R “Ray” Wang of Software Insider blog and a Forrester analyst wrote an interesting piece on how companies should consider and pursue resale of their unused, shelf ware they licensed or acquired as part of an acquisition. This he felt was an opportunity for companies to effectively manage their spend on software.
Shelf ware to those who are not acquainted with software licensing is a term used to identify licenses bought but not used. It is not uncommon these days to think of many companies being saddled with licenses that are rendered useless either due to staff reductions, business unit shut down or acquisitions. While they are not used and paid for, companies are continued to be charged for their maintenance/support.
This is the last thing software vendors would like to hear while the discussion about support charges increasing from both SAP and Oracle is still fresh.
Software vendors who are already facing a wave of on-demand /SaaS offerings, open source alternatives will no doubt oppose this vehemently. A string of third party support options surfacing for the large software is also threatening what was considered their gravy train (the maintenance revenue).
Given the change in the business dynamics and increased power vested in the customer in this bad economic climate, this concept of re-sale of unused licenses presents a great opportunity to reduce the spend.
But with all the wishful thinking by customers if the software vendors relent, this process is rife with challenges. Here are things I see as necessary actions that should happen involving the software vendor, original buyer and new prospective buyer (of the unused license).
- The software vendor now needs to amend the original license contract verbiage to allow for such secondary market transaction with caveats. I am sure it is not free for all.
- The software vendor also has to create process for migrations/transfers to be recorded in their service contract system so the new customer has to be recognized. The entire client services (sales, account management, support) process needs to align and recognize the new customer.
- A new license transfer transaction need to be recorded between the three parties along with the transfer of obligations to the new buyer.
- The new buyer should now make all the additional overhead payments (did you think the software vendor would do 1, 2, 3 for free?) and ensure compliance.
If both the seller of unused license and the buyer are lucky they will have the same hardware platform, processor configurations that the seller had or will need to make necessary investments to accommodate the newly acquire license.
Finally, there needs to be a marketplace to make this transaction. Logically you would think the software vendor themselves would provide a marketplace for a secondary market transaction. But then again why would they when they can sell anew.
As a Craigslist junkie I could not help but let my imagination go wild – think companies going to Craigslist and posting ads for selling unused licenses or shrink wrapped SAP CRM.
Wonder what others think about it? As a SaaS evangelist, I would beat the drum for such a process to happen, in the interest of the customer. As with anything commodity (and software is turning into one) there has to be a way for owner of the asset, a very expensive one at that, to salvage some value.
This clearly highlights another virtue of SaaS and pay-as-you-go metering model, you can just as easily expand and throttle your usage based on the prevailing conditions in your company.
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