Get ready for the shakedown...

People sometimes forget that software licence keys are only for the benefit of the software vendor, but give the vendor significant lock-in power over their customers.

Earlier today I had a fascinating discussion with a colleague of mine who works for a certain high-profile university here in Melbourne. He asked whether anyone had any experience with Macrovision's licence-key management software, FlexLM and FlexNET.

Seems that the university's IT department is running some software on one of their servers which uses Macrovision's software. You install the software, give it a set of licences, tell it which applications use it, and as users use those applications, the licence keys are checked out. Once you run out of licences, more people can't use the applications until some licences are released.

The IT department needs to retire the old, worn out licence-server, and replace it with new hardware. This wouldn't be a problem, except the licences are locked in to a particular server, and before they can migrate the software to a new server, they need new licences from the vendor.

Hence the shakedown.

Two software vendors are refusing to supply new licence keys unless the university buys maintenance contracts from them.

One vendor is just shooting themselves in the foot: their particular piece of software is used by only four people, and the university is prepared to do without it. But the other piece of software is very important, and the university recently paid US$60,000 for a set of unlimited licences. They're locked in -- without the licence keys, the software is useless, and the money they just paid out is spent for no benefit. The IT department is, understandably, quite peeved at the standover tactics the vendor is using, but don't really have a choice but to pay for a maintence contract they don't need or want.

It is a basic principle of economics that this sort of rent-seeking behaviour is inefficient: it harms the economy as a whole for the benefit of the vendor, instead of being a mutually-beneficial trade. The university does not need or want a maintenance contract, but may be strong-armed into paying extra for what they've already paid for.

(Note that this sense of "rent-seeking" is not the same as the ordinary meaning of the word rent, although ordinary rent can easily turn into monopolistic rent-seeking.)

With powerful lobbyists pushing hard for governments to pass laws increasing their ability to lock-in customers with Digital Restrictions Management software, expect to see a lot more of this sort of thing.