The status of SAM: the vision of lawyer Bart van Reeken
Software is becoming increasingly important to organizations and therefore managing software is as well. How do organizations cope with this? And how is software asset management (SAM) perceived by people with different job roles and responsibilities? To map out where SAM stands in 2018, over the next few months professionals from the field will take turns discussing this topic. In this article: Bart van Reeken, partner and lawyer at Van Doorne.
Bart, what can you tell us about your role and your work?
I have been working in the legal profession for more than thirty years, of which the last twenty years in IT and outsourcing. A year ago, I moved from De Brauw Blackstone Westbroek to Van Doorne. Currently, I am involved in the negotiation and drafting of outsourcing agreements, software development agreements, software licenses, implementation agreements and SaaS agreements, as well as dealing with IT-related disputes. My clients are mainly multinationals, financial institutions and large government organizations. Oracle and SAP are among the software suppliers I encounter most often, but I’ve also worked on major projects with Infor and Microsoft in recent years.
Based on your extensive legal experience in IT, what conclusion can you draw about software compliance and the relationship between software vendors and their customers?
In general software compliance becomes more important when the economy is stagnant – that has become clear to me over the past twenty years. In times of economic growth most companies purchase additional licenses. When growth slows down, they buy significantly less. Obviously, this does not suit the software vendors, as they are always looking for more revenue. This triggers the software vendors to audit their customers for additional sales opportunities. This also happened during the last economic crisis.
Now that the economy has started growing again, I do not expect the number of audits to drop immediately: why would you stop when the audit department is running smoothly? This attitude of software vendors is completely logical given the market forces in the licensing field. Initially, a supplier must do its best to win an account and several suppliers may be played off against each other in the process. After a supplier wins the customer deal, usually by offering hefty discounts, it takes a while to make itself indispensable. Then, it is the software vendor’s turn to be in control. Combined with the ever-present need to maximize profit, it is almost inevitable that the vendor exploits the vendor lock-in and makes use of the situation. A discount of 50% still sounds like a good deal, but if the initial discount was 75%, it represents a 100% price increase. Ending that discount represents a further 100% increase (and 300% compared to the initial price).
Does the arrival of SaaS change the way software vendors work?
I don’t expect that. I have no indication that suppliers such as Oracle and SAP will behave differently with their SaaS products. What you see now is that they will do just about everything to persuade their customers to move to the cloud. They are accommodating, give high discounts and really try to make their customers happy. But in a few years, once that lock-in becomes a fact, I expect that they will take advantage of their position again. When customers have become dependent again, I expect price increases and policy changes to follow quickly. Maybe when the current SaaS contracts expire, or even earlier, when organizations need to purchase additional SaaS licenses, they will find out that the initial discount was a one-off deal. Of course you can have an opinion on that, but it is important that organizations know that this is a possibility and that they are well-prepared.
Do these developments also mean that large organizations are more aware of software compliance and software asset management?
Yes, I definitely see professionalization in this field, especially in large organizations. Entire departments have been set up to deal with SAM – that was not the case five to ten years ago. Especially organizations that have experienced how a software vendor can change from a cute kitten into a mouse killer, realize that it is important that they are in control themselves. They now make sure that they are better prepared for negotiation new contracts and then monitoring, managing their compliance. ‘Price holds’, whereby you agree that you can continue to purchase products for the next three years against the same discount as at the start, are much more common than five years ago. It is always smart to procure price holds, both in licenses for deployment on premise and in SaaS contracts.
What changes in terms of software compliance do you expect in the coming years?
I think the discussions about licensing metrics will become even more complicated in the coming years, especially because more and more applications are connected and share data. Before connecting applications, you need to know exactly which supplier conditions you’ll need to meet to avoid unexpected costs. And how reasonable are these conditions? I expect that many discussions between software vendors and customers will revolve around this topic.