Fair Principle 7: Contractual terms shall allow customers to use progressive or innovative technologies and deployment models.

Fair Principle 7: Contractual terms shall allow customers to use progressive or innovative technologies and deployment models.

Fair Principles 07bTuesday 23 August 2022

Business users associations Beltug, Voice, Cigref and CIO Platform Nederland call for a balanced cloud market: 11 fair principles to unleash Europe’s digital potential. Fair principle 7 calls for that the contractual conditions should enable customers to make use of advanced or innovative technologies and usage models.

Thanks to cloud computing, software-as-a-service and other concepts, digital technologies ensure that data can be made available to the user as a utility. A business model we know for years from the "traditional" utilities such as water, gas and electricity. 

The contractual terms and conditions of these traditional utilities are quite simple because everything revolves around a clear measurement of usage expressed in m³ for water and kWh for gas and electricity. With a digital utility such as data, however, it is more complex because the flow is bidirectional between provider and consumer while the different phases (processing, storage and transport of data) are constantly evolving. In addition, the costs of processing (expressed in FLOPS or MIPS), of storage (in Gbyte) and of transport (in Mbps) continue to decrease.  

Software terms and conditions are always based on underlying technologies. But, when underlying technologies progress faster than the software terms, a disconnection between the usage, now based on the advanced technology and the software terms is created. The software terms and related pricesstill refer to an old concept of calculating the required entitlement, while the new technology has progressed to a different concept. Vendors use terms and conditions in their favour if they can be interpreted in such a way that the customer needs incremental investment to cover the same functionality, while the technology allows for better use. So, instead of making cost decreases possible, software vendors use new technologies to make the customer pay more. This is only possible because of the lock-in experienced by customers. 

Therefore, our 7th principle is this: software terms should within reasonable timeframe adopt rules that give the benefit of technological progress to the customer. More granular and efficient management of compute resources should be recognized and supported by a vendor offering to run the software on such advanced technologies and allowing the customer to also reap the benefit.  

In addition, the rapid evolution of digital technologies is not only an opportunity to lower the price but also an opportunity to simplify software terms and conditions. Some examples: 

  • Business software and cloud services that are offered on a ‘seat’ basis, cannot be uniformly quantified in the current way of technology delivery and modern office environments. The concept that one seat implied a physical computer installed on an employee’s desk, has been long replaced by portable or even virtual end-user devices that no longer relate to one single dedicated desk of an employee. The quantification of seat becomes therefore obsolete. 

  • Software terms refer often to processor licences as indicator of traditional physical on-premise workload. As such, they ignore the technologies that create more advanced levels of virtualised workload. Customers and infrastructure providers moved from physical compute power to virtual compute power and more recently to containers, while the software vendors create increasingly complex licence calculation to increase the required entitlements. In principle, the software of the vendor has no link with the virtualisation and container technology. Both technologies relate to the cost of compute power, not to functionality and should therefore be banned from software contracts. 

Together with principle four, five and six, this seventh principle confirms that there is still plenty of room to simplify and shorten the terms of use of business software and cloud services; contractual terms shall allow customers to use progressive or innovative technologies and deployment models. 

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