OK, I'll be honest. Someone awoke a sleeping bear with me regarding software licensing fees for VOIP systems. Sorry for another drag-on post.

A former employee at a former customer's site called today seeking a price for a phone system at her new company. She shared the horror stories about how badly the VOIP system's cutover went from day one. She did this "through the grapevine". They never received training as part of the deal, since their IT guy admitted that he really didn't know how to do this. He was just trying to save the company money on hardware and that they should be able to receive training assistance on-line. He got into his 1994 Isuzu with his $5,000.00 laptop and left the company within two months after "the sale".

I might also add that we were never offered the opportunity to bid on a new system, despite the fact that the system we had sold them was only three years old. IT man says "bad" and they jumped. We were the bad guys, since they didn't know how to program speed dials (24/7 phone support was there, but never consulted).

He was right, the manufacturer offered on-line training for end users at the rate of $450.00. She said that she absolutely snapped and eventually quit when she received an invoice from the new system's vendor to renew their software license. They are a tiny company, maybe 20 phones maximum. Their renewal fees were nearly $1,800.00 to keep using the system that they had purchased less than a year ago. This was assuming that they took advantage of the 25% discount by purchasing three months prior to their warranty expiration. If they waited, it would be almost $2,400.00.

The phones themselves were warranted for five years, "just like everyone else", but the license that they purchased for the system was for only one.

My company only sells TDM, or at least TDM/hybrid systems. The manufacturer offers a five-year warranty on hardware, which we extend to the customer. We only warrant the labor portion for one year. Most failures under warranty result in our having to ship them a replacement phone every now and then or some remote diagnostics. No big deal.

Why shouldn't we be able to force these customers into purchasing service contracts in order to receive the manufacturer's five-year warranty? As it sits now, our service contracts are not mandatory and customers are free to pay as they go should they desire to do so.

Maybe we should start telling customers who purchase new systems that they will be required to purchase service contracts for years 2-5 if they want to receive the manufacturer's warranty. I don't like it, and won't feel comfortable in enforcing it, but it seems to becoming the way of the times. It would still cost the customer less than renewal fees, not to mention the fact that we wouldn't have the right to cut their system off like IP-based systems can legally do.

They don't realize that they are buying a licensed computer program and some plastic things that resemble telephones. The software producer holds the keys to their system and they call the shots.

I am lost here. IT guys are stealing customers away from us left and right by forgetting to mention the license renewal fees in their sales pitch. The customers, as usual, are too busy looking at the bottom line price tag on the proposal to stop and read the fine print. End result: We lose a customer that won't ever come back out of embarrassment for another system purchase. It's only the "grapevine" contacts who will even share such information.

Hey Ed, it will take a while to filter down to the customer, to what they are doing. if you add on more money and tell them it just looks worse for you on paper.
Eircom here sell systems and in small print on back of their purchase contract, they have a 3 year maintenance contract at x per year. One customer saw this before signing and kicked them out.
People don't know anything about systems and are afraid to ask the one that looked after them for years, because they think its is the way to go and you will try to talk them out of it for your gain and not in their interest.
There is a lot of hidden costs with VOIP like POE switches...
What can we do but ride it out, it will get around.

I might also add that we were never offered the opportunity to bid on a new system, despite the fact that the system we had sold them was only three years old. IT man says "bad" and they jumped.

I'm glad you agree with me. When I said the same thing a few days ago some here said baloney, it's "because of my attitude". No, we are losing business because customers won't even consider us. VoIP is an IT product so that's where they go.

Sure, we can push VoIP like the CGs do but I honestly can't think of one customer we have that would benefit from it. And for sure, being the honest person I am, I would have to mention recurring licensing fees up front. Then we would never make a sale.

-Hal

Interesting Ed.
At the other end of the fence the license issue is taking another form.
I get calls from businesses that have a system they want to sell and they have the license...but I have to tell them I'm not interested..and it's because of license..they immediately tell me they have the licenses...I then explain that it's only good if I sell the whole system as one to one person..In other words I can't sell the phones unless the systems goes with it or there's a license problem...So there's not much of a market for these high end systems when they come out of service.
The poor customers...getting it at both ends.

Ask this awhile ago and no one responded. I would like to know what systems are requiring annual license renewals in order for them to operate year to year. Again please don't mention any hosted systems.

I saw that. I would like to see a list also and include the cost too. Maybe we could put it up somewhere in the public areas for all to see.

-Hal

VoIP is here and will grow not shrink. Most of us here sell hybrid systems TDM/VoIP that give customers flexibility they want or need.
On the other hand we have company's like the one Ed is talking about above who are sticking it to all who get suckered in.
It's our sale staffs job to convince their client everything Ed stated above. Here In St.Louis we have some pretty good examples, one is a school district, Cisco just about gave the equipment away, the next year they busted the districts communications budget when they had to renew and purchase new licenses.

cisco fees

Cisco,Vertical, Altigen, Zultys, etc etc etc.

Just Google the IP manufacturers name plus license fees and enjoy.

Update to link above. Apparently Cisco now has graduated convoluted 1-6 seat licenses for different handsets appliances.

more cisco license info

After reading that, I still don't understand the fees. Good grief!

Although you probably won't rep for a voip manufacturer long, consider offering apples to apples as best you can. You know 8 X 20 with cost of equipment, cost of lines vs ether, (Tricky, huh?) costs at end of 1st year, you then get to show them Licenses versus .........? Then show them how you transfer a call on each type of phone. Bring up external paging if applicable. Analog applications, fax, CCV, alarm(s). Don't forget to show the cost of NEW CAT5E/CAT6 network versus the already in place (or not) CAT3 or less cabling. Then show them the PSTN 'cloud' with dotted lines for voip, versus solid lines for POTS lines. If they ask why the dots, hesitate and then 'admit' that voip still has some issues that are VERY expensive to cure. "Your gonna lease the equivalent of 2 PRI's to get decent audio!" And the circuits are NOT 100% reliable. 99.5 maybe, but POTS are 99.99999999999 reliable and 'stuff' ALWAYS goes bad at the WORST possible time! It's going to take some serious training, and more thought for presentations, but, if you get it across, you'll NEVER lose that customer to voip, 'cause you ARE going to be there with voip when it is really what it's supposed to be! Hmmm, maybe I'll try selling strictly against voip and get out of the tech side! The emphezema has me pretty much helpless anyway! John C. (Not Garand)

Based on what i have read there is no annual fee, unless of course your confusing this with a maintenance contract. After i posted i contacted an IT manager of a call center, whom recently switched out their Alcatel units for Cisco call managers. He vehemently expressed that there is no annual license renewals.

My opinion is while i see how exeburant the cost can be (for device and added feature licensing)this is really no different than what i have experienced with Nortel as of late. The BCM and CallPilot voice mails are prime example of this, its all about licensing.

That's for Cisco as of late...we'll see where the 3rd party SIP licenses go. Ask a Televantage owner now. Or Altigen now or...I've found 7 other manufacturers and counting.

The other night on Chat I ask about Liscensing and the VOIP advocates on the board acted like there weren't any unless you chose them,Why would you sell a product that you could not use to it's fullest without these reacuring fees.

I found this in a search, basically some city budgeting their finances...

Director Rains reported that in 2001 the City of Casa Grande launched the Voice Over Internet Protocol (VOIP) telecommunications technology at the Police Department. This technology moved the traditional telephone equipment, better known as a PBX, to a computer based application that would operate over computer equipment, network and infrastructure. The application that was selected for this technology was Televantage. It was acquired through the Arizona distributor, MBT Inc. In 2004, the second phase of this project was completed when the City Hall system was moved to VOIP with the same products and equipment. The completed project allowed the organization to begin utilizing a 3-digit code for calling staff and other departments. Prior to this, a 7-digit number was required. There are numerous advantages that have been recognized with the new technology. The acquisition of the annual software subscription allows the organization to maintain the most recent upgrades that are available for the application.

Reading the last sentence, it seems clear that the renewals are nothing more than mere scare tactics about being "current"; not that the systems will shut down and cease to operate. Maintenance contracts.

Apparently Casa Grade never heard of Centrex.

Today I did my dog and pony show at a customer. This is the one I have been talking in the Installer area with the outgrown Partner.
I got the pleasure of coming in last because I'm the incumbent. Amazing. I didn't get to see the names of the bidders yet, but they propose to do a hosted solution. If you call from your desk to the desk next to you, you go to someplace in NY to set the path on the ethernet and come back to your neighbor. Sip city, I guess.

This is a 9 year old company. I took over about 5 years ago because I'm about 5 miles from their front door and the other vendor was 100 miles away. I have seen them grow from 4 lines and 18 phones to the present 6x40 and the VM to 40 mailboxes. (two building expansions).

So as I pitch my Panasonic TDA, I answered all their needs in terms of paging, AA with English and Japanese prompts, and timed forwarding to external cell phones, future growth to 160 ports, and a generous trade in of the Partner hardware, they keep asking "how much a month for maintenance and renewal?" "How much to port our lines to alternative carriers" Huh?
I give them a blank look. Gee, Mr. Customer. YOU OWN EVERYTHING! The lines are converted to PRI as part of the service, not VoIP, not hosted phones. You might be charged T&M for software upgrades and MAC work like you have in the past, but there are no other charges or fees.

Wish I could see the proposals...and I probably will get to do that in December or January :-)

Carl

It is like my father in-law, he use to think, if he did not pay through the nose for something was no good. I remember when times were tight the customer would keep getting the system repaired and keep the system for 10-15 years, now they have the CG employed and he says the system is no good after 5 years, the boss doesn't know what the CG is on about but rather than looking stupid he agree's.

We dont have great broad band here and no sip-cip lines yet, but computer companys are selling the systems saying future proof yourself with this product, but not telling them they will have to buy a shed full of licenses and hardware to upgrade?

Since I think gene is talking about what he asked me, I'll clarify a little for the avaya side.

I don't know details about any systems with recurring license costs so I'll speak what I know.

Licensing for certain features are nothing new in the telecom world. The majority of voicemail systems out there have had some sort of license on top of the initial hardware and/or software cost for a very long time.
Nortel uses license codes for things such as PRI, voicemail, etc.
Avaya Definity system has had licenses long before VOIP came along for several functions also.
The Avaya IP Office has a long list of licenses for things too. The licenses for the IP Office are NOT recurring and are not needed for normal telephone functions. If you have hardware for X amount of phones, then X amount of phones will all work the same. It doesn't matter if they are TDM based or IP based, no license required. The licenses are generally for advanced features that many users would not have a use for so why roll the cost of such features into the system for those who do not need it. Here is just a few options that require a license:
Mobile Twinning-seemlessly handle calls from either your extension or cell phone.
Phone Manager Pro-pc application to control phone and pop up external programs such as ACT.
Phone Manager Pro Softphone-VOIP phone on your computer.
SIP trunking- for those brave enough to try it. lol
Advanced Networking- hotdesk between multiple systems.
Voicemail Licenses....
Networked voicemail- integrate multiple voicemail systems
Text to Speech
3rd party database integration /IVR
VB scripting
contact store - call recording library
conferening center
extra ports - no additional hardware required.

and the list goes on. Many of these licenses also have a 45 day trial license to see if you actually need the feature offered and all of the licensed features are "buy it once".

From the Vertical side... if your system is licensed for an 8X24 and you need to add a station or trunk or optional module ALL licenses must be current at the supported level. There are fees for sets and trunks. There is a software subscription fee that also insures software assurance to keep your system up to date. Without software subscription you are not kept up to date unless it is done manually. Licenses are not issued to previous versions of software that have been end of lifed. Again this is not a maintenance contract. It is a digital key to the castle. No current license= no support or expansion.
Nortel PBXs have used ISM parameters in groups of 100 for TNs associated with their PBXs for years. They would even support up to up to 5 levels back of previous software. Even more than 5 levels back would still get tech support but no new bug fixes or patches would be supported.

The new IP mentality is software charges that never go away. Endless patches and upgrades that take much longer and are issued much more frequently that TDM hybrid systems. One dealer was complaining that the IP Office took around a hour and a half to patch and upgrade. Does the dealer take that charge in the shorts? Does the customer pay? I have several 300 phone plus MP5000s that are upgraded in 45 seconds.

We did have one customer that we did sub work for call one Monday morning and asked that we contact them via cell phone...they didn't renew their software licenses and their IP switch was dead. I'll see if I can get the manufacturer name from them.

Well first of all... if it takes someone that long to do an upgrade, they are doing something wrong. If the dealer is installing a patch for a bug found, then I would say the dealer should have tested more, researched the known caveats, or chalked it up to the cost of doing business and not charged the customer.

If the customer is requesting an upgrade to a newer version for additional features, then that is more than fair to charge the customer.

I think that there's some confusion here regarding the difference between licenses and upgrades. When I refer to licenses, I'm regarding to "right to use" fees that must be paid for the right to use the system's operating software for a fixed term.

Upgrades, keys or codes are purchased on an as-needed basis for a one-time fee. The "codes" mentioned are simply upgrades, meaning that the features are there, but they just need to be unlocked (and paid for) in order to use them. That makes perfect sense and there's little chance that anyone would argue that point.

The bottom line is that there ARE many VOIP applications that require software subscriptions. One manufacturer even touts this as being a "guaranteed revenue producing tool" for their dealers.

I believe that we have reached the point of "thou dost protest too much". Licensing fees are real.

Licensing fee's are real, and are the biggest scam in the software industry. It's like a car manufacturer selling an extended warranty, they are considered free money.

Maybe sometime this weekend i'll sit down with some nice green tea and relax and formulate a nice ed-style 1000-word post to add to why it's such a scam and furthermore why it still exists.

Anyone remember Circuit City's DIVX experiment?

https://hometheater.about.com/library/weekly/aa062199.htm

Right to use has been in the Definity/Communication Manager world forever. It stinks!!! 1/2 of the cost of a new PBX is right to use. Thankfully the RTU costs are only a one time fee.

To make matters worse, with CM4.0 and greater Avaya is making you sign a 3 year maintenance assist contract.

you relize that even panasonic is moving in that direction if you want to add 16 sip trunks to the
tde in the virtual trunk card slot it will have a
activation fee

There is a difference between licensing to add features than licensing just to continue using the features you already bought......

ED, I hate it, but the senerio you explaned has happenes to us alot..

Its a no win situation you have to somehow convince the customer that the IT guy they hired and trust to handle this stuff, is wrong!!!

its actually refreshing when you have an IT guy that when you mention voip says "why would I want voice slowing down my network, I have enough to worry about"

As I mentioned in another post, at the company I work for software assurance/maintenance fees are not unexpected. We've paid them for our Microsoft software, our mainframe environment, and on other applications. I can't speak for a mom-and-pop type company, but for a mid-size company like us this is just considered a part of doing business. I'm not saying this is right or wrong, just that I don't see any of our upper management considering it as unusual for phone system licensing to work this way as well.

Just out of curiousity, other then the one-time Right to Use fee's for microsoft licensing (Server and CAL's), what maintenance fee's do you pay them?

I am not aware of any licensing scheme that microsoft has with recurring right to use, just one-time up-front licensing.

Software Assurance (SA) for all server and application software. That software assurance lasts 2-3 years depending on your licensing level. After that, renewal of software assurance is required in order to receive updated versions of the software. Same is true for our Citrix software, Lotus Domino, Antivirus, etc. Each vendor might call it something different, but it's all really the same.

Some items I'll purchase without the SA if I don't think that I'll be upgrading in the near future. I did that with our Microsoft Office software as we've been using Office 2000 for 5+ years. Now if I want to upgrade to Office 2007, I'll need to purchase all new licenses for that.

It's really just a numbers game. If, for example, the software assurance cost runs 33% of the cost of new licenses for a two-year term, then it makes sense if you plan to upgrade to a newer version within 4-5 years.

Of course, with some software you really are forced to keep paying the renewal fees. With our anti-spam software, for example, we may not get the updates to keep our inboxes largely spam-free without paying the renewal fees (annually in the case of that vendor). Of course we've blocked over 11 million spam messages in the last 2 years, so that cost is certainly justified.

Microsoft usually only slates new releases every 3 to 5 years and if it isn't broke then upgrading wont gain you much unless there is some new feature/services you desperately need.

M$ also gives you the updates and service packs as part of your license so the only thing you need to buy a major version upgrade (IE Office 2003 to 2007, or Server 2000 to 2003).

As you stated all software is different but i've never ran into a microsoft installation that has ever had any SA contracts. I am sure they are out there but it is a fairly rare thing.

If I buy a Dell, I don’t pay them every year to allow me to keep using it. Microsoft puts out software updates and patches for their product and charges for upgrades to newer products. Anti-virus software is purchased and updated for a while. If you want to be protected from new threats, you have a subscription service. I realize there are some software programs with yearly fees.

When I buy a phone, pay for the hardware, software, options, initial licenses etc. The phone should work until it breaks or I want to change something. Software assurance is an option, if Microsoft had right to use fees… your server would stop when the license expired.

Well Steve was talking about Software Assuredness (SA), which is where you usually pay around 20-30% per year of what the new software (estimated) would cost, and if any new versions come out, you get them and the support to install it covered under your contract. That's why SA is only economical if you think there will be MAJOR versions coming out in the next 3 to 4 years, otherwise you are better saving the money in the bank and buying the new version when it comes out.

Think of it as paying 20% of what a new phone system cost every year, but always having the latest and greatest features and hardware.

An annual right-to-use license is a scam IMHO.

So let me get this right Cisco will charge a licensing fee to keep there phones up and running? What other companies do that Nortel is one time charge and Avaya is one time charge is the Vertical VOIP the same as Cisco? or is the Cisco a one time charge have seen many diffrent post and still trying to figure it out. We ended up with microsoft. Which isnt in the telephone side yet.

Cisco is currently charging one time for endpoints as bought. Their convoluted licensing however can result in certain IP sets considered as being anywhere from 1-6 licenses. (IE 2 specific sets could require 12 licenses). The fun begins on upgrades and additions.

Unless I'm forced, I never buy into software with an annual right-to-use or otherwise mandatory annual maintenance licensing. I will take a FEW exceptions to this such as Anti-Virus software or other software that has a high dynamic component to it. If the developers want to make money they should charge it upfront, and not pull a bait and switch. The bait and switch being they sell you the software for a pretty but not outrageous penny, you build it into every facet of your company, and then they pull the strings on it unless you pay them.