Oracle had sued a used software license vendor and lost. The judges were clear: the exclusive right to distribute a copy of a licensed program runs out with the first sale. A press release from the Court of Justice of the European Communities adds: “The principle of the exhaustion of the distribution right applies not only when the copyright holder markets copies of his software on a medium – CD- ROMs or DVDs – but also when made available by downloading and streaming them from an Internet site.
Despite this verdict, companies are struggling to purchase used software licenses. Although, according to various used software vendors, you can save up to 70% compared to buying a new license. How to explain the reluctance? What should companies pay attention to when buying used software licenses? And are there enough licenses on the market?
We spoke to Michael Vilain, International Sales Director at Capefoxx, the Swiss company that sells used Microsoft licenses in all countries where the law allows it.
Despite the “official” guarantees, the market for second-hand licenses still seems to be struggling. Why is that?
“The market has even been declared dead on several occasions. Especially when Microsoft says it won’t release any more versions of Office. Then it might take three or four years before you can resell it as a second-hand license. Another topic is the cloud. If everything really comes from the cloud, then the business of second-hand licenses will die out quickly because we will no longer be able to buy a license. But we are still far from it. Despite digitization and the cloud, many customers do not want to move to the cloud and want an unlimited license. Therefore, there will continue to be a strong demand for used licenses over the next 5-7 years.
How do you estimate the market potential for used Microsoft licenses?
“Somewhere between 1 and 250 million euros. This is small compared to Microsoft’s total revenues in Europe, which should be around five billion euros. The reason this is no longer the case: Microsoft has a very strong and reliable reseller network. »
Is the market for second-hand licenses a global market?
“No, because it depends on the respective legislation. The decision of the European Court of Justice applies in the EU, so licenses can be exchanged anywhere in the EU. In Turkey or Switzerland, for example, used licenses can also be sold, but only in these countries. UK licenses can be traded within the EU if the licenses were purchased before Brexit. Licenses purchased after Brexit, on the other hand, can only be sold in Britain.
What about companies headquartered in Germany but with branches outside the EU? Can the licenses also be used in these branches?
“This is only possible within the EU. Unless a country allows the use of used licenses. We take a close look at the respective conditions, because there are pitfalls here. We receive requests from India or African countries. But often the law does not exist or the trade in licenses is prohibited, for example in the United States.
Despite the legal clarification from the Court of Justice of the EU, are there any risks for buyers of used licenses?
“You need to know where the licenses come from. Otherwise, you run the risk of buying unverified licenses, which will then be blocked. This is especially important for companies that are at risk of being controlled by Microsoft. If the licenses are not legal, they will be fined for using fake software.
“We recommend that you don’t just look at the price of a license. Office license keys for 5 euros are offered on the Internet, but it is not known where they come from and how often they may have been sold. In private, you might still be able to take the risk. If a license is blocked, some buy the next one for a few euros. But if you buy licenses for several thousand devices, you take a big financial and legal risk. The money is gone, and Microsoft may rightly be taking action against it.
How do they use Deloitte’s expertise?
“There is still a lot of legal uncertainty among companies about whether they are allowed to purchase second-hand licenses. Therefore, we work with Deloitte when clients request it. They then act as external auditors to validate the licensing chain and ensure that there are no licensing inconsistencies. For example, they check where the licenses come from. Thanks to Deloitte, we can ensure that large companies can actually use these licenses. In this way, we can guarantee that the purchase and sale of the license has taken place in accordance with the requirements of the Court of Justice of the European Communities. »
There are used license providers that are certified. Is such certification not enough?
“We have deliberately chosen a different route, since certification is done once, but the purchase of licenses must be reassessed each time. However, auditors will verify each transaction if necessary and face fines if they do not do their job properly. We are convinced that this will bring even more security to our customers.
They say a business can save up to 70% by buying used licenses. How it works?
“Of course, it depends on how old the licenses are. But this figure is quite realistic. If you buy a new Office 2021 today at the lowest price, a license will cost you around 470 euros. However, if you find a 2016 version sufficient for your work, you’ll only shell out around $80 for it. It’s a big difference. And if you want the 2019s, you could shell out $200. It’s still more than 200% savings compared to a new 2021 license.
But you don’t have the latest software versions?
“That’s okay. But the question is, do you still need the latest version of the software? If so, you can’t avoid new licenses. But sometimes you just have to wait a few months until that the latest versions come to market as second-hand licenses.
And not all new versions contain really necessary new features.
“Therefore, companies must carefully analyze the actual needs. What is actually used by how many employees? A recent example is Teams. Because everyone is now talking about the new normal of work and hybrid working, that doesn’t mean everyone really needs teams. That’s where our hybrid solution comes in. Maybe Teams only makes sense for a third of your company’s employees. For others, a license without teams would be perfectly adequate. I’m also sure that very few would recognize the differences between Office 2016 and Office 2019. Moreover, 95% are identical.
How do companies use their existing licenses?
“It’s partly absurd that the money is almost wasted. For example, we purchased 200,000 user licenses from a major bank in the UK. The bank has never used these desktop licenses. In other words, for many years the bank paid Microsoft for products it never installed. You can calculate how many millions of euros that is. This is not an isolated case. There are companies like this all over Europe. And nobody in these companies wonders when the license agreements are renewed, even if nobody uses these licenses.
The second part of the interview is about the number of licenses available, whether volume licenses can also be sold as individual licenses and what the situation is with the support for used software licenses.