Renewing a software contract with a compliance issue hanging over you is not fun. Software vendors know this. A trap, I call the trojan horse, is a simple trick software vendors deploy to grow their software usage in your organisation, and hit you with a shock compliance issue at contract renewal time.
This trick goes something like this…
At the previous renewal the software vendor gave you some additional products to test for free, or threw in some add-ons to existing products to sweeten the deal.
When multi-year contracts are being inked and large POs are being cut, these “gifts” pass unnoticed in the spirit of the deal. The software vendor is, after all, in the business of promoting software. But woe betide those that don’t document this clearly in the agreement and then monitor the usage of these “freebie” products over the life of the contract.
What tends to happen of course is that the technical teams grow accustomed to having these software products. The products proliferate, they get embedded within the environment and become indispensable. Perhaps because they are “free”, no one takes them into account when hardware changes and upgraded licences have to be purchased. Or perhaps it is assumed that the software vendor knows about the usage of these products, so if a licence payment were expected, then the vendor would say so, right?
Every time I have seen this trap set, it has been premeditated and thoroughly effective.
In one particular instance, the procurement department was under pressure to reduce the price of a costly renewal of mainframe software. During the preparations for this negotiation, as we were gathering cost reduction arguments and preparing a threat to migrate to another set of products, the vendor began hinting that a number of the products which we thought were licensed on an LPAR basis, should have been licensed for the entire CPU. The cost of this full CPU licence, with all the back-maintenance payments, was more than the annual renewal fee on the entire contract!
The business unit was outraged. These products had been included free of charge on a trail basis at the last renewal for use on one LPAR, but no one had noticed that they had been included in the list of all products without any mention of the particular circumstances relating to the trial.
This compliance issue dominated the rest of the negotiations and made it extremely difficult to put pressure on the software vendor to reduce the overall cost of the agreement. In fact, this situation virtually guaranteed that costs would increase.
Software vendors will argue that if their IP is being used without a proper licence, then it is only right that the customer should pay for the actual usage. I agree. It is the underhand methods of introducing such software I have an issue with.
In order to illustrate just how underhand this practice is, let’s compare this to the automobile market. Imagine your fleet manager tells you that your company car is at the end of its lease and that you should make an appointment with the company’s preferred car dealer to select a new car on a three year lease.
You do so, but when you collect your shiny new car from the garage it has leather seats, an upgraded stereo system, panoramic glass sunroof, etc, etc. None of these expensive options were requested or included in the paperwork, but, with a nod and a wink, the garage salesman tells you that your company is a valued customer, and that if you don’t like the additional options then you can always bring the car back and get the model you actually ordered.
Who is at fault here? Is it the employee who does not call into question her “free” upgrade, or the car salesman who foisted it on her?
Of course, this is unlikely in the auto-market as leather seats and panoramic sunroofs have a production cost. However, in the software market, where the code is already written and where there is no cost to provide a copy of that code, this method of deploying software is extremely tempting to the software vendor.
To continue with our car analogy… at what point in the three-year lease would it be in the interests of the garage to draw attention to this situation? Clearly, the longer it goes on the less likely anything will be done by the employee or the fleet manager to rectify the situation. Better to wait until the car comes to the end of its three-year lease and then announce a significant back-payment for the additional cost of the lease over the preceding three years.
This is exactly what software vendors do. I have seen this first-hand, and heard about it from peers, too many times now to brush this away as random occurrence. If there is a little book of sneaky software sales tricks out there, then I am fairly sure that this one is in there.
So how do you counter such practices? Being aware of the risk means that you can guard against it. Having an effective SAM team that monitors software usage against entitlements would be a good way of guarding against such practices, as would educating your technical teams that there is no such thing as a free lunch. At a minimum, be wary of free gifts at the end of a software negotiation. They may come back to bite you at the next renewal.
Image credit: “Horse. Possibly Trojan!” by Tama Leaver, Creative Commons, Flickr.com