Campaign puts stiffing firmly on the agenda

Two years after Computer Weekly launched its campaign to stamp out the practice of stiffing, Karl Schneider looks back at what...

Two years after Computer Weekly launched its campaign to stamp out the practice of stiffing, Karl Schneider looks back at what has been achieved and asks where we go from here.

It is now exactly two years since Computer Weekly launched its campaign against the sharp practices used by some software suppliers to milk extra revenue from customers. These practices we dubbed "stiffing", borrowing a term used by some of the software suppliers themselves.

So what have we achieved over the past two years?

We started the campaign with a suitably modest aim - to get 10 major mainframe software suppliers to pledge not to use stiffing, by signing up to a Computer Weekly code of practice. Broadly, by signing up to the code the companies said they would not seek additional payments from existing customers due to changes in their circumstances unless either the customer gained significant additional benefits from using the software, or the suppliers incurred additional costs.

Judged on that basis, the campaign has already succeeded. We now have 12 software suppliers signed up to the code.

But the campaign against stiffing has moved far beyond our initial project. Last year Eurim, the parliamentary/industry group that brings together users, suppliers, civil servants and MPs, set up a working party to look at how to tackle the problem. Computer Weekly, as a member of Eurim, has played an active part in the working party.

Eurim is investigating several possible options. It is looking at the scope for standard contracts, or standard terms within contracts, which could remove the weaknesses in many current contracts that make stiffing possible.

It is also investigating the role that could be played by an alternative dispute resolution (ADR) process, and has already put together a draft code of practice that could set the benchmark against which an ADR body could judge disputes. It has not ruled out the need for changes in legislation, both in the UK and the EU.

The Office of Fair Trading and the Department of Trade & Industry are monitoring the Eurim initiative and have promised to follow up any evidence of unfair practices.

So far so good. But the bad news is that stiffing is still occurring. At the end of last year Computer Weekly reported that five major UK users were facing demands for payments of up to £500,000 from eight large software suppliers.

New examples have emerged this year. In one case, a major software supplier presented a very large UK company with a bill for £5m for doing little more than changing the name of the business that was licensing the software. The firm disputed the payment, but ended up settling at £3m.

Meanwhile new dangers are appearing on the horizon. In the US the Uniform Computer Transactions Act (Ucita), which has already been adopted by state legislatures in Virginia and Maryland, strengthens the hand of suppliers in dispute with customers over claimed breaches of software licence terms.

In some circumstances the Act gives suppliers the legal power to switch off the systems of customers who are deemed to be breaking their software licence terms. It is not clear what impact this will have on UK customers of software suppliers which start building the Ucita terms into their contracts.

Perhaps the most positive change to come out of the Computer Weekly campaign is that stiffing is now widely talked about. One of the reasons that software suppliers have been able to conduct stiffing on such a scale is that many users were simply not aware that such a thing could happen.

Like a dark family secret, the issue was almost never discussed in public. Suppliers who indulged in stiffing are understandably loath to talk about it. But the victims of stiffing are usually just as tight-lipped, often because they feel partly responsible for signing flawed software contracts.

This wall of silence has now been broken. Stiffing was one of the main items on the agenda at last week's annual conference of the UKCMG user group, made up mainly of large corporate users.

A straw poll conductedin March amongst 35 mainly large firms selected at random from theUKCMG database found that 28, or 80%, had heard of the Computer Weekly campaign.

Individual companies are still very wary of going "on the record" about their own stiffing experiences. But the topic is now firmly in the public domain.

Forewarned is forearmed. Users who are aware of the dangers lurking in software contracts are likely to be much more careful about what they sign up to. Anecdotally it does seem that firms are becoming much more professional in the way they deal with software licensing.

It will take a while for this increased awareness to bear fruit. Today's stiffing victims are still paying the price for contracts signed years ago. The real test will come over the next few years, as the latest batch of licences come under scrutiny.

Dozen on board

Software suppliers signed up to the Computer Weekly software licensing code:

  • IBM

  • Lotus

  • Tivoli

  • Amdahl

  • Bull

  • Compuware

  • Intentia Software

  • Beta Systems

  • Landmark Systems

  • Macro4

  • Computerbility

  • Neuron Data

    What is stiffing?

    Broadly, stiffing is a series of techniques used by some software suppliers to squeeze additional revenue from existing customers, by exploiting weaknesses in software licences. It usually occurs when there is a change in the customers' circumstances that the software supplier can argue takes the company outside the terms of its existing contract. The supplier then demands additional payments, often outrageously large, to amend the contract to cover the new circumstances.

    It is best understood by looking at a real example.

    A major UK company was using mainframe system software under a licence that allowed the software to be used on processors up to 140mips in power. With two years to run on the licence, the company decided to upgrade from a 75mips processor to a 120mips machine - still within the licence limits.

    But of course the company needed to run the two processors in parallel for a few days' testing, before switching over production to the new machine. For that short period, the company was running a total of 195mips.

    The contract simply referred to the total number of mips installed, whether or not the product was running on all processors. The annual licence fee was £90,000. But for running over the mips ceiling for those few days the supplier asked for an extra £320,000.

    There was an alternative: sign up for a new five-year licence at a higher mips ceiling, and with worse terms and conditions.

    Otherwise, the customer would have to stop using the supplier's software immediately - not a serious option in practice.

    In this example, the change in circumstances was a brief surge in the number of mips running on the site. But stiffing has also occurred when customers have used contract staff, bought or sold businesses or even changed the name of the company.

  • Read more on IT supplier relationship management