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Leverage on the secondary software market

6 minutes
Leverage on the secondary software market

Eight years ago, the court of justice of the European Union declared trade in used computer programs to be legitimate. All the key principles of this judgement have been summarized into this excellent post edited by Softcorner.

In parallel, third-party maintenance (TPM) services providers have launched attractive offerings based on pure corrective maintenance and support (remember that behind the “maintenance” word, software vendors include both corrective maintenance and upgrade rights to deploy new releases, and the latter can only be delivered by the official software vendor). Very often, the staff of these TPM providers are former software engineers from the publisher that they provide third party maintenance on: they know the products, and they know how to fix them.

That said, what is the real situation in 2020, and is the secondary software market a real alternative?

You must consider four factors before a wide deployment of secondary software in your organization:

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•    Maintenance lock-in mechanisms: Check whether your software publisher has tied you into a contractual scheme. For example, Microsoft’s Server and Cloud Enrollment contracts and Enterprise Agreement contracts include an “enterprise” perimeter that can sometimes force customers to license all servers through that contractual vehicle (including Software Assurance). For Oracle, we can talk about the matching service-level clause, which may result in an “all or nothing” decision. It is important to know where you stand to anticipate the next step, and make sure to remove these barriers during your next negotiation; this will give you the potential for much higher savings than simple Unit Price negotiation.

•    SW Lifecycle & SW Policy: If you are an early adopter, and you take the latest releases a couple of months after they become available, the secondary software market is not for you. At the opposite extreme, if you find that 80% of your data center footprint is running a N-3 or N-4 version of the product, keep in mind that 3 to 5 years at most of maintenance fees equals the cost of the license. Concretely, if you run 2012 R2 databases with SA, that means that you bought the licenses in March 2014 at the latest… and you have paid the maintenance for the past 6+ years at least… which is twice the price of the license.

•    Market liquidity: We find more and more second-hand licenses, in large quantity. Yet, a market requires an agreement between sellers and buyers. That explains why, for a long time, only “easy understanding” license assets have been sold and bought into this market: mainly desktop licenses, Office being the best example. But things have changed, and we can now find server licenses, in various metrics, Client Access Licenses, etc. Keep in mind that you may not be able to buy or sell licenses from Tier 2 or Tier 3 SW publishers; but for key players like Microsoft, Oracle, IBM, SAP, VMWare, and Autodesk, the market is open.
•    SW Publisher distancing: Get prepared not to be on the best terms with your SW publisher, and don’t try to sell the “partnership benefits” during your next negotiation. You may end up with an audit, which implies that you need to be compliant prior to moving to the secondary software market (or possibly use second-hand licenses to get back to compliance… but I am not supposed to write this!)
OK, let’s have concrete examples now.

For Microsoft, second-hand licenses are very useful:

•    Just to use the most up to date version, without SA? What is the difference between a second-hand Office 2019 and Office 2019 sold by Microsoft? Well, 150€ per device. Nothing more to say!
•    To license Microsoft server products in versions N-1 / N-2 / N-3 / N-4 environments, you may pay 10 to 20% more if you stick to a “flexible contract” on some products (e.g. Select+ versus E.A.), but you will save much more money overall.
•    Because of enhanced maintenance lock-in mechanisms decided by Microsoft when you go to Azure (that so-called “Listed Provider” announcement that prevents customers from using “new licenses” bought after Oct, 1st 2019 into the cloud, if such licenses are not maintained)
•    You still own SQL Server+CAL licenses, but you hesitate before using them, because it is too difficult to count who accesses what, and to make sure you have enough CALs? Well, a SQL Server CAL was much too expensive when you bought them, that is why only a small share of your users own a CAL. With secondary software, you may reconsider this, since you can now buy second-hand CALs for a cheap price… and possibly cover your entire data center with your former Server+CAL licenses (unless you have not noticed yet, the switch to the 2-core metrics has not reduced your spent!)
•    And more interesting moves to consider!!

For Oracle: 

•    With the Matching Service Level Clause, and re-pricing policy, it is difficult with Oracle to be halfway across a fast-flowing river. 
•    But you can easily distinguish the different type of licenses you own (between Tech portfolio and Application) and drop your maintenance on one part of the licenses (e.g. Tech), and buy third party maintenance services on all your databases. Should Oracle be unhappy with this, you are free to sign a new contract with them in one or two years and negotiate the “Entity” clause so that two entities can live their own life without having to make the exact same choices in terms of maintenance service.
•    Why not consider the purchase of NUP licenses as well if you want to divide by two your license consumption, even with secondary SW licenses? 

And same moves apply to other vendors. 
Is it a price worth paying?
YES, the numbers are really impressive.

And what’s the connection with

With you can easily check whether you meet the four conditions mentioned above and build a real SAM strategy with secondary software as a strong and sustainable lever for cost control. 

• embeds by default all licensing rules and contract dependencies. Should you be stuck into a lock-in mechanism, you will immediately see this with
• provides you with immediate insights on your footprint. It is easy to determine your SW obsolescence at a single glance. 
• helps you determine what is buyable, what is not. Everything is available on our platform, and our consultants are here to guide you to key stakeholders if needed. 
• is the most accurate SAM calculation platform in the market. It provides you with true results and enables you to determine your audit risk. Moreover, is the only SAM platform that lets you choose which type of licenses you want to consider buying in case of shortage. You can evaluate in a few clicks whether it is better to sort out a non-compliance via the official primary channel, or via second-hand licenses. 

I guess you have noticed: we strongly approve the inclusion of secondary software in your SAM strategy. So, let’s do it now!

By Damien Juillard, July 5, 2020

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