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The emerging trade in second-hand Microsoft licences

David Mitchell, Software Practice Leader

Last week saw the beginning of trade in second-hand
licences for Microsoft software, by discount-licensing.com.
The licences that it provides are acquired from companies that
have become insolvent or that are downsizing. The cost of the
licences is quoted as typically 20-50% below the price
provided by existing Microsoft retailers.

This ruling opens up a whole set of potential issues but we
will highlight two of them.

Firstly, there is a positive side. It recognises that
software is an asset that organisations should value and
manage in the same way as they manage other major asset
classes. Until now, many organisations did not have a mature
way to manage their software assets, and this led many to
become non-compliant with their licensing terms. Hardware has
always been treated as an asset and managed accordingly, with
derivative markets around financing and asset-recovery
services emerging in recent times. This is an early sign that
software is beginning to follow the same trend.

Secondly, this is likely to cause an element of price
disruption in the Microsoft economy. There are already signs
that some Microsoft resellers are uncomfortable with the
offering from discount-licensing.com. However, we see the
potential for a new set of market opportunities around
second-hand software. Ambitious resellers are likely to see
the potential and find strategies to address the same market
space. It can be difficult to generate technical innovation
without the R&D budgets of the major corporations, but
commercial innovation is equally valuable - and should be
encouraged.

This is a further validation of the move towards licensing
and pricing research that Ovum began five months ago.

David Mitchell is the Software Practice Leader,
managing the Software@Ovum advisory services. He also leads
the consulting group that focuses on the software and IT
services
market.

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