Software License

Critical Issues in Managing IT in Organizations

CE00303-3 Critical issues in Managing MIS in Organization

Software License

Learning Outcomes
Describe types of licence agreements used in software Explain of the ownership and implication of the types licenses that may be applicable Describe negotiation strategy and tactics Describe the features of a contract in IT

CE00303-3 Critical issues in Managing MIS in Organization

Software License

What is a software licensing

agreement?
A software licensing agreement is a legal contract between the software buyer (users) and software manufacturer (and/or manufacturers reseller). The exact composition of the agreement varies. It is best to think of a licensing agreement consisting of three parts: The master agreement The End User License Agreement (EULA) The software product.
CE00303-3 Critical issues in Managing MIS in Organization Software License

Master agreement
Explains the conditions of sale. the cost of acquiring the licensing agreement, the software being licensed who can use the software, what purposes the software can be used the conditions of the maintenance contract and tech support services how the software can be installed and accessed by users.
CE00303-3 Critical issues in Managing MIS in Organization Software License

End User License Agreement (EULA)

Explains specific rules and restrictions governing the use of the product. the classifications of illegal usage the termination of the users right to use the software Conditions of redistribution of the software rules and restriction governing how the software can be incorporated into another product disclaimers of warranties.
CE00303-3 Critical issues in Managing MIS in Organization Software License

Software product
Implicit conditions of use and performance capabilities. expectation that the software can perform under every circumstance and condition should not be a certainty. cannot guaranty that their software can work with all other software applications on a computer system.
For example, run two virus protection applications such as Symantecs Norton AntiVirus and Network Associates

CE00303-3 Critical issues in Managing MIS in Organization

Software License

What types of licensing agreements exist?

Freeware licensing agreements allow the user to use the software freely at no cost. Shareware licensing agreements usually have a limit period of use. Open source licensing is similar to freeware. Normally the software is free to use or there is a small charge to obtain the software on media. Commercial licensing agreements are seen all the time in stores and in volume (or bulk) licensing agreements. Academic (site) licensing agreements are specifically designed for the academic environment.

CE00303-3 Critical issues in Managing MIS in Organization

Software License

What is perpetual licensing?

Perpetual licensing is the purchased right to use a software product for an indefinite period of time with the proviso that the user abides by the rule and restriction governing the use of the software normally outline in the products End User license Agreement. Perpetual licensing cost more than lease licensing at its commencement. The upgrade or maintenance agreement for a perpetual license is usually lower than a lease license renewal.
CE00303-3 Critical issues in Managing MIS in Organization Software License

What is lease licensing?

Lease licensing is the purchased right to use a software product for a limited period of time with the proviso that the user abides by the rule and restriction governing the use of the software normally outlined in the products End User license Agreement. Lease licensing cost less than perpetual licensing at its commencement. The renewal cost of a lease license is usually higher than a perpetual license renewal.
CE00303-3 Critical issues in Managing MIS in Organization Software License

Issues of Negotiating Software License Agreements

1. Ownership importance e.g. scenario - software house/contracting firm analysis design and implement of a Web ASP Inventory system for a Cider Company Operating Strategy
Client owns it ~best option
reasons ~ no restrictions Exclusive License

could offer Perpetual Licence

indefinite period

CE00303-3 Critical issues in Managing MIS in Organization

Software License

1. Ownership
Non exclusive License
means that the user is allowed to use under terms of license but no restrictions on the Licensor as to his/hers own activities

Joint ownership Divide Ownership

CE00303-3 Critical issues in Managing MIS in Organization

Software License

2. Performance Requirements scenario~ could be broad based examples includes SLA, outsourcing, Customer Support
ideally clear unequivocal commitment
specification, delivery dates

may agree compromises

agree date etc agree different specification

CE00303-3 Critical issues in Managing MIS in Organization

Software License

2. Performance Requirements
strongly advise to avoid these clauses
best efforts or reasonable effort

commercially and / or satisfactory

satisfactory vague term depends on what context because it could work for or against you

CE00303-3 Critical issues in Managing MIS in Organization

Software License

3. Acceptance Testing
Scenario
could be a major deal off the shelf software or customized software
immaterial to the scope & size its important to the client who will be paying for the system and would be responsible if the system failed

payment conditions
on delivery, within 30days of delivery or when client is satisfied?

CE00303-3 Critical issues in Managing MIS in Organization

Software License

3. Acceptance Testing
compromise on delivery payment and specify performance criteria
objective standard ~ objective criteria ?
output ~ e.g. quality and/or speed time or speed e.g. response time, see example accuracy e.g. OCR scanner

see next slide for examples

Trial use period for the software

vendor negotiating tactic!

CE00303-3 Critical issues in Managing MIS in Organization

Software License

3. Acceptance Testing
example of software performance criteria
selection of menu option / icon to display screen
- 100% within 5 seconds

generate and display pre-defined reports on screen from initiation

- 100% within 15 seconds

commence production on a printer from initiation

100% within 40 seconds

movement of cursor between fields

100% within 2 seconds
CE00303-3 Critical issues in Managing MIS in Organization Software License

4. Most Favoured Customer Clause

Three Classic types ~ gives customer benefits of better terms 1. giving additional customers further concessions 2. gives customer evidence of good deal focus normally on price 3. combination of points 1 & 2
problems this can be deal killer
effectively doubting the trust of the vendor needs careful use as a possible concessions bargaining ploy could back fire

supplier wants business of company?

CE00303-3 Critical issues in Managing MIS in Organization

Software License

5. Pricing
Pricing can be complex
tiered
site, increments e.g.Novell ~ licence NetWare 4.1 will allow user to match licence with smaller increments ~ which is not the norm

nodes controls number of users

Oracle at the University

metering the use of software as you use run you pay e.g. Gas Technology site Licences concurrent licences~e.commerce enterprise agreements usually allow company to run a piece of software ~ 3 years with options to upgrade to latest version
CE00303-3 Critical issues in Managing MIS in Organization Software License

5. Pricing
NT price guide
5 user licence - $809 10 user licence -$1129 25 user licence - $2800 additional single client - 39.95 additional 20 clients - $659
source Microsoft

Lotus has simplified its licensing model and integration with Microsoft technology
six broad pricing buckets with extensive discounts for enterprise users
Gartner Group comments look more like Microsoft Backoffice & Enterprise licensing
source Computer Weekly Jan 2000
CE00303-3 Critical issues in Managing MIS in Organization Software License

6. Stiffing
practise of software suppliers squeezing extra cash from exploiting weakness in contracts usually occurs with a change in customer circumstances problems
typically problems arise when users make business changes which put them outside strict interpretation of their software license for example: acquiring or selling business, restructuring, outsourcing or upgrading hardware etc

CE00303-3 Critical issues in Managing MIS in Organization

Software License

7. Non Financial Aspects

reputation of vendor
risk

users training
training provision
free, costs, recurring costs etc

maintenance agreements
what are the costs & duration
procedure for price increase

warranty of products vendors responsibilities

support obligations and performance criteria
onsite ~ any multiple suppliers provision ~ procedure!

CE00303-3 Critical issues in Managing MIS in Organization

Software License

Q&A
Source: Staffordshire University
CE00303-3 Critical issues in Managing MIS in Organization Software License