Whether you’re a lawyer drafting software sales license agreements or reviewing software license-in procurement, one definite trend that is growing is the gradual disappearance of the perpetual licence. Some of this is to due to the trend for “cloud computing” but this seems to be happening at both ends of the supplier spectrum from the traditional US giants of the software industry to even the smaller niche vendors.
Subscription based licensing has been around for a while (remember buzz words like ASP, SaaS, etc?) but has usually been offered as a dual pricing alternative for licensees who wanted to explore the option of lower annual operating costs rather than amortising the upfront software expense and weren’t particularly bothered with the comfort of licence continuity.
The typical drafting of: “…XYZ Software grants to Licensee a non-exclusive, non-transferable, perpetual, royalty free right to use the Software…” in many cases has now morphed into “…XYZ Software will provide the Services to the Customer…” So the traditional software license has merged with the maintenance/support agreement into a basic services plan contract.
The real questions start to emerge when annual software subscription costs creep into the dollar range that used to be budgeted for traditional one-off perpetual software licence costs.
While some of the traditional licensing negotiating issues still apply, the disappearance of the perpetual licence means transitioning out provisions need a lot more thought. While it might be relatively easy these days to switch your mobile phone plan to another telco or change your electricity supply to another energy company, moving your business software functionality and data to another software vendor is not as seamless. Even if your corporate data is resident in-house or hosted in the vendor’s “cloud” servers, making sure you have access to your latest and complete dataset without being a commercial hostage to the vendor is key.
I’ll write about some of the other ins and outs of cloud computing models in a separate post shortly…
