Featured Article from Software Licensing

A British court recently ruled that Diageo, a multinational provider of alcoholic beverages, owes SAP (News - Alert) UK more than $67 million due to software licensing confusion. It’s a nice sized chunk of change, even for a large enterprise, and has sparked fear and dismay for other companies using SAP’s ERP systems. For its part, Diageo was in the wrong for letting 5,800 users access SAP software indirectly, in violation of its licensing agreement.

The high-profile case raises some interesting points for SAP customers, for sure, but also for software producers. According to Flexera Software, a company that provides software monetization and optimization solutions and services, software companies would benefit from redesigning their licensing programs to make terms more transparent and understandable to users.

In the case of Diageo, they were responsible for creating users and providing them with a license type, per SAP’s licensing system. There are a variety of different license types available, at different price points, based on what users can do and access through the software. Diageo’s users were accessing SAP through a third-party application and therefore without the proper licensing, which spurned SAP to ultimately claim millions of dollars in license fees for those users.

According to Flexera, many SAP customers are unaware of the license requirements and risks of access through third-party apps. And while customers can certainly take steps to mitigate risk and ensure compliance, companies like SAP can do their part by being reasonable and transparent when it comes to defining license metrics and price points. Policies should be easy to understand, and the process of remaining compliant should be simple and as automated as possible. Software companies can also track license consumption and provide usage metrics to their customers, giving them a chance to remediate in the case of non-compliance before courts and settlements enter the picture.

Another way software companies can step up to the plate is by determining the correct pricing model for usage and license arrangements. “There seems to be an acceptance problem with paying for indirect access by the user,” wrote Flexera in a recent blog post about the benefits of restructuring licensing programs. “In addition some SAP customers struggle with users that consume an expensive license (direct or indirect) but hardly access the system. There is a similar “shelf-ware” issue with many SaaS (News - Alert) applications today. This concept leaves the burden with the customer who will have to work continuously to find inactive users, duplicates or those that are classified incorrectly.”

Software companies ultimately need to find a monetization model that works for them as well as their customers to ensure everyone is gleaning the most value out of the relationship. By determining which metrics and options should be included within the licensing program, as well as the best way to enforce compliance while encouraging automation, companies can go a long way toward ensuring their customers are in compliance and keeping them happy.