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Second-hand Microsoft licences fuel startup

Not off the back of a lorry

A company that came up with the idea of selling second-hand Microsoft software licences said it has sold thousands of them in its first few months of operation.

The business model – based on acquiring licenses from insolvent companies – appears to be complementing that of traditional resellers, rather than undercutting them, according to Disclic, which sells through the discount-licensing.com site.

Disclic launched in November, and since then has sold 2,500 licences to around 50 customers, said Disclic director and co-founder Noel Unwin. The most popular licences have been Office 2000, Office XP and Office 2003, followed by Windows Server, SQL Server and Exchange Server. Disclic doesn't sell Windows OS (operating system) licences.

Though the company has only marketed in the UK, it has seen interest from as far afield as Australia and India, as well as the US and Europe.

Two and a half years ago, Disclic's partners hit on the idea of turning a profit from licences no longer needed by insolvent companies, with the initial idea of acting as evaluation agents in exchange for valuation commissions. After investigating the market, they realised they could sell the licences back into the private sector.

The process is complex, but perfectly legal, as certified by Microsoft. Disclic is now a Microsoft partner, and obtained Microsoft's go-ahead before launch.

"It's strange that the market was not identified before us, by another reseller," Unwin said. He said resellers probably wouldn't have thought to look into such a concept, since it would appear to conflict with their focus on selling the latest licensing plans.

However, Disclic is now working with resellers, who can bundle the 'open' licence agreements Disclic sells along with larger-scale 'select' licences, in order to reduce costs and improve margins. "One customer can have 10, 30, 40 open licences, you can have as many as you like," Unwin said. "There are lots of companies that have purchased open as well as select licences."

Resellers initially assumed Disclic would be taking business away from them, but in fact the resold licences seem to be appealing to a parallel market – including companies who ordinarily couldn't afford to become licence-compliant.

Another target group is companies wanting a licence that specifically covers an older version of a program, rather than the pricier option of buying a licence for the latest version and using downgrade rights. Those customers are likely to eventually upgrade to the latest product, putting money in resellers' pockets, Unwin said.

Disclic buys licences that aren't needed due to downsizing and insolvency, but nearly all of its supply comes from insolvency. "Insolvencies are not going to go away," Unwin said. "There's never going to be a lack of supply."

This story first appeared on Techworld.com.

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