SAM SUMMIT. Techniques for Future Proofing Your Software Contracts. Richard Kemp 16 May 2018

Transcription

1 SAM SUMMIT Techniques for Future Proofing Your Software Contracts Richard Kemp 16 May 2018

2 Agenda Intro & context Customer-side software over-deployment a growing risk to the business relationship SAP v Diageo (UK High Court, ) the UK s first software over deployment case Case Key takeaways audits and licence scope SAP s April 2018 new pricing model New software deployment techniques and managing the over deployment risk New pieces in the puzzle: AI/cognitive computing, Xaas, RPA, APIs, SOA and OSS Solving the puzzle - clear drafting of licence scope is key Q&A

3 Introduction and context The good old days - when licence scope clauses & restrictions generally well understood - are changing Commercially: software vendors are becoming increasingly assertive on over-deployment Legally: software vendors are starting to have some success in enforcing licence scope clauses Technically: new software deployment techniques means software is interacting much more widely Risks for licences in flight software over-deployment risks disputes, extra fees, contracting delays and inefficiencies need for clear, concise, future-proofed licence scope clauses Customers: Align use case to licence scope terms through contract lifecycle structured software asset management

4 How over-deployment happens change of use acquisition/divestment tech refresh cloud deployment click wrap override more restrictive licences change of use How over-deployment comes to light support request pro-active audit new product launch product catalogue whistleblowing Commercially: software vendors are becoming more assertive

5 Legally: SAP v Diageo (Feb 2017) the UK s first software over-deployment case Facts May 2004: Diageo licensed various SAP products, including mysap ERP ("SAP ERP") and SAP Process Integration ("SAP PI"). SAP ERP license fee calculated by reference to different categories of Named Users. SAP PI license fees calculated on the basis of the monthly volume of messages processed.

6 SAP v Diageo [2017] EWHC 189 (TCC) 2011/2012, Diageo developed 2 new systems: Connect Gen2 Salesforce.com system enabled customers to manage their Diageo accounts and to place and review orders directly, rather than through call centres. Interacted with SAP ERP via SAP PI. Salesforce.com app managed Diageo sales & service reps, enabling them to manage and record their customer visits and calls. Interacted with SAP ERP via SAP PI.

7 SAP v Diageo [2017] EWHC 189 (TCC) SAP claimed that the Gen2 and Connect systems used and/or accessed the SAP ERP directly or indirectly claimed additional licence & maintenance fees of 54,503,578 under Agreement or asdamages:

8 SAP v Diageo [2017] EWHC 189 (TCC) Ruling: only Named Users were authorised to access and use SAP ERP the extent of their permitted access and use was dependent on their user category set out in a schedule to the Agreement. "the plain and obvious meaning of "use" in the context of the Agreement is application or manipulation of the mysap ERP software. the plain and obvious meaning of "access" in the context of the Agreement is acquiring visibility of, or connection to, the mysap ERP software. usage was subject to Named User Pricing.

9 Audit Rights SAP v Diageo [2017] EWHC 189 (TCC) "Once in any 12 month period, unless otherwise requested by SAP and in any event no more than three times in any 24 month period, the Customer shall, using the tools provided by SAP, generate from each instance of the Software and deliver to SAP the information necessary to check that usage of the Software corresponds with the Exhibit. If Customer fails to do so then the Customer shall permit SAP reasonable direct and/or remote access to the Software and the equipment on which it is installed to verify usage. In so doing, SAP shall comply with the Customer's reasonable security requirements. If usage is discovered which does not correspond to the Exhibit, additional licence and maintenance fees will become payable as referred to in clause 6.2. For the avoidance of doubt each party shall bear its own costs incurred in the performance of its obligations of this clause." (Clause 3.19) Diageo had not hidden the integration between the SAP ERP and the Salesforce.com systems from SAP. It had also provided SAP with the reports required by clause 3.19.

10 SAP v Diageo [2017] EWHC 189 (TCC) Audits points to consider Why? Purpose and scope Who? Supplier? Third Party (NDA, etc)? Where? On premise or remotely using software tools? What? Details of Named Users? Use of s/w & Materials? How? Auditor (un)accompanied? On-site? Documents? Who pays? When? Notice Frequency Sub-contractor flow-down? Dispute Resolution

11 SAP s new April 2018 pricing model Digital Core SAP ERP, SAP S/4HANA direct access human logs on through interface Named user licence required indirect access any human, device or system indirectly uses ERP via non-sap intermediary s/w Gen2, Connect Pricing based on document types system generated records of commonly valued business outcomes from the Digital Core Customers can: Do nothing Exchange named user for document licenses Convert old licenses to new S/4HANA solution & contract

12 SAP v Diageo - key points Contract is King: terms addressing the following issues must be express, precise and clear: types of user nature and type of access scope of license interaction with third party systems and apps improvement/scope change charging mechanism, plus methodology for calculating changes in use type, access, etc. audit rights termination rights

13 New software deployment techniques impact licensing cloud/xaas, AI, RPA, APIs, SOA and OSS a puzzle until you realise what they do, then they re just software!

14 New software deployment techniques impact licensing cloud/xaas, AI, RPA, APIs, SOA & OSS - a puzzle until you realise what they do, then they re just software! XaaS

15 Cloud/XaaS (anything as a service) key licensing/ contracting issues: All: data format, ownership, return, termination SaaS: restrictions on use of s/w with other systems? PaaS: restrictions on using runtime/ middleware/os with other systems? XaaS

16 Artificial Intelligence (AI) machine control machine learning AI machine perception key licensing/contracting issues: writing up the project (SoW) ownership, etc treatment of data inputs ownership, etc treatment of outputs (reports) derived work (improvements through cognition, etc) regulatory - outsourcing

17 Robotic Process Automation (RPA) RPA is basically software people that replaces people processes with software processes It includes the following elements: 1. phase of consultancy/prof services to migrate/translate the processes from people to software 2. scope, map, timetable, project plan etc governance RPA process 3. s/w tools licensed to execute processes key licensing/contracting issues: interaction of the s/w processes with other s/w systems at several removes tools/tech licensing and fees/payment treatment

18 Application Programming Interface (API) server API is an interface by which an application accesses other software (operating system) It sets out the rules the application must comply with to call the other s/w (e.g. get the OS to print) data feed API Web services compliance ensures one application can run on different OS (portability) or work with s/w in another language (compatibility) APIs can be documents (specs) or s/w tools and routines, or a combination manager key licensing/contracting issues: Do you need an API licence? Are there any knock-on effects on what it interfaces to/with? Ongoing standards compliance obligations?

19 Software Oriented Architecture (SOA) orchestration software SOA SOA is built (architected) on associating (orienting) customer s required business processes (services) with the supplier s software. Key elements: orchestration: menu of applications to be selected and sequenced for customer ESB: middleware connects orchestration and application software. applications: s/w selected through orchestration & integrated through ESB to perform customer functions. application software ESB middleware Key licensing/contracting issues: Does SOA agreement/licence permit interaction with other s/w outside the SOA? Change/development inflight?

20 Open Source Software (OSS) modification permitted free redistribution OSS with source code OSS is software provided under licence that meets the 3 requirements of the Open Source Definition: redistributable without payment redistributable with the source code or well publicised access to it; and OSS modification & distribution of derived works is permitted Key licensing/contractual issues: in OSS, the licence wrapper, not the software, is different key issue is around copyleft (inheritance) requirement, esp in (L)GPL licences

21 New software deployment techniques impact licensing cloud/xaas, AI, RPA, APIs, SOA & OSS - a puzzle until you realise what they do, then they re just software! XaaS

22 Takeaways Licence scope clauses will need more attention going forward Commercially: software vendors are increasingly assertive on over-deployment Legally: software vendors are starting to succeed in enforcing licence scope clauses Technically: new software deployment techniques are interacting more widely The move to the cloud, APIs & interoperable systems makes clearly drafted licence scope terms critical new software deployment techniques systems can interact at several removes from initial licence align use case to licence scope terms... over contract lifecycle

23 Takeaways greater risk for licences in flight software licence non-compliance through overdeployment is inefficient risks extra charges (licence fees, legal, management time) delay, audit, enforcement needs clear, future-proofed licence scope terms avoid unattractive choice between: unbudgeted expense removing/working round offending software Customers: s/w use cases become more interdependent ensure deployment processes align use case to licence scope terms through contract lifecycle benefits of structured software asset management processes align use case to licence scope terms... over contract lifecycle

24 thank you Richard Kemp