PREO CEO Boris Vöge in an interview with CRN

In an interview with CRN, PREO CEO, Boris Vöge talks about the development of the used software market.

CRN: Mr Vöge: How did 2014 play out for PREO and how has the initial period been for your software exchange li-x?

Boris Vöge: 2014 was a good year for used software in general and a very good year for PREO and Li-x in particular.

PREO was able to increase its turnover by approximately 50 percent. The increases are split across all sectors. In doing so, we take inspiration from our large base of existing customers, which was carefully built up over the course of the nearly 10 year history of our business. Today – also due to certified processes – PREO stands for a high degree of integrity. It’s because of this that a large media group chose PREO when selling 200 SQL Server 2014 processor licences. More and more insolvency practitioners are part of our customer portfolio that is having software licences from their proceedings utilised by us. In this way for instance, licences from Neckermann and Praktiker were able to be recently resold.

With li-x, we brought a completely new business model to the market in 2014: A marketplace for used software licences with a pricing structure similar to that of a stock exchange, of which there’s only one worldwide. The feedback from small and medium-sized computer retailers in particular, is extremely positive, which can be traced back to two important advantages:

  • li-x offers access to a secure market for used software.
  • Handling used software is quite complex. We have put in place a well-structured and simple process for this, which takes into account all legal requirements.

CRN: What do you expect for your business in 2015 and the market for used software generally?

Boris Vöge: The market will continue to grow sharply in 2015. The potentials are huge and, together with our reseller partners, we enable user companies to partake in the considerable savings potential of used software. We consider PREO and Li-x to be in a great position and an ideal combination.

We expect the market to consolidate in 2015, 2016 at the latest. A multitude of market participants that are surging, but are unscrupulous, will leave the market once again. We recommend that resellers do not trade in software from businesses that do not disclose origin when buying or cannot prove this either (the keyword here is a transparent chain of rights).

An increasing number of dubious businesses are just selling keys – but which don’t show a software licence. They are trying to give their sales a reputable look by rebuking volume licences. In this regard, one must exercise extreme caution.

To offer resellers a secure software procurement and sales option for their customers, we have developed a controlled, fully transparent market with Li-x. Every licence is checked before trading and complies with the framework conditions of ECJ and FSC legislation. Our aim now is to constantly expand our product range.

CRN: Do bodies and business that want to switch from XP to Windows 7 or 8 currently make up a noticeable proportion of used software purchases?

Boris Vöge:  Some companies still use XP, but this is mainly for computers with no internet access. Apart from that, we have happy to procure enhancements or replacements – also via Windows upgrade licences from volume contracts.

CRN: Which software is currently in particular demand then?

Boris Vöge: The demand is dominated by the current and previous release respectively, with Microsoft Office its 2013 and 2010. In addition, Windows, Exchange and SQL Server releases up to 2008 in all variations are in demand – from Standard, Enterprise to the Data Center. For Adobe, demand is focused on Creative Suite 6 products and the previous version 5.5.

Incidentally, we are noticing business interest in reselling all tradeable licences, this includes CAD/CAM products, helpdesk systems, CRM and ERP software and even licence management software. Li-x will also have offers for products like this in the coming months.

CRN: Has Microsoft done the used software trade a favour by changing to Office 365, as many customers would rather continue using the classic box packages?

Boris Vöge: With rental models such as those from Microsoft and Adobe, the software industry is pursuing two essential aims:

  • First of all, the Customer Lifetime Value, i.e. the revenue from a customer over the duration of a business relationship, should be sustainably increased. To this end, exit barriers are being created that make a change to a competitor in the future more difficult.
  • Secondly, the gross margin for the software group should be increased. This is only possible to the detriment of dealers and computer retailers. A monopolist with direct access to customer no longer requires intermediate trade. As a result, manufacturers such as Microsoft and Adobe are best placed to shut off intermediate trade completely.

Companies that decide on a rental model sell their licences that are no longer required to refinance their rental costs for the first one to two years. This is very attractive to businesses and reduces rent to zero euros for a significant period. The licences that are subsequently offered on the market as used software help companies that don’t want to put themselves in rental dependency, to provide significant savings for the next few years. You are saving on the constant rental costs and you remain independent in your decision as to when you use which software release.

The current market situation offers the best prerequisites for computer retailers and IT advisors. The used software market is an ideal business enabler for computer retailers. What software groups are denying them is now enabling companies like PREO and Li-x, who are also still in the process of providing know-how of the whole process to transfer software licences. In this way, Microsoft Enterprise Desktop licences from Enterprise Agreement contracts are currently available on Li-X for the price of a used Office package, which have, up to now, been offered as ‘all inclusive’ licences with Office Professional, the Windows operating system upgrade and all important CALs, exclusively by the large Licence Service Providers.

Resellers can focus on their core business and can be supported all the way from buying used software to delivery to their customers. The advantage of the online marketplace is that trading is quick and at the click of a button.

CRN: With Windows 10, Microsoft is giving away an operating system for the first time and will probably introduce a rental model for this in the not too distant future. Could this mean the end of the used software market over the long-term?

Boris Vöge: The market for used software is developing nicely as you know. Of course, rental models restrict market perspective for the respective products. However, if you consider the large XP migration jam, then it becomes clear that e.g. Windows operating systems have a lifecycle of up to 12 years – Windows 8.1 was just launched in Winter 2014. Together In 2026, we will look at the market that is current then.

CRN: How great is customer uncertainty due to publicised cases of fraud such as the one at PC Fritz?

Boris Vöge: PC Fritz won’t have been the last company to commit software fraud. Of course, this creates market uncertainty. If the consequence of a detailed inspection is what is being offered to users and resellers, then this should be viewed in a positive light. As a rule, fraud should be condemned, but it doesn’t just happen in the software sector, even brake pads for powered vehicles or headphones from top brands have been counterfeited. In the case of particularly cheap offers, you must generally err on the side of caution. In addition, customers should only sell and buy software licences if the initial licensee and the original contract are named specifically.

CRN: What is the best way for resellers to convert their customers’ used licences back into capital, in the event of any migration projects?

Boris Vöge: By you selling this to PREO, either for an instant one-time payment or offer it for sale yourself via Li-x for an appropriately high amount. With PREO and Li-x, selling is just as easy and secure as buying. The easiest way for the reseller to get in touch with us is via our websites www.preo-ag.com and www.li-x.com. There he/she will also find the phone numbers to deal with us directly.

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