Waste of paper

As software piracy rates fall in the Middle East, so resellers find that they have to deal with a new problem—the complexities of software licensing schemes. Are impenetrable licensing programmes damaging sales?

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By  Mark Sutton Published  March 12, 2003

Still no solution|~||~||~|Nobody said that software was simple, but the majority of resellers can lead their customers through the features and benefits of Microsoft Office. The same can’t be said for the features and benefit’s of Microsoft’s licensing programmes, which even the vendor itself admits are much too complicated. Microsoft is not alone. Every software vendor has created a myriad of jargon-loaded licensing programmes that resellers have to understand and memorise. We ask the software industry—why?

When you look at the complexity of software licensing programmes offered around the world, you have to wonder who they are
serving. For software vendors, surely the aim of the exercise should be to use these programmes to encourage people to buy more software. But any sales person who approached me with a sales pitch that included phrases like ‘single level OLP SKUs’ would never get a foot in the door.

The programmes hardly seem to benefit customers either. Simply getting end users to recognise the benefits of licensed software is hard enough, but to then be confronted with a licensing programme that defies understanding is one step too far.

Resellers, of course, are stuck in the middle; trying to ensure they get the best deals from software vendors so that they can pass on savings to their customers. Rather than selling software, resellers have to spend half their lives learning, and then re-learning the intricacies of these opaque programmes.

The PC software industry is almost 25 years old. Software licensing has been around almost as long. Why, then, has every single software vendor failed to create programmes that are simple to understand for customers and resellers alike?

||**||Why is licensing so complex?|~||~||~|The answer, according to Ashok Sharma, manager of emerging enterprises, Microsoft Middle East, lies in the breadth of the software industry. “Microsoft has 1,000 products in 30 languages. We have upgrade pricing, competitive upgrades, full license products, OEM products. All of this is bound to lead to complexity,” he explained.

So much complexity, Sharma admits, that it is much harder to understand software licensing than it is to understand the software itself.

This problem is not new. The software industry has recognised for years that its programmes are too complex. Ironically, in trying to solve the problem, the industry has generally made things worse. Programmes change on an almost monthly basis—with each new programme designed to simplify the one it replaces. This can mean resellers learning dozens of new programmes from the major vendors every year.
Small wonder that very few resellers in the Middle East ever take the time to learn them.

In the midst of overwhelming complexity, however, lies opportunity. Resellers that are able to learn and apply the rules of software licensing give themselves a significant advantage over resellers that don’t. “A salesman that knows the wrinkles of a licensing programme can tailor projects and bids for customers quickly, simply and cost effectively,” said Frances Furtado, software business unit manager for Tech Data Middle East. “Resellers make the most out of their customer opportunities by understanding licensing properly.”

In an attempt to bridge the knowledge gap, Tech Data publishes a guide to software licensing for the Middle East. The booklet aims to explain the software licensing programmes of Computer Associates, Microsoft, Novell, Oracle, Symantec and Veritas. It stretches to 40 pages, but still only manages to explain licensing schemes for SMBs, not the even more complex world of enterprise licensing programmes.

Furtado defends the software industry’s propensity to build programmes upon programmes; pointing out that with so much software to sell, and so many different types of organisations to sell to, it is inevitable that there are a great many schemes. “Building licensing models to suit SMBs is a good idea, and so is a licensing model for enterprises, and so is a licensing model for education, and so on. The complexity is almost built in,” she stated.

That might explain the volume of licensing programmes, but it doesn’t explain why they have become such a quagmire of jargon, acronyms and gobbledegook. Can anybody explain ‘pre-authorised Open Level B or C authorisation numbers for all product pools?’

It doesn’t have to be this way.

||**||Creating clarity in licensing|~||~||~|If the software industry were able to partner more closely with its customers, the burden of complexity could be lifted off the shoulders of those customers. There are several models that show how this could work. The airline industry, for example, runs enormously complex loyalty programmes in the form of their frequent flyer clubs. A member of Airmiles, for example, can accrue rewards with flights, hotel stays, car hire, even eating at restaurants. The member can then spend those rewards in dozens of other ways. The frequent flyer programme is always changing. There are always new offers, new partners, and new incentives. Managing this loyalty programme is an enormously complex business. But that complexity is almost entirely masked from the customer. All he needs is a credit card-sized piece of plastic with a personal identification number on it. The card allows the customer to accrue rewards, the pin number allows him to check the value of his rewards on a web site.

Assuming Microsoft, for example, knows exactly what software is running in a customer’s site, it should be equally possible for the Redmond giant to create an online profile of that customer. Within that profile, a customer would be able to check, for example, what an additional ten licenses of Microsoft Office would cost. The customer would assume, quite fairly, that he will get a better price for those copies of Office than a business down the road that has not helped Microsoft create a profile of its software usage (or, indeed, admitted to using the 50 pirated copies of Office it has on its machines).

Of course, life is rarely that simple. Customers, particularly SMB customers in the Middle East, do not tend to have their software properly licensed, let alone properly audited. Software arrives in many different ways: pre-loaded on PCs, copied across networks, or downloaded from the Internet, to name just three.

Recent moves to ensure that software has to be activated before use, as is the case with Windows XP and Office XP, have gone some way towards helping software vendors build up accurate profiles of customer sites. But there is still a very long way to go before the software industry knows its customers in the same way that airlines know their passengers.

In the mean time, resellers with an intimate knowledge of their customers’ software usage, coupled with an encyclopaedic understanding of licensing models, are in a powerful position to cash-in. “It is really good business sense to invest time in getting to grips with these programmes. They do represent a very real opportunity for resellers to build revenue. Understanding these models can mean a much more competitive pricing model is offered to the user. In other words, the reseller that understands the business, wins the business,” said Tech Data’s Furtado.

Software vendors and software distributors have a vested interest in educating the channel about these programmes, and providing tools that help resellers give the right advice to customers. Microsoft, for example, has an online support service at www.ms-gearup.com that provides resellers with an online license calculator that generates quotations based on volume discounts and other parameters. A similar service is provided over the phone from Microsoft’s Contact Centre in Dubai (+971 4 391 7700). This centre has twenty trained operators that can—among other tasks—walk resellers through the creation of a quotation for a customer’s software licenses.

Even so, the entire software industry admits that simpler messages about software licensing need to get to both resellers and end user customers. Microsoft, ever the master of marketing sound bites, has created an advertising campaign that aims to show the cost benefits of maintaining licensed software over time. A magazine advertisement points out that running Microsoft Office on any PC costs less than a cup of coffee per day if a company buys into a licensing programme. A core client license, which gives a desktop access to all server-based applications and communication devices, costs less than one dollar per day.

This must surely seem like a more manageable investment than buying a full-priced copy of Windows XP (list price $299) and Office XP (list price $479).

The essence of software licensing is simple: if you buy more, you pay less. Unfortunately, the software industry has conspired to bury this simple truth under a mountain of techno-babble.

||**||The reseller's view|~||~||~|CME spoke to Hasan Zaheer, product manager for software solutions, Seven Seas about software licensing

CME: How difficult is it to stay informed about all the different software licensing programmes from the major vendors?

HASAN ZAHEER: Impossible. In fact all policies have catches and I have often come across situations where a client easily defeats the biggest benefit statement of a particular policy.

CME: Do you think that they are too complicated?

ZAHEER: Simply, yes.

CME: Which is easier to understand: the software, or the licensing programme?

ZAHEER: You can do a demo to test the software, and look into reference sites to evaluate the performance. Licensing is strange. You don’t buy a license and you have no issues but if you start looking into options it becomes more difficult.

CME: Which vendors offer the best programmes?

ZAHEER: Novell’s licensing philosophy is one of the simplest ones. Pricelists and nomenclature is a nightmare though.

CME: Do you think that the complexity of these programmes makes it more difficult to sell software licenses to customers?

ZAHEER: Life is easier for smaller customers but it is difficult to sell to large corporate accounts.

CME: How much time do you have to spend explaining licenses to customers?

ZAHEER: The problem is that the more you explain the more confusing it becomes. I just prefer to answer customer queries, give them the broad benefits and give examples of similar organisations who have invested in the same programme.

CME: Do licensing programmes help you sell more software, or add complexity to the sales process?

ZAHEER: Those who buy software will buy software anyway. Large organisations get volume discounts but they have to give certain commitments and sign on certain bindings that eventually force them to pay for things that they don’t need.||**||

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