E-Business Software Licensing: Have It Your Way

Would you like to ramp up your e-commerce capabilities? Increase the amount of business you’re doing over the Internet? Bring new digital channels into your sales and marketing mix? Or perhaps you would like to better tailor your e-commerce platform to match your business needs and order management processes?

The good news is that there are plenty of options out there from which to choose, and with ongoing technological and business development, more and more of them offer the potential to realize these goals. Yet to do so requires time and patience, among other things.

Look to the Bottom Line

Vendors are offering an increasing number of e-commerce software packages and platforms designed specifically to address e-business sales and order management. There are, likewise, a growing number of licensing options, which in turn are being driven by customer needs as presented to vendors.

Evaluating and choosing which is best for you is a big, possibly daunting, decision that may well have deep and lasting effects on the trend of your e-commerce business and on your organization — as well as on your bottom line. With that in mind, the E-Commerce Times decided to do a bit of digging into the world of licensing e-business software systems with an eye to helping you find the one that best suits your organizational needs.

Redwood Shores, Calif.-basedComergent has rather quickly become a significant player in the e-business software systems market. Conceived in 1998 by Silicon Valley entrepreneurs Jean Kovacs, Bill York and John Mumford, Comergent now boasts a client list that spans the manufacturing, high-tech and retail sectors, among others, and includes the likes of Goodrich, Cisco Systems and Best Buy.

Along withSterling Commerce’s Supply Chain Applications Suite and SAP’s mySAP Business Suite, Comergent’s eBusiness System was recently chosen as one of three applications to earn its developer an “Order Hub Leadership” designation in a recent Forrester WAVE research report that evaluated 115 e-business/order management systems processes among key providers.

“[The licensing decision] basically breaks out into two buckets: how customers prefer to pay and how they want the system deployed,” explained Kovacs, Comergent’s president and CEO.

Perpetual, Term and Monthly – and We’re Not Talking Insurance

As for the first — three basic types of e-business systems licenses have become common in the marketplace: perpetual, term and monthly. They differ and are constrained by term, or the duration, of the lease contract and the extent to which the system, or parts thereof, can be used.

“[Perpetual licensing] makes the best sense for those businesses which are growing and expect to be in it for the long term. You own the code and you have a fixed IT cost that is predictable,” explained R. ‘Ray’ Wang, a Forrester Research analyst and lead author of the study, “The Forrester Wave: Order Hubs, Q2 2006.”

Term licensing best suits new business start-ups and businesses where financial viability is less certain, Wang continued, the benefit being that the user organization effectively rents the software for a short and defined period of time.

However there is a caveat. “The costs are typically lower than initial ownership of a perpetual license, noted Wang. “However, usually after 3 years, you are better off with a perpetual license. Most vendors have conversion programs.”

Companies also enter into term licensing agreements when they want to pilot and test the software — often in a particular division, department, or business line — to see how well it works and fits their needs.

“Typically, companies that do this are subsidiaries of large organizations looking to start in new markets and start-ups,” Wang explained.

In contrast, monthly licenses are typically taken out by start-ups and cash flow-focused businesses, the advantage being their low initial cost of ownership. Hedge funds, professional service organizations, and high tech start-ups tend to choose this option, according to Wang.

Again, there is a caveat. “We figure that in 5 years it’ll end up costing you much more than purchasing the software outright,” he said.

Scope and Usage Limitations

Any of the above may be limited in terms of its organizational and extra-organizational scope.

Licenses may be limited to a particular site, a particular department in one or more locations — including organization-wide — an entire division of a company, or throughout the organization at the enterprise level.

To add a final wrinkle, licenses may be limited in terms of use.

They may be licensed solely for internal use or for distributing particular functionality with resellers, distributors, agents, partners, suppliers and/or customers.

Next Week: Getting Things Up and Keeping Them Running