The Business

Understanding Licensing

Software licensing is increasingly complex, but with clients facing fines for under-licensing, you have a duty – and an opportunity - to help

There is little doubt that software licensing is a confusing topic for smaller businesses. Companies that have bought always boxed software from retail channels, and added to it has they have grown, or bought applications as part of a bundle with a PC or server, tend to have little in the way of formal mechanisms for monitoring and tracking their spending on software, or on licences.

Smaller companies also make relatively little use of bulk or volume licensing, even though such schemes can save significant amounts of money, bring additional benefits in features, training or support, and avoid the risk of under-licensing.

Microsoft’s Software Assurance, for example, is open to companies with as few as five seats, yet it entitles businesses to regular updates and upgrades during the lifetime of the agreement, as well as access to added value features such as Microsoft’s BitLocker security system in Windows without paying a premium for it and subsidised copies of Office so staff can legally work from home.

FrontRange License Manager improves the accuracy of licence records and looks up details from the online ‘Nexus’ database.  This database holds information on over 1.25 million software titles and every record input into License Manager is automatically checked against this database to ensure the license is valid.
FrontRange License Manager improves the accuracy of licence records and looks up details from the online ‘Nexus’ database. This database holds information on over 1.25 million software titles and every record input into License Manager is automatically checked against this database to ensure the license is valid.

Some volume licences are simply a way of saving a little money on the purchasing prices of applications, passing on the savings of distributing multiple licence codes with a single set of media and manuals. Even these relatively simple volume licences can be very useful, especially in areas such as security software, where the ability to apply the latest software to a new machine – without having to buy a new licence or boxed product – saves time and reduces risks. Some packages (Sophos’ small business edition of its security software is a good example) come with added value tools for installation over a network, another real time saver.

But licensing remains poorly understood by many SMEs, and this presents both a challenge, as well as a business opportunity, to IT consultants. In particular, you can build up business managing licences for clients, as well as auditing licence use and managing support and maintenance agreements for them. First, though, you have to educate businesses around licensing issues, and help them understand the dangers of under-licensing and ‘borrowed’ software.

“The licence market for SMEs is a minefield. There are just too many different systems, some just based on actual licences, some on points, some on user roles and so on,” warns Clive Longbot-tom, service director at Quocirca, an industry analyst.

“The company involved needs to decide on its own risk profile – if it just wants to be compliant, come what may, then it either has to ensure that every user using the software has a defined licence, which requires management software, or that they have an enterprise licence, which can be expensive.”

Taking the time to count licences often saves money. Research carried out by the Software Industry Research Board and the Federation Against Software Theft suggests that businesses are as likely to be over-licensed as to have too few licences.

Some businesses will accept a degree of over-licensing as a necessary cost of doing business: with licence packs often coming in blocks of five users, it is not always cost effective to buy the bare minimum number of copies. And having licences to hand makes it easier to install new computers or to set up new joiners, or to provide software for freelance or temporary staff. And with heavy penalties, including potentially prosecution by Trading Standards officers – who can ask the courts to bar offenders from holding the position of director – playing safe does make sense.

According to Matthew Fisher, chairman of the Software Industry Research Board, the number of companies fined by Trading Standards remains relatively small. In all but the most severe cases, software vendors will attempt to reach an agreement with companies that are under-licensed or breaking the terms of their licences.

There will usually be penalties, agreed on a case by case basis with companies, for putting li-cences in order. Although software vendors are reluctant to disclose the amounts of any penalties, they are likely to be significantly more than the cost of the original licences.

Avoiding penalties for honest mistakes, rather than deliberate piracy, or indeed avoiding paying for too many licences, is made more difficult by the number of licensing schemes operated by the main software vendors, and the frequent pace of change. The picture is made more confusing still by the growth in virtual environments, and the use of portable devices and so-called ‘roaming rights’.

“All of the major software vendors, including Microsoft, IBM, Oracle and others, have fairly com-plex licensing policies, with no consistent software licensing model followed across the board,” explains Patrick Gunn, EMEA sales director at Flexera Software, a vendor of licence management tools. “Their software licence rules and programs also tend to be dynamic and change on a regular basis. For instance, Microsoft publishes quarterly updates to its Product Use Rights Guide and each edition is more than 120 pages long.”

Some of these changes are designed specifically to help smaller businesses meet the needs of a changing business environment. According to Sam Bramwell, UK licensing and SAM marketing lead at Microsoft, licence features such as Roaming Rights makes it easier for a company’s employees to use a Microsoft application, such as Office, on a third-party device such as in a hotel business centre, or at a client’s site, albeit with some restrictions. But Bramwell concedes that licensing is still not well understood. “This year, we will commence a range of online activities targeted at SMBs to help them learn and understand and get more from their licensing,” she says. “We rely heavily on our partners to work with our customers, and we work with our partner ecosystem to provide them with the right know-ledge and skills to support our customers.”

The Case for Outside Help

For resellers and consultants, not only is there an opportunity to build a business around licensing services but there is almost a duty to help SME customers find their way through the licensing maze through practical advice.

If businesses fail to renew volume licensing or maintenance agreements on time, not only could they lose access to support, they may face renewals at a higher fee. For software that is being paid for on a subscription basis, a failure to renew means that legally, the software is unlicensed.

Few small businesses, though, can afford to invest in the skills and the specialist asset man-agement tools that make software licensing easier. If you invest in such tools, you can work with customers to ensure that they have the most effective combination of licensed software for their specific business needs. Microsoft’s new InTune management service includes licence management tools.

“Resellers should be directing businesses to the right licence programmes for their specific needs,” says Flexera’s Gunn. “Enabling customers to secure the best software licensing programme for their requirements will help businesses significantly reduce on-going IT costs. In addition, resellers should assist in managing their customers’ software licences. They are the middle-men between the customer and the software vendor, and must take on the role of trusted advisor when it comes to managing software licences.”


Microsoft volume licensing basics:

Microsoft Select Plus:

Microsoft Open options for small and mid-sized companies:

Microsoft Software Assurance information for partners:

Microsoft video comparing license types:

Microsoft video on licensing MCP accreditation:

Federation Against Software Theft guidance for resellers:

Understanding Microsoft licensing

Microsoft has a confusingly wide range of licensing options, ranging from a fully packaged product or FPP through to enterprise agreements for the largest companies.

Schemes such as Select Plus, targeted at businesses with at least 250 users, allow businesses to sign up to an organisation-wide agreement, but without a fixed, up-front commitment to purchase a given number of licences. As the business buys more seats, the discount increases in real time. An Open Value Subscription, on the other hand, allows companies to pay for software on a subscription basis. Schemes such as Select Plus and Select can be combined with Microsoft’s Software Assurance, for extra protection, but Software Assurance can also be used by smaller businesses, creating what is, in effect, a semi-subscription system. Used correctly, Software Assurance provides better value than FPPs or small multi-user packs and paid-for upgrades.

“Wherever possible, we advise SMBs to look at Software Assurance as the basis for their Micro-soft agreement – and to then see if they can talk to their supplier, which is generally a VAR, to get the best possible deal based on usage profiles,” says Quocirca’s Longbottom.

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