Software license types and definitions vary from one vendor to another. Failing to clarify what the license types are and what the definitions mean in your software contract can cost you money! Before you sign on the dotted line, always ensure you have clarified and understood what it is you are buying and make sure that license types and definitions are clearly stated in the software contract.

Software suppliers are adept at auditing users and finding businesses where their software is being used in breach of the license types or definitions in their contract; the net result is usually an unexpected and unbudgeted invoice arriving on your finance directors desk asking for payment for the actual software usage. If you don’t want to get caught out, then make sure you know what you’re signing when a software supplier presents you with a license contract. Look particularly at the number of users allowed, the type of users (ie, named, concurrent, employee, cpu, affiliate, professional, lite, etc etc), the geography of use (ie, on one site, across multiple sites, in subsidiaries, outside the UK, etc), and also clarify the definition for each license type (ie, what does ‘concurrent’, ‘cpu’, ‘lite’ etc actually mean?). Also check to see what happens if you were to outsource your IT function; does your software contract allow free and easy transfer of use to an external party?

A little time spent up-front prior to signing a contract can save you a lot of wasted time and money later!

Last week a new client of ours was asking about software license usage rights. Specifically they wanted to know what was the difference between a concurrent user and a named user. The simple answer is that there’s a lot of difference, including the price per user. The definitions of usage terms vary between suppliers and failing to get usage terms clarified can cost you money when the supplier finds you are ’under licensed’ after only a year or two. If you’re buying software then clarifying and agreeing usage rights should be a part of your negotiation strategy.

Confirm the numbers and types of users you have. Then discuss different licensing options with your software supplier. Find out which license type best suits your business. It’s not just your employees that might need licensing; do you plan to use external consultants or your outsourcing supplier to help implement the solution, will you be allowing your agents or customers web access to do self-service activities, etc etc. And note; you can mix and match usage types which will bring your sofware costs (and pro-rate annual support) down. 

And some licensing is based on servers/CPU’s; so make sure you clarify what happens if you decided to upgrade or change server type during the life of the software.

And find out where you can use the software; UK may be fine for most of your business, but what about that subsidiary abroad?

Software suppliers have developed an array of ways to catch you out. So as the saying goes: caveat emptor -  buyer beware.