Alternate Models for Acquiring Technology Products and Services

• Author: J. Fraser Mann
• Pages: 319-340

319

Chapter 13

Alternate Models for Acquiring

Technology Products and Services

j. fraser mann

A. INTRODUCTION

The increasing competitiveness of the technology sector, and the growing

reliance on technology by all public and private sector organizations, has

resulted in the adoption of increasingly innovative technological solutions.

“Traditional” business models have evolved and any organization seekin g

to update its technology can f‌ind a broad array of commercial arrangements

to suit its business needs.

In this chapter I set out t he essential features of four types of business

models t hat an organization m ay use in order to acquire and implement

new technology. I also describe the c ircumstances in which each such

model may be deployed, and the key terms and conditions which should be

included in any agreement required in connection with each model.

Each of the business models described in this chapter cannot be consid-

ered as wholly separate and distinct from the others. To the contrary, an or-

ganization that wishes to implement new technology may adopt and modify

elements of more tha n one model in order to a rrive at an overall business

solution. However, each model has certain conceptual features that distin-

guish it from t he other models. Accordingly, it is important to understand

the distinct features of each model and the issues that need to be addressed

in the agreement required to give effect to the proposed transact ion.

320 j. fraser mann

B. AN OVERVIEW OF FOUR KEY BUSINESS ARRANGEMENTS

The specif‌ic types of business models that are desc ribed in greater det ail

below are software licences, technology purchases, outsourcing agreements,

and application ser vice provider (ASP) ar rangements. Eac h business model

involves the prov ision of certain products or service s, or s ome combination

thereof, in order to permit the customer to carry out its business operations.1

1) Software Licence Agreements

Licence agreements are the most common means for the commercializa-

tion of technology. The essential feature of a licence agreement is that it

permits the owner of various t ypes of intellectual property to grant lim ited

usage r ights to other persons.2 In particular, in the case of non-exclusive

licences, numerous licensees may be granted the same or simila r usage

rights simultaneously.

Where the technology consists of computer software, the licensor makes

copies of the software available to numerous licensees for use on the cus -

tomers’ own machines and at their own premises. The licence agreements

will generally impose various limitations on the rights of licensees, such as

restrictions on the type of equipment or the facilities on which the software

may be used; the place or duration of use; and the per mitted purposes or

area of endeavour of use.

Recent c hanges in business models have necessitated changes in the

manner in which software is licensed. Computers have become networked,

so end-users may access software from multiple locations. At the same

time, softwa re may need to be installed on multiple computers, including

laptops, in order to meet the needs of licensees. Licensees may also require

the right to allow their service providers (e.g., outsourcing companies) to ac-

cess and use the software in order to provide services to the licensees.

Licensee agreements were traditionally stand-alone transactions. More

recently, licences represent one aspec t of a larger commercial transaction,

such as a development or customization agreement, a master software and

services agreement, and a large-scale outsourcing transaction. L icence

agreements may be entered into in a variety of ways, including by means of

1 See, generally, D.M. David son, “Project Controls and Computer Contrac ting” (1983) 4

Computer L.J. 133, and D.M . Davidson, “Negotiating Major System P rocurements” (1982) 3

Computer L.J. 385 at 409.

2 See, generally, M. Liberman “Overa rching Provisions in Soft ware License Agreements”

(1995) 1 Rich. J.L. & Tech. 4; see a lso M. Erdle, “Software L icensing Agreements: An O ver-

view ” (Paper presented to t he Ontario Bar Associat ion Continuing Legal Educ ation, License

Agreements and Sof tware Use Contracts, 17 Apr il 2001) at 11.