Presentation at a NOTAP event - addressing the experience of licensees with licensors, local vendors & support services in Nigeria.

1. EXPERIENCE OF LICENSEES WITH
LICENSORS, LOCAL VENDORS &
SUPPORT SERVICES:
Presented at the NOTAP ICT Workshop 2011 By:
Rasheed Adegoke

2. Content
o Quick Definitions
o Understanding the Software business models
o Key issues in software licensing in Nigeria: a
Licensee perspective
o A deeper look at licensing…
o Q&A

3. Experience of
software licensee with licensors…
Quick
definitions

4. Understanding
software and industry players: quick definition…
SOFTWARE
 Software is the non-physical component of a Computer System that
enables the proper functioning of the physical components
 Software comprises Systems software (Operating system,
Database, Schedulers, etc), Business Applications (Core banking,
HRMS, etc) and Productivity Software (E-mail, MS Word, Excel, etc)
PLAYERS/ACTORS:
 OEM/ISV: Original Equipment Manufacturer/ Independent
Software Vendor is the intellectual property owner on a software
product
 Reseller Partner: partner with sales responsibility within a territory
 Integrator (SI) Partner: partner with sales and/or systems
integration responsibility within a territory

5. Experience of
software licensee with licensors…
Understanding
the software
business models

6. Software business model
The ISV-Reseller model
Holds Software IP
Has responsibility
for software
implementation &
support
OEM/ISV
Manages
customer
relationship
Responsible for
sales in local
market
Local Reseller
License software
for own use
Directly contracts
with OEM/ISV
Customer/
Licensee
Maintenance fees (recurrent)
SW Licence
revenue
SW Licence
fees
Resell
Software
Supply
Software
Provide maintenance & support
This is one of the two predominant arrangements between Nigerian resellers or local
partners and their counterpart Independent Software Vendors or Licensors:

7. Software business model
The ISV-Integrator model
Holds Software IP
Has responsibility
for software
implementation &
3rd-line support
OEM/ISV
Manages
relationship and
support/deliver
implementation
services
Responsible for
sales & 2nd-line
support in local
market
Integrator/
Reseller
License software
for own use
Contracts jointly
with ISV (license)
and local vendor
for support
Customer/
Licensee
Maintenance revenue
(recurrent)
SW Licence
revenue
SW Licence
fees
Sell SW &
Services
Supply
Software
Provide maintenance & support (3rd Level)
Maintenance Fees
(recurrent)
Provide Level-2 support
This is second variant of the two predominant arrangements between Nigerian
resellers/local partners and their counterpart ISVs or Licensors:

8. Software business model
The Revenue-share model
Holds Software IP
Has responsibility
for software
updates and
improvements
OEM/ISV
Re-packages or
embeds solution
within own service
or product
offering/bundle
Responsible for
sales,
implementation &
support
Revenue share
Partner
License software
for own use
Contracts jointly
with ISV (license)
and local vendor
for support
Customer/
Licensee
Maintenance revenue
(recurrent)
SW Licence
revenue
SW Revenue
share
Sell SW &
Services
Supply
Software
Ongoing SW license
renewal (recurrent)
Provide all services
Though not commonly used, this model could work in the case of a Nigerian ISV trying
to bundle its product into a larger international software packages (e.g. Signature/
Mandate verification add-on to a core banking software or where the local vendor
(revenue share partner) is bundling an ISV toolkit into it’s own solutions package:

9. Experience of
software licensee with licensors…
Key issues in
software
licensing in
Nigeria…

10. Key issues in software licensing
a licensee perspective…/1
 Complex & Diverse licensing models
 License agreements and pricing models vary widely between software
vendors even for the same class of business applications thereby
sometime making it difficult to compare offerings especially on a total
cost of ownership basis
 Local partner organisation’s capability
 Poor transfer of skills/expertise to local partners thereby limiting the
extent of support that can be received locally
 Poor investment by local partner organisation in the area of technical
support & systems integrators in favour of more sales/marketing staff
 Licensor’s commitment to local market
 Sometimes, licensors do not invest enough in the local market due to their
perception of the opportunities available relative to their global
operations

11. Key issues in software licensing
a licensee perspective…/2
 Legalese…
 License agreements could include “tricky clauses” which
needs to be clarified at the onset of the contract. Such issues
as dispute resolution and the legal jurisdiction or applicable
laws could become quite important in the event of a dispute.
 The golden rule is: “READ ALL PRINTS: fine & bold”…
 Taxes and logistics costs
 Agreements that are not explicit on the responsibility for
taxes (WHT, VAT, etc.) as well logistics costs such as travels,
hotel accommodation, etc could leave room for disputes
early in the contract especially mid-way through
implementation

12. Experience of
software licensee with licensors…
A deeper look
at licensing &
service pricing

13. Software license model:
Commercial off-the-shelf software (COTS)
Total cost of
ownership
(COTS)
Acquisition
Special
channel
license
OEM-Bundled
License
Educational/
Research
NFR (Not-for-
Resale)
End-user
license
Perpetual
Named user
Concurrent
User
Per-Server
Per-Site
Enterprise or
unlimited
Subscription
Open-source
Shareware &
freewareOperations/
Maintenance
Annual
maintenance
Upgrade/
Customisation

14. Software license model:
Turnkey or Custom Software (TKS)
Total cost of
ownership (TKS)
Acquisition
Development
Time-based costing
Value-based costing
Customisation Time-based costing
Operations/
Maintenance
Annual maintenance
Upgrade/
Customisation

15. Software license model:
Software as a Service (SaaS)
Total cost of
ownership (SaaS)
Setup/Sign-up
Operation/subscription
Per-user subscription
Time-based subscription
Transaction volume-based
subscription

16. Software Services
Pricing models
Consulting/
Professional
Services (fixed cost)
Firm fixed-cost
Statement of Work
with clear timelines
Early delivery bonus
vs. Penalty on missed
targets
Consulting/
Professional
Services (variable
cost)
Per-hour billing (with
ceiling price for
project)
Statement of Work
without firm timelines
Performance bonus &
penalty
Managed/
Outsourced Services
Retention or
engagement cost
Volume based pricing
(e.g. per-transaction or
per-employee)
Performance bonus &
penalty

17. Software License & Services
Pricing Summary
 Sofware Price negotiation guide
 Begin from the published Global Price List (GPL) or Retail Price
List (RPL) of the Independent Software Vendor (ISV)
 Agree pricing model (per-user, per-site, enterprise, etc.) based on
your specific needs and growth plans.
 Always explore more than one viable option (where possible) to
make financial negotiation competitive
 Get discount related to usage categorisation (e.g. educational or
government use discounts)
 Don’t lose sight of services cost
 Services cost could be a significant part of the cost of owning and
using a software product
 Negotiate all services cost upfront during the contract initiation
rather than later

18. Experience of
software licensee with licensors…
Questions &
Answer