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Interview: PwC exec sees software licensing 'disconnect'

Interview: PwC exec sees software licensing 'disconnect'

Corporate IT executives often complain that software contracts are too complex and don't offer enough flexibility to meet their needs. But when software vendors have tried to introduce new licensing models, they have rarely been adopted by customers.

Corporate IT executives often complain that software contracts are too complex and don't offer enough flexibility to meet their needs. But when software vendors have tried to introduce new licensing models, they have rarely been adopted by customers. To help make sense of where the industry is heading, Computerworld's Thomas Hoffman spoke with David L. Marston, a partner at PricewaterhouseCoopers who leads the firm's U.S. licensing management practice in San Francisco. Last month, PwC published a technology licensing marketplace study based on interviews with 112 CIOs and chief financial officers at U.S. technology companies. Among the findings: Half of all U.S. technology companies expect to lose revenues this year because enterprise customers improperly report the amount of licensed software they use.

Are software vendors moving to new types of licensing models? Are enterprise customers clamoring for them?

There's a disconnect there somewhere between what enterprise customers are asking for in terms of flexible licensing models and models that vendors have tried that didn't catch on. There is a lot of dialogue in the industry about how to address that, but I honestly don't see licensors making a mad rush to the door to change licensing models.

What are licensees saying? Do they want to see new models introduced into the market?

A lot of licensees we speak to would like to have an agreement that would provide them more flexibility and ease of compliance. Most of these agreements are structured by CPU or by the number of end users; 99.9 percent of the CIOs we talk to want to be in compliance, especially post-Sarbanes and in the environment we're living in. But they're resource and budget-constrained, so it's difficult for them to stay in compliance. They have complex data center environments, multiple locations and IT managers who aren't close to the terms and conditions.

People would like to see a model that keeps them in compliance.

Enterprise customers also complain about having to wade through 100-page software contracts. What are the chances of software vendors developing more simplified and standardized contract language?

I can't envision that ever happening. Even within the same software company, contracts vary -- and when you get down to negotiating, terms and conditions change. I just don't see that happening.

If you look five years or more down the road and you get to a place where industry consolidation leads to five or 10 major software companies, and you get past the major antitrust issues, maybe you could get vendors to agree to a standard contract form. But you'll still have negotiations galore. Nobody walks into a car dealer and pays the full sticker price. It's the same with software contracts.

Has the Business Software Alliance been more aggressive about conducting enterprise software audits in the past three to six months?

I don't know if BSA has been more or less aggressive on software audits. But I have seen an increasing trend among enterprise customers toward conducting self-assessments. Whether it's a reaction to a software vendor sending a compliance letter and/or a factor of the Section 404 work related to Sarbanes-Oxley, I'm not sure. But companies are saying that their software asset management controls aren't as robust as they thought they were, so they're opting more towards doing self-assessments. I do see more self-assessments than I did a year ago, that's a fact. -- Computerworld (US)

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