On 4 Feb 97 at 22:20, James Wowchuk wrote:
> While much has been said in this thread about the pricing strategies
> benefits and drawbacks, one fundamental policy has not been questioned: Why
> is software licensed rather than sold?
Good question. I don't have the answer to this, but...
> That licensing though *does* inhibit a second-hand market for software is
> clear, but I'm not yet certain whether this is good or bad.
Actually, there is a second-hand market for software, including many
on the 3k. However, this is limited to the hardware it was licensed
for. If you sell you hardware, many licensing agreements are
transferable (some with a transfer fee) to the new hardware owner.
> As it is, once the license fee for software is made, there is no value left
> to the purchaser. Where I buy a new piece of equipment for my factory, the
> capital value is preserved: I've exchanged cash for equal value in
> equipment. But for software, the money is gone and there is no value showing
> up for the company. It is simply an expense.
Not in the U.S. In the U.S., software licenses can be captialized just
like the hardware. I believe it follows the same rules as any
hardware -- depends on the value and expected life.
> Second, I think it prevents critical measurement of the return on investment
> and actual contribution to productivity of some software. It is harder to
> convince others on the point of measuring the value of the software when the
> expense is done. I certainly can get others too interested in finding out
> why my horse came eighth after the race has been run. Now if only I could
> do something mid-race! :)
On the other hand, if you expense the software and capitalize the
hardware, you have an indirect measurement of ROI -- There's not too
many pieces of computer hardware that will have an ROI without
software:)
> As to whether intellectual property rights are better protected by license,
> I think we can see that Music CDs and VideoTapes are as reasonably well
> protected as software without complex agreements restricting what machines
> they may be run on or how many people are listening (providing it is not in
> a commercial environment however).
Just a question -- could the reason software is licensed and not sold
be because you don't have a tangible product? (as I said, I don't know
why it is licensed)
> Licensing can make it easier for suppliers to introduce new clauses with a
> yearly renewal which can be to their benefit. The reality as observed by my
> twenty years experience is that most business do *not* fully read license
> agreements, and of the few that do, the readers are either not sufficiently
> competent in law to comprehend the meaning of the clauses, or not
> technically competent to appreciate the application of the law to the
> business' computer operation. Even where both these needs are satisfied,
> the license has probably not been tested in court so its validity is
> questionable.
So, then my question would be if you 'purchased' the use of the product
(e.g., you don't have source code; you must use it on a specific piece
or type of hardware; etc.), how would this differ from a license?
> The decision of Microsoft to impose a 10 concurrent license limit to the
> TCP/IP service of NT Workstation OS in order to favour its NT Server OS
> (with its bundled software) despite both being identical operating systems
> is a clear example of exploitation of a market base (IMHO). [The details of
> this are more fully explained at the O'Reilly site http://www.ora.com]
Isn't this a two-level user license?
> So I like to consider what the software "product" world would be like if
> software was sold, say as Nintendo plug ins, or Dongles, rather than our
> software "license" world. If there was a used market for some software,
> then software may be capitalized rather than expensed, encouraging software
> use for the longer term: if its purchase was amortized over three years, you
> would certainly expect to get three years use out of it. If a new version
> was released every three months later you would question your supplier's
> reasons for not including this initially. The purchaser may be
In the PC word, I thought you could resell your license to someone
else. If you resell it, you don't have the right to use it any more.
Can I sell my license to MS Word 2.0 if there was a market and I
didn't already 'sell' it back to MS with my upgrade to 6.0?
> Needless to say, tier pricing would not be effective if the software is sold
> as a product. It comes at what ever price you can get for it, and it
would
> work on whatever system it was designed for. If you can get Chevy intake
> manifolds to work on a Ford engine, then so be it. You could get the
> situation where your software might break say if you moved from a PA7100
> chip to a PA8000, but so what? If there are other PA7100 chips about, then
> sell your version and buy a newer one, or take a dealer trade in.
Another interesting issue with software is that you don't buy a
'finished' product and typically (at least in the mini/mainframe
environment) you don't want a 'finished' product. I recall a
presentation where the CEO of a large application software company said
something about this. It went something like, "Software is the only
business where customers don't want to buy a finished product. If you
tell them, 'Here it is and it's complete -- no more enhancements.' they
won't buy. Can you imagine going to buy a shoe and it not having a
sole? 'The sole will be shipped with our 2.1 version.'" I remember
thinking how funny it is that we buy licenses for software that we
don't want to be finished. While we may argue whether as individuals we
want a finished product, emperical evidence shows that when a company
says 'Da Ta, we're done.' no one else wants to buy or license it.
> But I think it is interesting we as a community so readily accept
> 'licensing' for software when we wouldn't for other things.
Could it be a historical issue -- "We've always done it this way"?
Jim's brought up some really interesting issues that I've wondered
about myself. Thanks for making me think about it again, Jim.
LB
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