With clarity about the legal standing of used software licences, could buying licenses for your major office applications significantly reduce your business’s costs? Silicon speaks to Michael Vilain, Director of International Sales at Capefoxx , the Swiss company that sells used Microsoft licences in all countries where the law allows it.
July 2022 marks the 10th anniversary of a judgment by the Court of Justice of the European Union that brought clarity to what had been a legal grey area.
Oracle had sued a provider of used software licences and lost. The judges made it clear: The exclusive right to distribute a licensed program copy is exhausted with the first sale. A press release from the European Court of Justice goes on to say: “The principle of exhaustion of the distribution right applies not only when the copyright holder markets copies of his software on a medium – CD-ROM or DVD – but also when he makes them available by downloading them disseminated from a website.”
Despite this verdict, companies find it difficult to buy used software licences. Although, according to various providers of used software, you can save up to 70% compared to buying a new license. How can the reluctance be explained? What should companies pay attention to when they want to buy used software licences? And are there enough licences on the market?
We spoke to Michael Vilain, Director of International Sales at Capefoxx , the Swiss company that sells used Microsoft licences in all countries where the law allows it.
Despite the “official” guarantees, the market for used licenses still seems to be struggling. Why is that?
“The market has even been declared dead a few times. Especially when Microsoft says they won’t release any more versions of Office. Then it might be three or four years before you can sell it again as a used licence. Another topic is the cloud. If everything really comes from the cloud, then the business with used licences will die out quickly because we won’t be able to buy a licence anymore. But we are still a long way from that. Despite digitization and the cloud, there are still many customers who do not want to go to the cloud and want an unlimited license. Therefore, there will continue to be a large demand for used licences in the next 5 to 7 years.
How high do you estimate the market potential for used Microsoft licenses?
“Somewhere between 1 and 250 million euros. That’s little compared to Microsoft’s total revenues in Europe, which are likely to be around five billion euros. The reason it isn’t anymore: Microsoft has a very strong and trusted reseller channel.”
Is the market for used licenses a global market?
“No, because that depends on the respective legislation. The decision of the European Court of Justice applies in the EU, so licences can be traded anywhere in the EU. In Turkey or Switzerland, for example, used licences can also be sold, but only within these countries. UK licences can be traded within the EU if the licences were purchased before Brexit. Licences purchased after Brexit, on the other hand, can only be sold in Great Britain.”
What about companies headquartered in Germany but with branches outside the EU. Can licences also be used in these branches?
“This is only possible within the EU. Unless a country allows the use of used licences. We take a close look at the respective conditions, as there are some traps here. We get inquiries from India or from African countries. But often the law does not exist or license trading is prohibited, for example in the USA.”
Despite legal clarification by the EU Court of Justice, are there risks for buyers of used licences?
“You should know where the licenses come from. Otherwise, you run the risk of unverified licenses to buy, which will then be blocked. This is especially important for companies that are at risk of being vetted by Microsoft. If the licences 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 are taking a big financial and legal risk. The money is gone and Microsoft is perhaps rightly taking action against it.”
How do they use Deloitte’s expertise?
“There is still a lot of legal uncertainty among companies as to whether they are allowed to purchase used 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 inconsistencies in the licences. For example, they check where the licences come from. Thanks to Deloitte, we can ensure that large companies can actually use these licenses. In this way, we can guarantee that the licence purchase and sale have taken place as required by the European Court of Justice.”
There are providers of used licenses that are certified. Is such a certification not enough?
“We deliberately chose a different path, since certification is done once, but the purchase of licences has to be re-evaluated each time. However, auditors will check every transaction if necessary and face fines if they don’t do their job properly. We are convinced that this will give our customers even more security.”
They say a company can save up to 70% by purchasing used licences. How does that work?
“Of course, it depends on the age of the licences. But this number is absolutely realistic. If you buy a new Office 2021 today at the lowest price, a license will cost around 470 euros. However, if you find that a 2016 version is sufficient for your work, you will only pay around 80 euros for it. That’s a big difference. And if you want the 2019s, you might pay 200 euros. That’s still more than 200% savings compared to a new 2021 license.
But you don’t get the latest software versions?
“That’s correct. But the question is, do you always need the latest version of software? If so, then you cannot avoid new licenses. But sometimes it is enough to wait a few months until the latest versions come onto the market as used licences.”
And not every new version contains new features that are really needed.
“Therefore, companies should 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 work, this does not mean that everyone really needs teams. This is where our hybrid solution comes into play. Maybe Teams only makes sense for a third of your business’s workers. For the 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. Also, 95% are identical.”
How do companies use their existing licenses?
“It is partly absurd, that money is quasi squandered. For example, we bought 200,000 user licenses from a large bank in the UK. The bank never used these desktop licences. In other words, for many years the bank paid Microsoft for products that it never installed. You can work out 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 questions when license agreements are renewed, even though nobody uses these licences.”
The second part of the interview deals with the number of available licenses, whether volume licenses can also be sold as individual licenses and what the situation is with the support of used software licenses.