Buying software in 2015: how has the landscape changed? ANDREW JOINT JEREMY HARRIS EDWIN BAKER 28 APRIL 2015

Transcription

1 Buying software in 2015: how has the landscape changed? ANDREW JOINT JEREMY HARRIS EDWIN BAKER 28 APRIL 2015

2 Agenda How has software and its procurement changed? The impact of: Cloud SIAM Agile OSS The changing nature of software disputes Conclusion Q&A _2

3 How has software and its procurement changed?

4 What has changed? We live in interesting times The relatively juvenile life of IT has seen such times of change before There are numerous different lessons that these events can teach us but there is a common lesson which can be applied to all: Often a change requires an evolution in thinking and approach but recognising where a revolution is needed is vital _4

5 General changes relevant to software procurement? Speed of procurement Incremental delivery Multi-vendor approach Reduction in customer leverage Employee driven requirements Mobile _5

6 Specific changes relevant to software procurement? Agile OSS Cloud SIAM Disputes s/w usage lifecycle Development Deployment Run _6

7 The impact of: Agile, OSS, Cloud and SIAM

8 The impact of agile on software procurement Agile vs Waterfall what's the difference? Becoming very popular in software development, also gaining traction in systems integration Outcome based requirements can result in patchwork combination of bespoke software, supplier licensed software and third party licensed software Scenario: Customer wants to deploy enhancements to its e-commerce platform. Customer is not entirely sure on its exact requirements. _8

9 The impact of agile on software procurement Issue: Licensing the unknown Typical software licence: Does this work for agile? _9

10 The impact of agile on software procurement Agile approach means: Requirements not fixed and outcome based/technology neutral Software to be used therefore not fixed (usually) Software chosen by team/scrum from an efficiency perspective patchwork of licences will change with project Third party software selected on the fly Traditional single licence unlikely to work for agile 3 tier approach needed _10

11 The impact of agile on software procurement Despite these issues, the single licence approach is often a starting point Supplier s problem? Not necessarily in customer s best interest can erode flexibility, speed and price Post contract licence governance essential for agile project previously pre-contract _11

12 The impact of OSS on software procurement What is OSS? Unlike commercially licensed software, OSS is licensed: without charge with source code access modification rights Sub-licence/distribution rights + internet, economic downturn, faster deployment = popular! _12

13 The impact of OSS on software procurement Scenario: 70% of a Customer s system requirements can be satisfied using OSS. Customer contracts with a Supplier to develop the final 30%, and deploy the solution Traditional software licence limited use, no source code, contractual warranties, contractual indemnities. OSS licences few limitations on use, full source code BUT no contractual warranties, contractual indemnities. _13

14 The impact of OSS on software procurement _14

15 The impact of OSS on software procurement _15

16 The impact of OSS on software procurement OSS licences are a complete reversal to the usual risk profile Regularly a disconnect between Customer and Suppliers who should take the risk? All or nothing approach is likely unacceptable to customers and suppliers alike often the starting point though!! Middle ground is a hybrid licence that accommodates the traditional approach, while carving OSS out of the general rules. However, NB copyleft OSS Net result is again a patchwork of licences and related terms. _16

17 The impact of the cloud on software procurement IaaS The cloud = the internet Infrastructure as a Service = IaaS Remote access to configured hardware Scenario: IaaS allows a customer to host software on an IaaS solution (e.g. EC2). The software was previously hosted locally at the Customer s offices. _17

18 The impact of the cloud on software procurement IaaS (2) Issue 1: Traditional Software licences, often: Prohibit providing/sub-licensing software to third parties Limit use outside the Customer s place of business/an identified address Limit use outside an identified country Require physical access to hosted equipment for supplier audits _18

19 The impact of the cloud on software procurement IaaS (3) Issue 2: Licence payment mechanism may not work: Some software licences calculate fees by reference to use against physical processor cores. Supplier may have different licence/pricing structure for IaaS use. PAYG not always best option _19

20 The impact of the cloud on software procurement SaaS (1) What is SaaS? Scenario: Customer/Supplier wants to redeploy their current locally hosted software in a SaaS model. Issue 1: Software licence doesn t fit the facts e.g. the customer doesn t get any code and the general split of responsibilities is wrong. _20

21 The impact of the cloud on software procurement SaaS (2) _21

22 The impact of the cloud on software procurement SaaS (3) Issue 2: Payment model for SaaS usually different. Can be very beneficial for both Supplier and Customer. PAYG has multiple benefits However, like most pay as you go models, moderate to heavy use may not be as efficient in the long term. _22

23 The impact of SIAM on software procurement Service integration and Management (SIAM) is the response to the move into multisupplier solution provision SIAM there to ensure that the different aspects of a solution (and their respective suppliers) work together Scenario: A customer is deploying a new IT system which: Builds on and integrates with existing legacy systems Uses a combination of locally hosted and cloud hosted software Involves a number of software vendors along with the in-house development team Will be rolled out implemented incrementally Is governed by multiple contract and licences _23

24 The impact of SIAM on software procurement Issues: How much will it cost The timetable impact Contracting for SIAM Impact of SIAM: Warranties Indemnities Relief _24

25 The changing nature of software disputes

26 Dispute resolution roadmap Audit Assessment of breach Dispute resolution obligations / tactics Assessment of quantum Settlement / renegotiation _26

27 Audit US trend of aggressive audits has hit the UK! What rights does the licensor have? Assess audit request in context of parameters of the audit clause in the licence - does it go too far? what servers, computers, systems can the licensor access when how quickly for how long what data can they access/take confidentiality Link to how you draft/negotiate audit clauses Transport for Greater Manchester v Thales Transport Security _27

28 Assessment of breach Licence terms sometimes complex/hard to track, so easy to fall foul of terms Do the audit findings go beyond what is permitted under the licence? need to look at what use is permitted how is use / user / usage is defined is the licence based on use by people, on computers, servers, virtualised servers, logins Does licence cover how the software is actually being deployed? changing technology and methods of software distribution/access has rendered some licensing terms obsolete Is any contractual interpretation required e.g. where contract is vague as to permitted methods of distribution _28

29 Dispute resolution Contractual escalation provisions discussion by project managers / client account managers negotiation by senior executives mediation arbitration or Court proceedings Ensure compliance with dispute resolution obligations. If not, risk claim getting struck out. Trends in dispute resolution mediation increasingly used and very effective for these disputes role of sales team can be important can things be resolved by the licensee committing to new products, maintenance terms etc? new / longer commercial deals, rather than damages settlement often achievable around quarter or year end _29

30 Damages how to assess quantum What causes of action? copyright infringement / breach of contract does it matter? injunction risk From what date should damages be calculated? date of negotiations / settlement date of breach / infringement date of original agreement Application of discounts bulk discounts or client discounts Licence types and use characterisations covered by existing licence? pricing for new methods of deployment _30

31 Conclusion Procurement of software has experienced a fundamental change now faster, incremental, multi-vendor more revolutionary than evolutionary Driven by both technology change and supplier landscape change Prime licence model becoming less common Change not bad can be cheaper, quicker and more flexible than previously, but devil is in the detail More risk is now with the Customer to manage the contract after the initial procurement procurement doesn t stop on signature Managing contract not just about risk management, increasing need for SIAM type coordination _31

32 Questions?

33 Contact us Andrew Joint Partner Jeremy Harris Partner Edwin Baker Senior Associate KEMP LITTLE Cheapside House 138 Cheapside London EC2V 6BJ TEL +44 (0) FAX +44 (0) kemplittle.com Kemp Little LLP is a limited liability partnership registered in England and Wales (registered number: OC300242) and is authorised and regulated by the Solicitors Regulation Authority. Its registered office is Cheapside House, 138 Cheapside, London EC2V 6BJ. A list of members is open to inspection at the registered office. _33