required Oracle licences would be de-prioritised by the FCA, thus reducing demand; some projects would be implemented later than anticipated and hence fell outside of the agreement’s one-year timeframe; and some projects would adopt an alternative technical solution.”
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One senior IT professional in the financial services sector said banks were notorious for underlicensing in the past. “Banks are used to underlicensing because they create standard systems and then replicate them globally so they have to have enough licences. Also there are so many starters and leavers at companies and servers and PCs being bought and decommissioned it is difficult to have the right licences.”
But he said that he knows of a couple of finance firms that have had problems with overlicensing recently. “The problem is the procurement teams buy in build to get better unit discounts – but then some licences are not used. It looks like the FCA has also suffered as a result of the complexity of software licensing.”
Jean Louis Bravard, outsourcing consultant and former JP Morgan CIO, said licensing in the finance sector is a mess. “The only companies that are licensed properly are those that have software to track licences.
He said suppliers are not helping customers because they see underlicensing as a chance to sit back down at the negotiating table. “They see it as a commercial opportunity.”