Today, many software vendors are undergoing a transformation. Motivated by developments as diverse as the availability of the Internet, improvements to bandwidth and network technology, changes to software revenue recognition guidelines, and changing ideas about software shelf life, many software licensors have been switching to application service provider business models during the last few years. When a software licensor changes into an ASP, several intellectual property and related commercial issues arise. Knowing what they are will help you to prepare your client for the transition.
Licensing business models — models that involve selling copies of software for users to install and run on their own computer systems — present many obstacles. First, software often becomes outdated quickly, sometimes only months after its installation. Also, software maintenance and end user support on customer premises continues to be expensive and introduces unknown configuration and environmental issues into the technological picture. Finally, having to renegotiate license agreements for upgrades makes it difficult for newly public software vendors to predict their revenue accurately to report to the capital markets.
