Software Licensing Practices Easing for Licensees?

July 16th, 2009 at 03:12pm TPI

Hack Heyward, Director, TPI, Inc.

Over the past several years, large software providers have not shown much flexibility in their negotiations, particularly with renewals that don’t necessarily represent incremental revenue and situations where the licensee has trouble demonstrating real competitive leverage.  In fact, anecdotal evidence suggests that the current economic climate may actually be hardening large, public software providers’ stances in areas such as maintenance fees and licensee flexibility.

Certainly there has been a recent upswing in the time and attention that corporate licensees give to validating license counts and negotiating renewals. This puts pressure on large software providers and has therefore created a particularly difficult climate for licensees attempting to improve business terms in existing agreements.

The pendulum may be swinging toward licensees in at least one area, however.  Recently a Texas court struck down as “illusory” and unenforceable a provision that allowed licensors to arbitrarily change the terms of service by creating a binding reference to documents located on the licensors’ website (See: Are your Web site’s terms of service illusory and unenforceable?, Network World) . While we have found that software providers remain publicly firm on this point, privately there seems to be some movement.

Software licensors that routinely insist on a right to arbitrarily modify standard terms for their existing customers will find themselves in a weakened position.  The implications of this for the market; however, are positive and could result in some potential software buying decisions breaking loose as the perception of business risks to the licensee are lessened. We certainly believe that this type of movement will ultimately be helpful to the overall business environment.

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Entry Filed under: General