Software licensing or licence to print money?

In October of last year, Tube Fab, a Mississauga, Ont.-based manufacturing firm, paid $57,000 to settle a claim it had unlicensed copies of Autodesk and Microsoft software on its computers.

Unlicensed software is a growing problem in Canada. According to statistics from the Canadian Alliance

Against Software Theft (CAAST), almost 40 per cent of the business software applications in this country were ill-gotten in 2001. Software piracy is the dirty little secret that’s costing Canadian vendors $289 million in lost retail sales of business software applications, the study shows.

Software sales are an important part of the economy in Canada, contributing roughly $6 billion a year. When a chunk of that revenue goes missing, it’s a cause for concern among software vendors.

Intellectual property is a corporate asset, says Jacqueline Woods, Oracle’s vice-president of global practices in Redwood Shores, Calif.

“”I have seen situations where customers were using software they haven’t paid for,”” she says. “”That’s actually people using intellectual property they’re not licensed for.””

Because of the high level of software piracy, the issue of licensing has become an increasingly important one — beyond the walls of the IT department and into the corner offices.

“”I sense there’s more of an interest among chief financial officers and chief information officers about total cost of ownership in this regard. It’s percolating up,”” says Steve McHale, senior channel analyst at IDC in Toronto.

Also on the brew is a conflict between companies that sell software and companies that purchase it. Users are calling for vendors to simplify their licensing agreements and allow them more autonomy in tracking assets to ensure compliance, while manufacturers are eager to ensure their customers are paying for all the software they’re using.

In the case of a global software company such as Oracle Corp., which has more than 200 applications, simplifying the process is easier said than done.

The licensing of its database management system product has been the object of much confusion, according to Jane Disbrow, research director at Gartner in Stamford, Conn. The controversy centres around Oracle’s definition of “”multiplexing,”” which traditionally involves the use of software that employs a shared pool of connections to the back-end database and masks the actual number of users physically connecting.

“”When you get right down to it, their licence model was vague as to how the measurement was to be performed,”” says Disbrow.

Woods admits Oracle is trying to “”demystify”” its licensing policies. To that end, the company introduced a new licensing model in September of last year.

The changes were welcome, at least by one customer.

“”The new licensing changes have gone a long way to simplify this process, and now deal with the issue in a manner that makes sense,”” says Harris Newman, operations manager at Barewalls Inc., a Montréal-based print and poster e-tailer. Previously, he notes, the model rated servers by the number of CPU cycles.

“”That didn’t reflect how most administrators and purchasing officers evaluate their resources and make real-world decisions.””

Disbrow, however, remains frustrated.

“”As far as we’re concerned that issue still exists,”” she says. “”We gave them an example that came from a discussion with a client; they couldn’t really answer the question. In my opinion that makes for a complicated licence model.””

Oracle is not the only software vendor under the microscope for its licensing policies. Microsoft has, on more than one occasion, locked horns with its customer base on the subject, most recently with the introduction of Microsoft Licensing 6.0 Program in August of last year.

Customers expressed “”outrage”” at the high cost of Licensing 6.0 terms and conditions, according to a survey of 1,500 corporation worldwide by Information Technology Intelligence Corp., a U.S.-based research company.

But despite plenty of advance warning, says IDC’s McHale, many customers sat around and did nothing to ensure they would be compliant when the new licensing model came into effect.

“”When it came down to D-day, Microsoft had to push back the date because people suddenly started thinking about it and realized it was going to cost them hundreds of thousands of dollars more — and they didn’t budget for it,”” he says.

It’s a good example of companies not appointing someone to look after licensing, adds McHale.

“”By the time people got around to it, the magnitude of the thing far overwhelmed any of the resources they could put to it.””

How can licensing be made simpler for users, while still ensuring a fair shake for the software makers?

McHale says regardless of the ethics involved, users expect manufacturers to take the lead in knocking the complexity out of software licensing.

“”It doesn’t matter whether it’s morally right because users are expecting vendors to make it simpler,”” he says. And rather than the vendors running checks, McHale says companies want their software suppliers to give them to tools to be able to track and manage their software assets.

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Jim Love, Chief Content Officer, IT World Canada

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