Cost Saving Alternatives to Buying new Software
According to a poll of economists recently conducted by Reuters, it would take two or more years for euro zone GDP to reach pre-COVID-19 levels. That means company revenues will remain moderate and cost cuts will need to go deep into budgets. There is one category that all companies have, but few consider when it comes to saving money: software.
Photo by Shutterstock/Markus Mainka
Software vendors and their resellers are continuously pushing clients to upgrade to the latest version. Better features, more collaboration, more efficiency, better security: these are the reasons usually invoked. But are the new features really worth the price? Is there staff training needed for operating them? At what cost?
Look at the history of Microsoft Windows releases, for example, and you notice that some were unpopular (ME, Vista), while others were so successful that vendors had a hard time replacing them with the new edition. Windows 7 was so successful that it would probably still be in use at many companies, had the company not shut down support for it in January this year.
So, it seems that there is nothing wrong with keeping software that is one or two versions old; what is more, this applies not only to operating systems, but also to office suites and other programs. The expenses of the cloud, as an alternative to the existing models, are high and expected to grow further.
Companies planning software deployments usually have two choices: buying so-called on-premise products or usage rights (often Microsoft products), or open source /free software.
Both have their pros and cons. For example, there are free of charge alternatives to MS Office suites (most popular are Libre Office and OpenOffice), but they are not able to fully display the document formatting of files created in MS Office word processors, spreadsheets or presentations.
Furthermore, third party products implemented in applications usually have a dependency on classic Microsoft products such as Word or Excel, or Access components which are not working with open source.
The Relicensed Alternative
There is a third alternative: relicensed software. These are usage rights that are no longer needed by the owner company because of scenarios like signed Microsoft agreement which fully covers the existing technical environment, centralization of server environments and/or movement to cloud too, but are still well ahead of the end of their support life cycle.
Relicense AG, which has a strong focus on Eastern Europe, deals in these usage rights from upgrading owners like ZF Friedrichshafen or Nifisk.
“We are transferring the usage rights to the next end clients, in our name. We act not as a broker, but as a trading company which is buying those assets in our own name and handle the sourcing/sales processes with our own experts, former employees of Microsoft, the biggest software resellers in Europe, software auditors and license managers,” explains Alfred Girr, Relicense AG’s director of sales for Eastern Europe.
“In Eastern Europe, the products are roughly six years in use and normally the support life cycle will end soon or has already ended so there is the need to upgrade the software. Microsoft is playing with that, increasing the pressure on the companies to go to cloud solutions, to sign cloud software agreements,” says Girr.
“The demand in Eastern Europe is huge and buyers are able to reach a 60-70% discount in comparison to the known price level by working with us. Even more important, next to the pricing impact and compliance to legal obligations, we can still offer on-premise products. The products we are able to offer still have a long support lifecycle: for example, MS Office 2016 Professional or 2019 Professional until 2025. The software vendor, Microsoft, is in this case obliged to offer security patches until the end of life cycle mentioned above,” he explains.
Naturally, the questions arises: what is the compromise when buying relicensed software? First, the buyer cannot upgrade to a new version of the software. Secondly, the licenses cover use “in the EU, based on the existing court decision, and in regions which did implement or adopt international usage rights in IP law, like Switzerland, but are not allowed for use in general worldwide,” Girr adds. South Africa, China, and the United States are not covered, for example.
When it comes to cutting costs with software, licensing enterprise systems may be an area worth checking. Briefly: software systems developed by SAP, Oracle, Microsoft and others have complex licensing agreements. One example: licenses are sometimes issued not per computer, or processor, but sometimes per cores of the processor, and with a multiplicator factor.
Sellers regularly perform audits at partner companies, and if the result shows that the users accessed features that were not licensed, the fine can result in a shocking amount. On the other hand, the company may be paying license fees for features that employees never use, which means unnecessary costs.
These issues can be handled through Software Asset Management (SAM). Sándor Zsoldos, CEO of Budapest-based IPR-Insights License Consulting explains how it works.
“We can reorganize the license structure set up 10-20 years ago at a company, assign the necessary license to the corresponding user, find the cheapest license for him or her. Thus we may find a lot of unused licenses in the company, which can be used for many goals, for example to sell on the second hand software market or exchange them for a new module.”
So, is it better to hire a SAM manager, or outsource this area? “There are many cases in which it is worth outsourcing, as we are talking about many products of many vendors. One or two employees will never be able to complete the tasks of a consulting firm with 35 specialists, each of them having extensive knowledge about a specific vendor,” Zsoldos says.
“So, yes, the administrative tasks are worth outsourcing. We can prepare decisions, offer the necessary information, but the CIO or the CEO has the responsibility to decide what and how he or she will buy; the decision is ultimately his or hers,” Zsoldos says.
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