Leathes Prior: Making good use of software licenses is vital for small tech firms

Alex Saunders, Leathes Prior

Alex Saunders, Leathes Prior - Credit: Leathes Prior

It has long-since been recognised that Norwich is increasingly reliant on its digital economy.

The financial success of tech firms hinges on their use of software and how they license it. Picture

The financial success of tech firms hinges on their use of software and how they license it. Picture: Dominic Lipinski/PA Wire - Credit: PA

In 2016, TechCityUK reported the tech sector in the city was worth about £148m.

The financial success of any tech start-up will hinge on how effectively it exploits its software. Software will generally be exploited by granting licences to use the software on the terms of a licence agreement.

Historically, a customer would be granted an on-premises licence where software was locally installed on computers at their premises. However, there has been a recent trend towards licensing software using the Software as a Service (SaaS) model, which makes software available online via a web browser, with data being processed and stored in the cloud.

The benefits of SaaS are apparent: costs tends to be lower as there are no installation fees, and accessing the software only requires log-in details and an internet connection. The SaaS model usually operates on a pay-per-user basis, so customers have flexibility to change their usage as appropriate.


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However, SaaS can present risks, so the licence agreement should clearly set out the responsibilities of the SaaS provider and customer. For example, the provider should consider what guarantees are made about availability of the software.

Unlike the on-premises model, software is hosted centrally by the provider, available to access 24/7. The licence agreement should address when the provider can undertake maintenance, and the customer's remedies if availability is less than guaranteed.

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The provider may also consider who is responsible for data input by users. For example, who is obligated to back-up data? What is the status of the data for data protection purposes? These are important issues, particularly given increased public awareness around data security.

Whilst SaaS may not be appropriate in all circumstances, it will continue to appeal to start-ups looking to exploit their software. Given the likely value of the software, it is crucial that any licence agreement adequately addresses the issues at hand.

Note: the content of this article is for general information only and does not constitute legal advice. Specific legal advice should be taken in any specific circumstance.

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