A roundtable of industry licensing specialists has been discussing software ownership and liability in the complex new world tech order where cloud computing, virtualisation and Software as a Service reign supreme.
Certainly there can be little doubting that over the course of the last 12 months or so CIOs and IT managers alike have been under increasing pressure to answer the question: Where Does The Ownership Lie?
The roundtable was hosted by FAST Ltd and included software vendor Symantec, together with sponsor LANDesk, Webroot, Rocela, The UK Oracle User Group, Bytes Technology Group, ConnectSphere, Flexera Software, Regent Partners International, Beachcroft LLP, FAST customers LeaseDrive Velo and Lloyds Register, and a representative from industry analyst Quocirca.
A key driver for the discussion was the current confusion around the software ownership landscape and how it’s multiplied when you add M&A to the mix. Clive Longbottom at Quocirca said the situation is confusing for businesses. “Originally organisations went for the very old style of ‘thou shalt pay’ and thou shalt pay on a yearly basis when it came to licensing their software. However, now there are a lot of organisations that are moving towards subscription-based software as they don’t want the responsibility or liability when it comes to licences. But, the reality is that they still aren’t reading the contracts and don’t realise they are responsible for counting licences, so ultimately they are back to square one.
“And when you add M&A into the mix, these problems are multiplied three-fold. The amount of stress being put on organisations to conclude the deal quickly is immense and businesses are waking up to the fact that their IT is in a real mess and are therefore looking for ways out of it.”
Tim Pollard, Director Enterprise Sales at Symantec agreed and said that he’s seen an increase in tier 1 vendors introducing and offering more flexible licensing packages. “There are more and more ‘all you can eat’ licences, and we tier 1 vendors need to work with the customer to figure out what is right for them, but also what makes commercial sense for us. More organisations are looking to outsourcing and functional computing, and we’re seeing more clauses being drawn into our contracts.”
Head of Customer Services at FAST, Paul Clements said that he has seen an increase in organisations affected by ownership concerns and software licensing, and who are looking to cut costs. “One of the biggest issues a lot of our customers are facing is that they are being told to outsource as a result of the economy. We have to explain that although you can outsource projects, you can’t outsource the liability.”
Peter Rowell from Regent Partners International agreed and added that it’s a whole new story when M&A is added to the mix. “In the past year Regent has tracked over 300 acquisitions of European software companies and there have been three times the acquisitions of software companies today than there were nine years ago. Generally when a company makes an acquisition it’s not because of the IT, it’s because it’s a strategic business decision for them. Therefore IT is overlooked at the beginning of the process which really shouldn’t be the case, and this is where due diligence comes in.”
When asked why this happens, Robin Fry from Beachcroft LLP commented: “Secrecy during an M&A is one of the biggest challenges. “Businesses simply aren’t going to go to their software vendor to discuss their future licensing before they tell investors, staff and the Stock Exchange. It's a huge risk with the relevant enterprise likely to be unlicensed the day after the deal closes, and companies are continuously taking this risk.”
Martin Mutch Chief Executive at Rocela added: “Most clients we deal with want to know the complexities and the implications of their licensing. However they struggle to understand the impact an acquisition will have on this. We encourage clients to ‘embrace it, control it and manage it’ to ensure they are controlling their costs more effectively.”
All participants agreed that managing IT assets through effective Software Asset Management and utilising ITIL best practice is important to ensuring that if and when a merger or acquisition happens organisations won’t get stung with large penalties.
“It’s surprising that there are a lot of companies that just don’t have a clue - when it comes to physical IT assets and also their software,” said roundtable sponsor, Andy King at LANDesk.
“A merger or acquisition will merely highlight existing inefficiencies within an organisation’s software and licensing,” said Michelle Hales, Training Director at ConnectSphere. “Organisations need to have good Service Portfolio Management – they need a good understanding of the end-to-end process and an overall plan for the future.”
Asked on whether SaaS will solve licensing and ownership problems, Ian Moyse at Webroot added: “There are benefits to SaaS and it does solve deployment issues of companies coming together in M&A. However it’s not a one size fits all, and it doesn’t solve all of the problems of M&A and licensing.”
Lloyd’s Register’s Mark Duffy welcomes SaaS, but believes more work needs to be done to convince him of its Widespread suitability: “Where we utilise SaaS solutions at the moment, life is certainly easier in regard to licensing who can use what, where, when and how. Part of me would like to see more of this style of licensing across the board. However pricing models in this space need to be more flexible in order to gain the true benefit of using such a service.
“Buyer Beware is key,” said Ronan Miles, Chairman of the UK Oracle User Group. “You need to understand what your company may be doing now, what it may plan to do in the future, and what will happen if that happens. This will make all of the conversations that you have afterwards a darn sight easier.”
Paul Clements at FAST Ltd concluded: “Software licensing won’t go away. And in the current auditing climate, companies are more at risk of being pursued for non-compliance. Where licensing has been put on the back burner because companies have said, ‘Let’s just get the business going for the next 12 months’, there should be an effort now to start catching up and trying to put things right, because vendors audits are not going to go away in 2010.”