Software licenses will have exchange value

Buying software is often a throw-away expense. Agencies purchase software licenses knowing they have no resale value. Software vendor Bentley Systems, which makes geographic information systems software, said it plans to address such inefficiency with a new concept.

In September, Bentley will introduce the Annual License Exchange (ALE) program, which lets customers trade their software licenses for full purchase-price credit once a year.

With ALE, an agency can annually rebalance its technology portfolio to reflect new business needs, replace underutilized licenses, or adopt new communication and collaboration technologies, said Joe Croser, Bentley’s director of global marketing. An agency’s investment in software licenses doesn’t have to equal zero, he added.

Government agencies that don’t want to commit to a long-term enterprise license program might opt for the ALE model, company officials said. The Federal Aviation Administration, a Bentley customer, does not use enterprise licensing and could save money with ALE, said Malcolm Walter, the company’s chief operating officer.

In the ALE program, government contractors, for example, could potentially save money by not needing to license the Bentley software for specific agencies or projects as they do now. “The entity that they might be doing business with this year might be different than the one they might be doing business with next year,” Walter said.

Ray Wang, a principal analyst at Forrester Research, said the new license exchange program reflects Bentley’s customer-focused strategy. Users can adjust their software portfolios as they change and grow, Wang said.

For Bentley, the potential advantages are twofold, he added. ALE could keep customers in the Bentley family for a long time, and it could help engender greater cooperation between Bentley and its customers in developing future software.

Other analysts, however, warn that a license exchange program could create contractual problems for federal agencies.

When dealing with the federal government, contract changes are complex, said Jim Krouse, acting director of public-sector market analysis at Input. “When a government agency makes a purchase decision for a software license, there are well-defined terms and conditions,” Krouse said.

Trading in software for upgrades could violate contracting rules, he added. Competing software companies might argue that they did not have the opportunity to bid on the licensing. However, he said, some federal contracts might allow for such upgrades, depending on how they are written.

Bentley officials said they created the license exchange program to expand business. The company already counts as its clients 90 percent of Engineering News-Record’s top 500 infrastructure companies. The best way for Bentley to expand that customer base is to help its customers grow, Croser said. Offering new communication and collaboration technologies and novel licensing strategies will enable Bentley’s clients to undertake bigger projects, he said.

Bentley’s biggest federal customer is the Army Corps of Engineers, which licenses software under the company’s Enterprise License Subscription (ELS) program. That program gives the corps unlimited use of the company’s 150 products for a fixed annual fee. ELS offers flexibility, but it is available only to large organizations.

Small and midsize firms, including many subcontractors, cannot take advantage of ELS. Instead, they must purchase software licenses at a significant initial cost. Those companies could benefit from a license exchange program, Walter said.

In addition to developing new licensing programs, Bentley is buying companies. It has made 25 acquisitions in the past five years, most recently by purchasing Research Engineers and RAM International. The company reported revenue of $336 million in 2005, compared with $304 million in 2004.

Bentley’s competitors are primarily engineering, scientific and computer-aided design/computer-aided manufacturing software companies. Bentley also competes in sectors dominated by businesses that make collaborative software; content and document management software; and multimedia, graphics and publishing software.

Intergraph, a maker of mapping and design systems, owns about one-quarter of the company, according to Hoover’s.

Forty-seven of the 50 state departments of transportation use Bentley software to design and manage their state and municipal transportation infrastructures, company officials said. Bentley unveiled a new licensing program this past spring that the company said would give municipalities greater access to mapping and engineering software.

Freelance writer Dibya Sarkar contributed to this article.