experience of licensees notap presentation

EXPERIENCE OF LICENSEES WITH LICENSORS, LOCAL VENDORS & SUPPORT SERVICES:Presented at the NOTAP ICT Workshop 2011 By:

Rasheed Adegoke

Content

o Quick Definitionso Understanding the Software business modelso Key issues in software licensing in Nigeria: a Licensee perspectiveo A deeper look at licensing…o Q&A

Experience of software licensee with licensors…

Quick definitions

Understandingsoftware and industry players: quick definition…

SOFTWARE Software is the non-physical component of a Computer System that

enables the proper functioning of the physical components Software comprises Systems software (Operating system,

Database, Schedulers, etc), Business Applications (Core banking, HRMS, etc) and Productivity Software (E-mail, MS Word, Excel, etc)

PLAYERS/ACTORS: OEM/ISV: Original Equipment Manufacturer/ Independent

Software Vendor is the intellectual property owner on a software product

Reseller Partner: partner with sales responsibility within a territory Integrator (SI) Partner: partner with sales and/or systems

integration responsibility within a territory


Understanding the software

business models

Software business modelThe ISV-Reseller model

Holds Software IP

Has responsibility for software implementation & support

OEM/ISVManages customer relationship

Responsible for sales in local market

Local ResellerLicense software for own use

Directly contracts with OEM/ISV

Customer/ Licensee

Maintenance fees (recurrent)

SW Licence revenue

SW Licence fees

ResellSoftware

SupplySoftware

Provide maintenance & support

This is one of the two predominant arrangements between Nigerian resellers or local partners and their counterpart Independent Software Vendors or Licensors:

Software business modelThe ISV-Integrator model

Holds Software IP

Has responsibility for software implementation & 3rd-line support

OEM/ISV Manages relationship and support/deliver implementation services

Responsible for sales & 2nd-line support in local market

Integrator/ ResellerLicense software for own use

Contracts jointly with ISV (license) and local vendor for support

Customer/ Licensee

Maintenance revenue (recurrent)

SW Licence revenue

SW Licence fees

Sell SW & Services

SupplySoftware

Provide maintenance & support (3rd Level)

Maintenance Fees (recurrent)

Provide Level-2 support

This is second variant of the two predominant arrangements between Nigerian resellers/local partners and their counterpart ISVs or Licensors:

Software business modelThe Revenue-share model

Holds Software IP

Has responsibility for software updates and improvements

OEM/ISV Re-packages or embeds solution within own service or product offering/bundle

Responsible for sales, implementation & support

Revenue share PartnerLicense software for own use

Contracts jointly with ISV (license) and local vendor for support

Customer/ Licensee

Maintenance revenue (recurrent)

SW Licence revenue

SW Revenue share

Sell SW & Services

SupplySoftware

Ongoing SW license renewal (recurrent)

Provide all services

Though not commonly used, this model could work in the case of a Nigerian ISV trying to bundle its product into a larger international software packages (e.g. Signature/ Mandate verification add-on to a core banking software or where the local vendor (revenue share partner) is bundling an ISV toolkit into it’s own solutions package:


Key issues in software

licensing in Nigeria…

Key issues in software licensinga licensee perspective…/1 Complex & Diverse licensing models

License agreements and pricing models vary widely between software vendors even for the same class of business applications thereby sometime making it difficult to compare offerings especially on a total cost of ownership basis Local partner organisation’s capability

Poor transfer of skills/expertise to local partners thereby limiting the extent of support that can be received locally Poor investment by local partner organisation in the area of technical support & systems integrators in favour of more sales/marketing staff

Licensor’s commitment to local market Sometimes, licensors do not invest enough in the local market due to their perception of the opportunities available relative to their global operations

Key issues in software licensinga licensee perspective…/2 Legalese… License agreements could include “tricky clauses” which needs to be clarified at the onset of the contract. Such issues as dispute resolution and the legal jurisdiction or applicable laws could become quite important in the event of a dispute. The golden rule is: “READ ALL PRINTS: fine & bold”…

Taxes and logistics costs Agreements that are not explicit on the responsibility for taxes (WHT, VAT, etc.) as well logistics costs such as travels, hotel accommodation, etc could leave room for disputes early in the contract especially mid-way through implementation


A deeper look at licensing & service pricing

Software license model:Commercial off-the-shelf software (COTS)

Total cost of ownership (COTS)

Acquisition

Special channel license

OEM-Bundled LicenseEducational/ ResearchNFR (Not-for-Resale)

End-user license

Perpetual

Named userConcurrent UserPer-ServerPer-Site

Enterprise or unlimited

SubscriptionOpen-sourceShareware & freewareOperations/ Maintenance

Annual maintenanceUpgrade/ Customisation

Software license model:Turnkey or Custom Software (TKS)

Total cost of ownership (TKS)

Acquisition

DevelopmentTime-based costing

Value-based costing

Customisation Time-based costing

Operations/ MaintenanceAnnual maintenance

Upgrade/ Customisation

Software license model:Software as a Service (SaaS)

Total cost of ownership (SaaS)

Setup/Sign-up

Operation/subscription

Per-user subscription

Time-based subscription

Transaction volume-based subscription

Software ServicesPricing models

Consulting/ Professional Services (fixed cost)Firm fixed-cost

Statement of Work with clear timelines

Early delivery bonus vs. Penalty on missed targets

Consulting/ Professional Services (variable cost)Per-hour billing (with ceiling price for project)

Statement of Work without firm timelines

Performance bonus & penalty

Managed/ Outsourced Services

Retention or engagement cost

Volume based pricing (e.g. per-transaction or per-employee)

Performance bonus & penalty

Software License & ServicesPricing Summary Sofware Price negotiation guide

Begin from the published Global Price List (GPL) or Retail Price List (RPL) of the Independent Software Vendor (ISV) Agree pricing model (per-user, per-site, enterprise, etc.) based on your specific needs and growth plans. Always explore more than one viable option (where possible) to make financial negotiation competitive Get discount related to usage categorisation (e.g. educational or government use discounts)

Don’t lose sight of services cost Services cost could be a significant part of the cost of owning and using a software product Negotiate all services cost upfront during the contract initiation rather than later


Questions & Answer