As I understand it, you are asking two questions. First, what are the ways an ISV can license their software to another party who will be reselling/delivering the application via the SaaS model. Second, how will the arrangment change if the ISV is licensing into a virtualized environment.

I think there are two different situations: Either the ISV's app is a minor component of the SaaS deliverable or it is a major component.

In both cases I would try to align the licensing metric (what you charge for) with the SaaS deliverable's value. For example number of paid users...

If you are a major value-add to the deliverable, you may even be able to get a share of revenue. Minor components can't be so demanding and may have to license on the basis of CPUs (which is a loser) or a flat fee which can be derived from a price list where prices vary by size of site/offering/customers.

In both cases, payments should align with the SaaS vendor's payment arrangements with their customers e.g. monthly. If they do paid up licenses for multi-year deals, do that.

As for virtualization, I'm not sure it figures into this discussion if you license based on the SaaS deliverable. If you license as I indicate above, who cares what the number of CPUs or instances of the app may be?

If you are stuck with a hardware based metric (CPU), then I think you have a real problem. I don't think license manager technology has come far enough to include license tracking in virtualized environments but the other moderator (Dominic) may know.

Besides, if you are a minor player, you may not be able to get the SaaS vendor to do license management.

HTH

Jim Geisman

[COLOR=DarkRed][B][URL="http://www.softwarepricing.com"]Software Pricing Partners, Inc.[/URL] [COLOR=Black]+508-647-0330[/COLOR][/B][/COLOR]

IÂ?m interested in the structural aspects of the hypothetical transaction, and IÂ?d like to be sure I understand the facts correctly.

Is the licensor also a SaaS vendor who wants to license the SaaS service to an online reseller who will resell the SaaS service (a services transaction -- no software is delivered)?

Or is the licensor an ISP who wants to license and deliver software to SaaS reseller who will resell as a SaaS service (a software transaction -- software is delivered)?

Also, please explain what you mean by licensing into a Â?virtualized environmentÂ??

IÂ?m just trying to make sure I've got this right.

Thanks.

Chip

Disclaimer: my comments on this forum are for informational purposes only; they do not constitute legal advice, and should not be construed as such.

I completely understand the differences among an end user, SaaS vendor, and ISV.

My questions focused on structure -- what was actually delivered from the ISV -- whether a software application or a service.

I believe your answer indicates that a software application was delivered, not a service.

We are currently structuring services transactions where the licensor provides a SaaS service (as distinguished form a software application) to a licensee-reseller for resale as a SaaS service.

A few years ago, this was typically accomplished by a linking-framing arrangement where the licensor provided a link to the resellerÂ?s site and the licensorÂ?s content was Â?framedÂ?. This was typically a private label (or white label) transaction.; however, any web savvy person could easily see through the framing technology to learn the identity of the licensor.

Now, weÂ?re seeing and structuring services transactions in a virtualized environment, where there is no link between the licensorÂ?s site and the resellerÂ?s site Â? there is only a single server with multiple possible site instances, each with its own domain name.

With the virtualized environment, the licensor runs a single server with multiple, partitioned website instances, some of which may be customized for private label (or white label) purposes. Since the licensor in this structure is hosting all of the virtual sites and with them all of the customer data, the licensor potentially assumes significant liability for data privacy and security.

So, todayÂ?s technology provides exciting new ways to accomplish the resale-of-SaaS services transactions, but the legal complications are challenging.

Chip

Disclaimer: my comments on this forum are for informational purposes only; they do not constitute legal advice, and should not be construed as such.