Secondary Software Market – Guide and Commentary
The Secondary Software Market, created by an EU-ruling in 2012, is not just about sourcing second-hand copies of old licenses, or getting some money back for your now redundant Office licenses. In preparing a guide to this market I interviewed David Chamberlain, General Manager of License Dashboard, and Chris Morgan, CEO of Astute Licensing. Chris and David have recently assisted clients transacting in the Secondary Software Market and their insights are shared below.
Leveraging Selling Power
David Chamberlain argues that selling licenses can be a useful strategic lever to pull in negotiations with software publishers. Getting a price for software made redundant by a move to the Cloud should inform pricing negotiations with the publisher, particularly if you’re moving to their Cloud. Agreeing to hand back perpetual licenses in return for a discount reduces secondary market license stock which directly benefits publishers’ “Cloud First, Subscription First” strategies. Furthermore, the availability of second-hand licenses may resolve a non-compliance position which otherwise may have forced an unwanted move to subscription software. This particularly applies to Adobe software given that perpetual licenses are no longer available for most of their products.
Putting a financial value on your license stock may be beneficial from an accounting perspective. Typically license purchases will be depreciated over three to five years but the secondary software market proves that even legacy licenses have some value. Talk to your finance team to determine if it’s appropriate to list them as an asset on your balance sheet.
Selecting a partner
This all sounds good so far. However, Chris Morgan, CEO of Astute Licensing, recommends caution when selecting a secondary software market vendor. In particular, you should check whether the vendor has sufficient capital or license stock to meet your ongoing needs. Many vendors act as brokers between buyers and sellers and as such may carry only limited stock. If your purchase is large, or time-sensitive, you need to ensure that the vendor is aware of this and can meet your demands in a timely fashion. For large orders some vendors may prefer to transact in batches, as this financially de-risks the transaction for them. These concerns apply equally when selling your own licenses. A broker needs time to find a buyer for you, whilst a vendor willing to purchase license stock for immediate payment will require enough capital to do so. All this affects the price you’ll receive for your used licenses – so shop around!
Chris also advises that this is a short-term opportunity, particularly if you are looking to sell licenses. The value of legacy licenses declines daily as support ends, and, with the move to subscription-based licensing accelerating, the supply of second-hand licenses will slow over the next few years. For UK companies there is also some uncertainty around the impact of Brexit on the market.
For a guide to the Secondary Software Market please see the ITAM Review Marketplace. As always, if you have comments on the guide, or would like to share your experience of working with secondary market vendors, please contact me. Conversations can be confidential if required. We have a lot more content related to this market – follow this link for in-depth research on the topic.