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RULING CREATES A NEW ASSET

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Paul Sheehan ITAMS

The European ruling on the re-sell of software licences was expected to cause a stir – but then very little happened. What’s going on behind the scenes? Paul Sheehan, partner, IT Asset Management Solutions gives his view…

Paul Sheehan ITAMS

Paul Sheehan ITAMS

More than a year after a ruling by the European Court of Justice over the re-sale of software licences, the business world is still holding its breath to see what will happen next. This is despite the Financial Times saying that the decision has “the potential to create a multimillion dollar market”.

Yet it seems that few outside of corporate IT departments have stopped to assess all the implications. In particular, few within the finance world appear to have considered the impact of putting a value on software licences.

The EU court made a final ruling on the UsedSoft versus Oracle case in July 2012. It decreed that perpetual software licences bought legally could be resold and was seen, in some quarters, as a European act of defiance against the power of the global software giants.

This means that unsupported or ‘orphaned’ licences which would have previously been written off, now have a value and can, quite legitimately – be regarded as a tangible corporate asset. Of course, their value will depreciate over time, but even so, these licences can help raise significant asset values for a business and increase share value.

What’s it all about?

So is this ruling sustainable or is it likely to be overturned?

Although sales of licences have continued quietly and informally, usually driven by mergers and acquisitions or because of an unbudgeted shortfall revealed by an audit, new trading has so far been minimal in most areas. However, there has been some activity in the “after-market software” space (as it is gradually becoming known) in Germany where the seeds of the EU judgement were originally sown.

In our experience, while a good number of businesses say they would be happy to sell superfluous licences, provided all the right legal checks and procedures had been carried out, very few would be prepared to buy, even if they could save their business hundreds of thousands or even millions of pounds by doing so.

Corporates are cautious
Why the apparent reticence? In many ways, businesses are right to be careful and seek expert advice. Yet, this is no longer a grey area; it is backed by the EU. We have talked to lawyers extensively about this and it seems that the European Court’s judgement takes precedence over any contract a company may have with its vendor. In fact many lawyers who specialise in intellectual property (IP) law believe that, as the ruling reflects a fundamental principle of free trade, it will be difficult to reverse or unpick and that it is a real opportunity for businesses to save money or recoup costs.

Underneath the outward bravado, large corporates with a significant number of licences are typically cautious about damaging relationships with major software providers and are concerned that they may refuse support and maintenance.

But although software vendors can’t ignore the decision, there are several ways they could easily side-step it by changing the terms of their licensing agreement. After all, the ruling only covers perpetual licences. No-one has done so yet and I suspect they won’t do anything until re-selling licences begins to affect core revenue streams. No doubt, they are conscious of the brand damage any adverse publicity could inflict.

Microsoft, for example, isn’t blocking re-sales. I know of a 15,000 user organisation that has sold 4,000 licences to another business and the transfer quietly went through the accepted novation process as if the transaction were part of a merger or acquisition.

Large volumes equal big savings
Will the market develop from here – and if so, how? Although there is still significant work to be done on the due diligence process, the potential financial benefits are so huge that it’s unlikely that businesses will hold back for much longer. It’s likely that used licences will be available for around 50 per cent of the original cost – and for companies buying in large volumes this means significant savings.

There’s obviously a need for some type of trading forum or marketplace but it’s not yet clear the form this will take. It’s probable that an independent third-party will act as a broker, possibly by hosting an online portal which will act either as an internet auction site or a “dating” site where specific buyers are matched with possible sellers. Brokers will either take a percentage of sales or might even buy the licences outright to resell and burden the risk in return for the promise of faster sales.

Whichever way the market evolves, it will be essential that processes are transparent, showing all the right legal checks, while audit trails are maintained.

At first, I believe, more transactions will naturally emerge through improved licence management and the need for compliance. If licences are now an asset, companies will become even more concerned about keeping control of what they own. If, as part of this process, a business discovers it doesn’t have enough licences, it may use an asset and licensing management specialist firm to engage with another company which has too many through downsizing or other circumstances.

Whatever the reason for buying or selling, the situation is still complex and it would be advisable to use a facilitator who knows their way round licensing processes. Anyone interested should also talk to their own company lawyers. Although the EU ruling has minimised the risk of legal challenge, it’s essential to ensure that the licences and the conditions and terms under which they are transferred all comply. Global companies need to be aware that the situation in the US has yet to be clarified. An outstanding case from 2007 is still with the higher courts for debate.

It’s a case of weighing up a slight risk – which can be reduced further by using expert help – against major savings. The business world can’t take too long to make up its mind though. Transition to the cloud, for example in the case of moving from Microsoft Office 2010 to Office 365, is opening up a window – but it’s not going to remain this way indefinitely.

Tips for Taking Action Now
Whatever the ultimate consequences of the EU court’s judgement are, one of the biggest factors driving companies to achieve better control over their software licences and to take action is the current compliance environment. Software auditing by vendors is becoming increasingly prevalent – and businesses are often forced into paying huge sums to settle up, often because they have not prepared properly in advance.

In these kinds of scenarios, independent industry experts like ourselves at ITAMS are well placed to help companies negotiate resolutions utilising quality data. When they are faced with audits, this will be far less expensive for them than having to buy new licences directly from the vendors themselves.

So what can smart companies do now to ensure their licence management is up to scratch?

  • Plan Ahead – Companies should be aware of when their software licences are coming up for renewal, and sensitive to potential vendor activity, and have information ready.
  • Optimise Data Quality – Businesses need to get their house in order before they buy or resell software. They need to know exactly what licences they have in their estate, who is using them and how they are being used on what hardware. It is key that they ensure that their IT assets are being managed properly and where they are gaps in their approach that need rectifying.
  • Deal with exceptions proactively– Even if software licences are installed on redundant machines locked in a cupboard, for example, the business that owns those licences will remain liable for them. Ensure that all parts of the company are covered, not just the easier ones, as any gap will be used by the vendor to trigger a negotiation cycle.
  • Look to External Advice – Seeking out advice from independent experts in the area is critical. No one end user can be an expert in all licensing schemes, nor understand the latest changes and techniques in this area. Leverage the experience of others. Only these kinds of companies will be able to conduct a truly independent assessment of a company’s estate and provide them with the kind of low-cost, high value engagement that will help them manage the audit process. Large account resellers that are working on behalf of the software vendor cannot be expected to give impartial advice.
  • Skill Carefully – The market is short of highly experienced licensing professionals. Plan ahead and partner in advance of need.

Looking Ahead

One by-product of the European Court of Justice ruling on the re-sell of licences is that it has focused more attention on issues around used software and licence management generally. There are many businesses today with hundreds of thousands and even millions of pounds of used software on their books, yet they are simultaneously buying the same assets and paying penalties. Knowing what to do with all of this is a massive problem for enterprise-sized organisations, in particular.

The Court ruling potentially opens up more opportunities for these organisations in terms of enabling them to exchange or resell at least some of this resource, while at the same time giving them a chance to exert greater control over their licences and make huge financial savings as a direct result. But to turn the vision to reality, they need to ensure they follow the tips above and most importantly of all open their minds to new paradigms in this space.

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The case for AI technology adoption in financial back-office roles to improve efficiency

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The case for AI technology adoption in financial back-office roles to improve efficiency 1

By Tomas Gogar, AI CEO, Rossum

In this era, digital transformation isn’t anything new. Nonetheless, it can still cause a lot of confusion and resistance for some companies, many of which are often slow, unwilling or unable to implement the necessary changes to embrace technology. As a result, entire industries are barely scratching the surface when it comes to shifting to the digital world, and many, from the insurance industry to logistics and delivery are still catching up on the digital transformation.

The banking and financial sector have been notoriously slow in adapting to the online world. They paid the high price for it, giving way to a flurry of incredibly successful new disruptive players, built on cutting edge tech from the ground up. From Transferwise, Revolut or Venmo, to GoCardless, this new generation of fintech companies addressed consumers changing expectations in a way that traditional retails banks simply couldn’t.

To catch up, incumbent players have prioritised the user interfaces, giving the appearance of a digital offering, and oftentimes leaving the back end infrastructure untouched, and hence the processing power, accuracy and speed unaffected. Back-office functions, although they are essential to the smooth running of a business, have seen very little change and as a result,  too many people in these functions are still tied up typing information into spreadsheets and software forms – in fact, manual data entry is a prime example of how much resources the offline legacy wastes. Take Accounts Payable for example, invoice data entry in this sector is estimated to eat up roughly 100 human lives worth of time every single day.

Tomas Gogar

Tomas Gogar

With the significant increase in the number of employees working from home due to the global COVID-19 pandemic, the back-office challenges have suddenly come to light, and finally, companies that got away with minimal changes so far, are realising that they need a structural digital overhaul, and fast. We believe the solution to this is artificial intelligence backed software solutions.

Previous technology based solutions essentially did half the job, heavily depending on human fact checking. Consequently, these solutions were actually quite cumbersome and time consuming and costly to implement and maintain, and offered only incremental improvements. Now with AI, automises data processing completely removing the need for human fact checking (and human error!). Additionally, deployment is massively simplified with an average setup time of one week, compared to about 6 months for previous technologies.   AI solutions are also highly adaptable to new formats and scenarios, allowing businesses to test them in say one department and to quickly roll out a single unified solution across all functions of the business.   Data can be extracted from any invoice layout with no template or rule set-up, saving significant and effort. Rather than trying to change and standardise a highly fragmented environment (there are about as many invoice formats as there are businesses), AI can work with it, and optimise the overall process and offer a unified answer to a fragmented ecosystem.

Taking Accounts Payable as an example again, this is a sector that has relied by and large on Optical Character Recognition (OCR) software solutions in an attempt to remove some of the manual labour involved in reading processing and filing invoices. Although OCR did improve the processes to a certain degree, ultimately these types of solutions still required a long and expensive set up processes and a lot of manual labour to actually capture the data accurately with templates and manual data entry. Now, with AI software, like the one we have created, this is a solution that makes data extraction simple and easy, saving time and man power, as well as building on existing infrastructure. It has the ability to transform this industry.

In conclusion, for a sector that has been slow to adopt digital change, AI is THE technology answer that is finally fixing the invisible pain points that businesses had simply accepted as unremovable. AI applied in this way offers a viable way forward and businesses that were notoriously slow and resistant to embrace the digital transition, incentivised to make a change, may actually end up at the head of the pack. Skipping ‘older tech’ and jumping straight into AI solutions, the best scenario available by far, is indeed the smartest, fastest and most cost effective way to transition into the digital world.

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InsurTech is helping to drive the digital evolution of the UK motor retail industry

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InsurTech is helping to drive the digital evolution of the UK motor retail industry 2

By Alan Inskip, Tempcover CEO & Founder

If the last nine months have made anything clear, it is that the pandemic has fundamentally changed both buying and driving habits for UK motorists. The latest Tempcover research has revealed that online-only used car sales had increased fifteen-fold during the pandemic among 2,000 survey respondents.

Before lockdown, just 4% of used car sales were fully-digital. The vast majority of those surveyed opted for either a physical purchase (50%) or a digitally-assisted purchase (45%), relying on a combination of digital tools and an in person viewing or road test before buying.

While car sales overall are down on last year’s figures*, one in six (17%) of those surveyed had bought a used car during lockdown, with two thirds (64%) relying on a fully-digital purchase journey. Digitally-assisted purchases counted for one in five (20%) used car sales, while in person sales fell to just 15% – no surprise considering the ongoing social distancing measures.

And when it comes to arranging insurance for their recently-purchased vehicle, our survey participants displayed an equal balance between telephone and online as the preferred method (48% each). Nearly a third of those (28%) said they wait up to ten minutes for their policy to be confirmed, and a further 22% wait as long as 20 minutes to get cover.

The switch to digital insurance, driven by InsurTech

In the midst of rapid and significant market changes, many traditional insurers have lacked the agility and flexibility to adapt accordingly. InsurTech can provide immense value in bridging that gap, as the digital solutions are entirely scalable, with the flexibility to substantially increase in size and across multiple geographies, with minimal disruption.

Alan Inskip

Alan Inskip

The ongoing decline of physical transactions in the motor retail industry is a perfect example of how InsurTech is adding value. Several national blue-chip dealerships, with both physical and digital showroom floors, are already streamlining their online purchase process by offering temporary driveaway insurance policies to cover the vehicle for a fixed-term, usually between five to seven days, as part of the purchase journey.

The entirely online one-step user experience is the first of its kind in the traditionally outdated and inflexible driveaway insurance industry and it is dramatically simplifying the process of how insurance is purchased and consumed. Due to the flexibility and agility of the digital solution, each retailer has its own unique URL, where the customer can obtain a simple single-cost policy in just 90 seconds through an entirely digital process, which fits in line with the evolving consumer purchase trends.

For the dealers, this technology means more efficient stock clearance times and greater profitability. For the buyers, it takes the stress out of searching for annual insurance on the spot, and provides the driver with near instant cover so that they can immediately drive their new car, while giving them the opportunity to thoroughly research the best annual policy to suit their needs. An added benefit is there’s no risk to any existing No Claims Discount, as it’s a separate and standalone policy.

While there is a chance these trends will reverse to some extent post pandemic, it is clear that the consumer appetite for digital purchase and consumption is here to stay, and InsurTech will continue to lead the way in making motor insurance more easily-accessible across digital platforms, while offering consumers the best value for money.

* https://www.thisismoney.co.uk/money/cars/article-8615851/Used-car-sales-halved-lockdown-brakes-1m-motor-transactions.html

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Five ways enterprises are using the public cloud

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Five ways enterprises are using the public cloud 3

By Michael Chalmers, MD EMEA at Contino

The public cloud is the most significant enabler in a generation. It’s causing a massive shift in how businesses are operating and tearing apart previous business models.

Amid challenging economic times, it’s inevitable that spending within IT is dropping. However, the cloud is the only segment that is still growing. The public cloud is increasingly becoming a central element of enterprise IT.

Contino asked 250 IT decision-makers at enterprise companies across Europe, USA and APAC within companies of over 5,000 employees about their views on the state of the public cloud within their organisation at the beginning of 2020.  Nearly all of them (99%) saw a significant technical benefit compared with on-premises.

Here are some other ways public cloud is being used by enterprises:

  1. Widely, albeit not yet business wide.

A whopping 77% of enterprises are using the public cloud in some capacity. Overall, 50% of businesses are utilising a hybrid cloud, 22% single private cloud, 20% multi-cloud, 7% single public cloud and only 1% are using only on-premises.

But only 13% of businesses have a fully-fledged public cloud program. The largest set of respondents (42%) have multiple apps/projects deployed in the cloud. 24% were still working on initial proofs-of-concept, and 18% were in the planning stages.

83% of respondents said they want to grow their cloud program. Almost half (48%) do wish to grow, but with caution, while 36% want to move as quickly as possible.

Only 4% plan to revert to on-premises but are in no rush to do so.

  1. To enhance security and compliance versus on-premises, although these are still also seen as barriers to adoption.

A massive 64% of respondents stated they find this more secure than on-premises, and only 7% see it to be less secure. 72% found it easier to stay compliant with business data in the cloud versus only 4% who found it harder.  However, 48% cited that their biggest barrier for not using the cloud was security, and 37% stated the need to remain compliant was the most prevalent blocker.

Other challenges also posed a barrier: a lack of skills, the cost to purchase and cloud-native operating models not working with existing investments made up 29-32% of responses.

19% stated that lack of leadership buy-in is the biggest barrier, reflecting that a significant number of IT departments have a need for this solution but have not been provided with the support to do so. However, relatively speaking, this was one of the least-cited barriers.

  1. For improved efficiency, scalability and agility, but vendor lock-in is still a major concern.

The top three cited technical benefits of public cloud were better efficiency, agility and scalability versus on-premises. However, 63% of IT professionals were ‘somewhat’ or ‘very much’ afraid of the commitment that can come with investing in the cloud. This is another major barrier that is preventing businesses from ​migrating to the cloud.

Only 23% are not afraid of being locked in and a meagre 5% have no fear at all. However, the fact that 77% of businesses are using the cloud shows any risk of being locked in is outweighed by the benefits of the cloud.

  1. To align IT with the business.

This is by far the most cited business benefit of the public cloud. 100% of those surveyed witnessed varied business benefits versus on-premises. Other major benefits include the ability to focus on new revenues (43%), accelerated time-to-market (43%), and increased ROI (40%).

  1. To accelerate innovation and increases cost-effectiveness.

Innovating in the cloud was quicker for 81% of respondents. What’s more, not one person surveyed said the cloud slowed down their innovation. 79% have saved money with the cloud and only 5% have found it more of an expense than on-premises.

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