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.