Legally Illegal

Last year was a very difficult year for most software companies with slowdown in new licence sales that brought in a negative trend in new business revenue. This happened very quickly after the globally experienced slowdown a few years back compounding the issue. This had all software vendors almost like acting in unison deciding to engage their existing customers in licence audits. If you cannot get new revenues, let’s squeeze some juice out of existing lemons.

So these engagements began to look all over the place; the data centres, servers hidden under tables, desktops converted to servers for a simple test or proof of concept, users created though inactive, resigned employees not deactivated, it did not matter what the event was, if there was an user identity or a database, or an instance of the application, it needed to be licenced. Office automation and other fringe app vendors joined the fray and added to the already harried CIOs blood pressure.

No debate that licence compliance is non-negotiable; licences for software or product or package used for the enterprise that in any way impacts a business process. Most vendors allow disaster recovery to be setup at nominal or no extra investment as long as it is not used conjointly with the production environment. That looks like a good principle though some complicate matters based on number of days used even when the primary was down and not operational.

Some also allow test and development instances to be setup; interestingly most do have a licencing policy that charges the customer, however most sales teams shy away from highlighting this fact during the pre-sales discussions or even when the purchase order is received. Instead they give the CIO a fine printed legal document to sign without pointing out to the salient points that the customer needs to be aware of. I don’t know of CIOs who read those wonderful documents; it’s like pressing “I accept” when we enrol to a new website or app.

So far still so good as each instance expects the customer to get into an engagement with eyes and ears open; the principle being we gave you the full documents, you read and sign or you don’t read and sign, that is a choice. The discussion gets interesting when new or additional licences are required even if a line of code is changed or added to any screen, form or report or an add-on deployed. This now attracts additional investment, sometimes a lot more than bargained for. Now that is hitting below the belt !

If I may add, the same vendors participate during the pre-sales gap analysis and bid and quote for customizations through their consulting arms vying for implementation business. But no mention that if the customer did end up customizing, then … This aspect of licencing is rarely discussed if at all and mostly comes up during licence audits leaving the CIO gasping for life. The management demands that the CIO know all this as it is his/her job to know and manage the vendor.

Page number XX, clause YY, sub-clause ZZ in the sales agreement is cited as the reference for the new demand. Read it and if you can figure it out differently let us know; else here is the bill of material and the timeline in which you need to buy. Consequences you know are not something you want to talk about. Sheepish acceptance and wows to be more careful and read all the fine print is normal behaviour; the management takes a not-so-kind view but goes ahead with the devils choice.

Why does this charade repeat itself globally with many vendors, some more than others ? It does not matter which industry, which country or geography, size of the customer (in fact the bigger the better as they are averse to the publicity it draws), this is becoming one of the relationship breakers between the impacted CIO and the vendor. Stories of these are rarely published by publicity shy individuals and enterprises. Is there a way out ?

I believe there isn’t an easy way out; negotiating from a compromised position does not get any great deals; neither does it do wonders to CIOs careers. Whether they like it or not, CIOs have to get more diligent in their approach to legalese and contracting. As the markets saturate and mature, read changes to changing end user contracts and/or licensing terms. You never know what impact it has on your company.