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April 1999

NewsWire Editorial

It's not a license to steal What's your opinion? Send your comments about this article to me. Include your name your company, or just post anonymously.

Ron Seybold, Editor In Chief

We learn our first lessons about ownership on the playground. There as children we watched playmates grab valued items like toys and declare their ownership. A struggle ensued, and some exchange happened: either combat and words, or an exchange of ownership. Something very similar is happening between Hewlett-Packard’s 3000 division and some of its customers this spring. The lessons learned probably won’t change much from those we recall from the playgrounds of our youth.

HP is suing three used-hardware resellers, businesses which it claims have stolen millions of dollars worth of intellectual property. The items in question are licenses, really. Webster’s defines a license as permission to act, to do something that without the license would be illegal. HP says the copies of the 3000 operating system running on some systems are illegal, not officially licensed. The businesses being sued haven’t replied in any public forum to the suits, so we haven’t yet heard their side of the story.

There is contrary comment on the HP action. In its best Wild West tradition, these comments are floating on the Internet. People are saying that HP wouldn’t have much reason to sue anyone if their products were priced fairly and uniformly across its product lines. Others are worried that the discounts now unavailable from these sued companies will keep people from owning HP 3000 systems. Finally, some comments have emerged about the murky nature of HP’s policies about transferring ownership. I think only these last comments have any merit.

One of the silver linings to suing over the used equipment is to show the durable value of HP 3000s versus other computer choices. But I’m getting ahead of myself.

In the first place, unfair pricing is never a license to steal. Comments about uneven pricing are comparisons that customers should always make. People are comparing auto ownership in trying to explain how unfair it is that an HP 3000 component or software costs more than its HP 9000 complement. It’s a dubious allegory at best. There’s nothing much like computer industry licensing going on in the automobile industry. Ownership of everything but physical computer systems is based on that permission we noted in our definition of license. You can own hardware, but it’s useless without software. And software is always a license arrangement.

Yes, people do complain about the cost of that arrangement. But simply stealing it, or failing to verify legal ownership, is a child’s remedy to the complaint. Clever people populate the computer business, and their rationalizations for acting childish are legion. It’s a community where intelligence is rewarded more often than ethics. Some say that makes it much like other arenas of commerce. We think it’s different, because the items in computing are so easy to steal.

People who would never think of stealing a diamond bracelet or a Mercedes can easily steal software, or programming that enables hardware. As their excuse they offer the unfairness of its price. The burglary that happens at the click of a key is just a grownup way of swiping that toy on the playground. Anybody who argues otherwise probably never created something worth stealing — a creation that can be pilfered easily.

Creating this newsletter was my first experience with this behavior. Like software, it’s easily pirated. Any copy machine can serve as the means. A few people have been so unthinking as to take what we produce without paying, then use it to sell their own products. This about-face in ethics continues to startle me, but once you have a product of value, people will find a way to steal it. You must learn to believe that nearly everyone doesn’t act that way, or you’d never create anything which you try to sell.

Secondly, some customers are concerned about the suits’ impact on low prices for those HP 3000s available from some used hardware suppliers. This premise asserts that HP’s legal actions will chase the affordable systems from the market, and drive customers out of HP 3000 ownership. If we subscribe to this theory, then any product that can be pirated will have a declining cost of ownership and profitability for its creators. This gives the makers no incentive to enhance and improve the product.

If there’s anything that’s a constant in this business, it’s requests to improve products. We’ve heard more than three years of dedicated, earnest requests to improve HP 3000 capabilities. A look at today’s list of enhancement requests from the MPE Special Interest Group shows many aren’t even planned. If the illegal transfer of systems and hardware took place as HP alleges, then millions of dollars of revenue never made it into the HP 3000 division budget. Nobody knows how many of the enhancement requests could have been planned and executed by now with that money.

I think any customer who’s purchased an HP 3000 and never paid a license fee for software — wittingly or otherwise — has diverted funds for enhancements. This isn’t a victimless crime. It deprives paying customers of a better product. This is the most costly sale of HP 3000s, a subsidy of a low-cost marketplace by ignoring license transfer fees. It would appear that HP has decided to end this subsidy and start collecting what it believes the HP 3000 is truly worth. One apparent byproduct of this business decision is to cut off a customer base that can only purchase systems without paying MPE/iX license fees.

It’s hard medicine if your company can’t justify a system purchase at a legal price. HP will lose some customers in this action. Those who can remain will have a better investment. HP is going to take some of the medicine itself, as the size of its installed base contracts. Expect the shrinkage to occur in the support revenues as well — fees HP won’t be collecting for “discounted” systems that will soon be unavailable.

That looks like an appropriate penalty for HP to pay — simply because I have to believe HP isn’t blameless for the current state of commerce. Brokers we respect in this market report that HP’s policies on transfer of ownership are treated like some kind of trade secret. HP’s top media people can’t yet point to a document that any customer or broker in the industry could read on request. That kind of policy clarity is only just emerging from the HP 3000 division, after years of disregard.

A single person at HP is responsible for approving all Software License Transfer Authorizations — the first document HP identified as Proof of Ownership for an HP 3000. If one person to approve sales transfers in a market with more than 20,000 active customers seems unreasonable, HP has a reply. They add staff as needed to handle the requests. Perhaps its renewed interest in legalizing ownership will make that staff a permanent addition. There certainly will be revenue available to hire them.

This tussle over the toys on the computer playground is far from over. HP must still prove the actions of the resellers being sued took place. There is an immediate benefit that all HP 3000 owners can reap right away, however. They can tell their senior management and shareholders that HP 3000s have lasting value — unlike alternative HP enterprise systems, allegedly purchased for a song and converted to look and act like HP 3000s. They have HP’s own testimony to that now: that 3000s “have substantially more features and functions than the HP 9000 servers, and are accordingly more valuable.” It’s as if the HP 3000 has been on trial, and has just been exonerated. Compared to HP’s Unix systems, it looks like owning one really is a steal.

— Ron Seybold

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