/dqc/media/agency_attachments/3bO5lX4bneNNijz3HbB7.jpg)
Follow Us
the past few years, much has been spoken about SaaS, virtualization,
cloud and related concepts. However, most of the vendors or even the
distributors are not keen to state the legality and the contract
which makes these concepts work, both at the SOHO as well as the
enterprise level. The complexity of the End User License Agreement
(EULA) digitally signed between the vendor and the end-user (either a
single user, an enterprise or a CIO) undergoes at least 4 change of
hands; right from originating at the development lab to its final
destination in the workstation or a portable device. It is here that
the complexity of the EULA and the issues related to software
licenses arise.
IS A SOFTWARE LICENSE?
terms and opinions have been given to define software license. It
starts right from the source code to the final application and even
goes beyond interoperatibility and even migration and updation.
Often, for most of the available products, it is noticed that some
are updated freely, like Microsoft Windows, while some are charged.
While some of the vendors allow migration of the software without any
applicable monetary charges or the complex legal issues, others, like
the famed Microsoft Office or the Windows platform charges the user
for mere migration! All this accounts to a loose form of definition
about the license. On a simpler note, a software license is generally
termed as a legal instrument (usually by way of contract law)
governing the usage or redistribution of software. This arises from
the fact that all software, whether in the free domain, open source
domain or otherwise are copyright protected and the contractual con
fi dentiality by the instrument of law is a way of protecting the
digital copyright. Besi des, the EULA also highlights the fact of
usage of the same whereby some are coded open, while others give a
limited access to its codes and some others altogether prevent any
modifications, either to the source code or others.
“
of all sizes are increasingly getting frustrated with the procurement
complexities and time commitments normally associated with managing a
myriad of software licenses and renewals from numerous technology
vendors. Cost, complexity and change, all contribute to the software
licensing challenge faced by the customers. Limited resources,
maintenance, support, variations in terms and conditions, boxed
product, complex contracts, compliance fears and cost
constraints,however, have made software licensing an increasingly
challenging discipline for both procurement and IT departments,”
said Ajay Goel, MD, Symantec, India and Saarc.
COMPLEXITY OF DIFFERENCE: OPEN AND PROPRIETARY LICENSES DECODED
foremost phenomenon in software downloading online as well as the
purchases made or obtained from 'friends' is the key fact of open
licenses and the proprietary ones. Often, one notices the replacement
of Microsoft Office variants (both at home as well as office) with
the fabled Open Office software whereby, no or minimal monetary cost
is involved for installation. Although major vendors would tend to
dispute about the reliability of the technicalities of Open Office
and open software, the popularity of these 'Open terms and
conditions' can nevertheless be undermined. The same is the case
with platforms like Apple Macintosh, Microsoft and Linux/Unix. “Both
(open and proprietary) types are copyright licenses for software.
While open-source license allows everyone to review and modify the
source code for his own customization, the proprietary software is
licensed under exclusive legal right of the copyright holder which
means that user can use the software but not modify it or distribute
it further,” said Pankaj Jain, director, ESS Distributions. Although
the key differentiator between open and proprietary licenses
seems to be the fact of source code modification, the factor 'better
if purchased' continues to echo in the minds of the consumers.
Besides, low priced products (often in the anti-virus, language tools
and graphic tools) still remain atop the minds of amateur artists and
end-users. Nevertheless, pirated versions and hacked editions
continue to rule the single license market.
LICENSING AND SHAREWARE
the realm of the open or 'free' software, the issue of
multi-licensing comes into consideration. Although
much is not heard about it these days (a long journey from the
1980s), the fact of multiple licenses still continues to influence
the business models in a major way. Multi-licensing is commonly done
to support free software business models in a known commercial
environment. In this scenario, a 'copyleft' free
software/open-source license is encoded requiring any derived work to
be released under the same license. The copyright holder of the
software then typically provides the free version of the software at
little or no cost, and profits by selling proprietary licenses to
commercial operations looking to incorporate the software into their
own business. This model can be compared to shareware. Examples under
this category include MySQL AB's database, Asterisk, Oracle Corpora
tion's Berkeley DB, ZeroC's Ice, and Qt Software's Qt
development toolkit. Since in most cases, only the copyright holder
can change the licensing terms of a software, multi- icensing is
mostly used by companies that completely own the software which they
are licensing. Confusion may arise when a person outside the company
creates additional source code, using the less restrictive license.
Because the company with the official code is not the copyright
holder of the additional code, they may not legally include this new
work in its more restrictively licensed version.
RISING ISSUES
terms and applicability of software licensing are so vast and complex
that most of the major software vendors tend to avoid this complexity
altogether or evade speaking over licensing terms and agreements in
the open. This case has been pertinent to Microsoft as well as Oracle
who totally evaded issues related to licensing. “With the advent of
ever evolving technologies today, software plays a critical role in
business. Traditional software licensing models are under pressure as
they do not satisfy the changing business needs of today's
enterprise,” said Goel. “For enterprises that depend on software
to maintain a marketshare and secure its confidential data from being
breached, the software licensing model can strongly influence the
RoI. However, selecting a model can be overwhelming, involving
considerations from total licenses purchased to the resources
available to install and set up licensing systems. Given the recent
evolution of software licensing models, enterprises are finding it
increasingly important to keep abreast of what is available and to
understand how particular models are advantageous or detrimental
matches,” added Goel.
to the business aspect of licensing wherein the channel players come
into play, the factor of low profitability and margins echo
throughout the country. “We used to focus on software licensing.
But for the last 2 years, we are not at all focusing on it as it is
no longer lucrative with margins as low as 3%. Stocking products for
a long time with such a low margin is indeed unwieldy,” said Bimal
Raj of Allied Digital. Further, the issue of double taxation
continues to plague the scenario with Infotech Software Dealers
Association (ISODA) repeatedly taking it up with the Government of
India, even going to the extent of challenging the government's
authority over taxation. “The biggest problem for partners dealing
with software licenses is the fact that the central government fails
to differentiate between a software developer/researcher and a
trader. This results in enormous TDS in the gross margin. Whereas the
software developers pay the TDS at 50% rate over gross margin, the
traders, instead of paying 20% TDS over gross margin have to pay 50%
which is atrocious,” complained Alok Gupta of Softmart. Although
the factor of low profitability and
can be understood by the economic reason of the 'invisible hands'
ie, demand and supply, compliance issues have also been brought up by
the SPs unanimously. “Every vendor or a technology company has
different ways of interpreting its licensing policies and this
invariably also causes misinterpretation and misunderstanding by the
customers as well as the partners. This leads to noncompliance,
inappropriate usage of licenses and IP violation,” said Mohan Babu,
associate VP, Choice Solutions. In this context, it needs to be
highlighted that Microsoft makes a distinction between the term
'version' and 'edition' when referring to product licenses.
The term 'edition' means different functional offerings within a
product family that are usually released at the same time. The term
'version' refers to different generations of a product family.
Downgrade rights between the current generation, the prior generation
and the generation prior to that are limited to the same functional
editions within each version. However, these two terms are used by
different vendors in different contexts often leading to puzzle the
end-user. “Inflexibility of not being able to move from a single
license to multi-licensing also poses huge problems and especially in
the context of smaller organizations or independent deve loper
community. Tracking and asset management of multi- licensing also
brings in its own set of problems,” added Babu.
factor can be portrayed from 3 different points; namely in the realm
of single user license (SUL), multi-user license (MUL) and volume
software license (VSL). The SULs are typically restricted to one PC
owned or controlled by the licensee. Sharing the software with other
individuals is violation of the license where it restricts one to
make the program available on a network or provide the program to
multiple users. In the MUL scenario, the license permits the user to
install the software or the program on specific numbers of computers,
namely in an organization in a specified location. It however
restricts one to share, transfer or sell it to any other third-party
user. The case, however, is just opposite for VSL where it is simple
and a cost-effective way to purchase multiple licenses for an
organization. This fact comes into play as the virtual world either
in an enterprise, home or small office is a combination of all these
three different kind of licenses. With the origin of online gaming
and anti-virus companies offering multiple protection plans for
different PCs, this differentiation becomes all the more prominent.
Further, the advent of managed software services (MSS) has led to
further complications. However, on inspection as well as on a
practical ground, it is very hard for enterprises as well as SMBs to
define their IT legacy. Independent solution vendors (ISVs) who build
either point in solutions or applications need to have the ability to
simulate their customer's deployment environment and test their
application. This poses huge challenges for these ISVs to license
software-be it open or proprietary. Both of these have their own
challenges.
“
source software do not have a particular author on whom these ISVs
can potentially rely or call for any technical or support related
issues. Needless to say it is time consuming. Proprietary software is
notionally expensive and not affordable. There isn't much scope for
these ISVs to quickly test their applications which potentially
discourages innovation and new generation solutions that could solve
business problems,” said Babu.
VIRTUAL AND SaaS CONNECTION
dubious and varied nature of software licensing is often blamed for
the poor adoption rate of virtualization and SaaS. MSS and
application integration has further led to complications in IT legacy
and policies. “Some licenses allow software use on a single
processor. Most software manufacturers and their licensing standards
have not yet caught up to the sheer flexibility that virtualization
and networking technologies have enabled today. There are a few
technology vendors who have started considering these scenarios and
have incorporated few flexibilities into their licensing programs.
They are Vmware and Microsoft,” opined Babu. As a fact from the
above statement, it appears that there is no single solution to
ensure adequate licensing in a virtual environment. Licensing terms
and conditions vary by software vendor, and not all software vendors
are equally amicable to licensing changes. “In my opinion, the
vendors are not themselves clear on the con cept of licensing in a
virtual environment. As virtualization induces a shared and virtual
mode of functioning, licenses need to be made in accordance,” said
Suresh Ramani of Techgyan. “As every vendor has a different EULA
and its terms vary, the customer gets confused easily and then blames
the SPs. Actually, the customers don't realize that it is the
vendors who are making the EULA and compliance tools and not us,”
added Ramani. However, these concepts like virtualiza tion, SaaS and
others are conti nuously floated by the major software and solution
vendors to garner more resources and add 'more space' in their
verticals, according to Gupta, these concepts are yet to take off in
India. “In my view, virtualization and SaaS are just keywords in
India. SMBs are not at all opting for it. In a country where less
than 1 crore people have access to internet, does these high- ounding
concepts really matter? It is true that the enterprises are indeed
opting for virtualization and SaaS and it is there that legacy and
compliance complexities arise,” stated Gupta
BOON OR BANE?
the software licensing scenario continues to echo the factors and
issues ranging from business to compliance to source code tweaks, the
future of software licensing seems to be status quo. The union
finance minister has declared the adoption of general goods and
service tax (GST) from April 2012 with an aim to bring in homogeneity
as well as price stability. However, concerning software licensing,
vendors as well as the channel players have a different take. GST
regime will have fundamental implications for businesses, including
software and distribution business, in a variety of ways. All vendors
operating in India expect GST to result in a simple, transparent and
easy tax structure, merging all levies on goods and services into one
GST. “At present, in the current regime of taxes, software vendors
are puzzled by the classification of software (package and customized
software) as goods or services. The vagueness in classification leads
to double taxation whenmany software companies were charged VAT as
well service tax on the value of software. After implementation of
GST regime, it should be clearer,” said Jain. “On the other hand,
as GST will impact all business processes since it replaces existing
indirect taxes. It will affect all business tran sactions carried out
by manufacturers, dealers, service providers, service receivers,
companies as they have to update various software solutions as well
as some business processes,” added Jain. On the similar note,
Ramani opined that the GST will definitely wipe out the issue of
double taxation, but after the implementation, bad debts could be
handled more effectively. However, he seemed unconvinced about the
effects on octroi stating that it might stay as well. On another
note, Gupta said that as the rate of GST may equate to that of the
tax rates compounded together (under the present scenario) which
might not bring in any dramatic change. However, pricing disparity is
a factor which has to be put to the test after the implementation of
GST.
MYTH OF LICENSE AND EULA CONCLUDED
stated earlier that no major vendor in India is keen to address the
issue of software licensing, either in the business sense or the
technical one, it is high time to discuss and decide over some of the
dubious aspects of software licensing. It seems that the term, taken
in a single coinage is not as dubious as it appears but it is the
EULA and the regional or global compliances which make it uncertain
further accelerated by the factor of the variants and the constant
flux in the technological world.