Software licensing has gotten especially complicated.  Virtualization has made administration of upgrades and patches a breeze but you can't assume that you're living up to your software agreements.  Certainly the Microsofts of the world wouldn't agree!

Go ahead, admit it. You’ve peaked at your opponent’s cards during a poker game. You’ve texted while driving. And maybe, you’ve even cheated a little on your taxes. Those relatively mild indiscretions haven’t resulted in any major repercussions and so you say, no harm no foul.

You might want to rethink that strategy the next time you decide to copy the current version of Microsoft Word onto a new computer or share that accounting software on your office network. The results can be dramatic. Consider these recent headlines.

A Denver-based construction company settles claims for unlicensed software totaling $114,000. A Dallas-based healthcare firm agrees to pay $136,000. A Pennsylvania car dealer ponies up $107,000 to Adobe and Symantec. The U.S. Army settles with a Texas software firm for illegally installing software on servers and thousands of devices. Price tag…. $50 million dollars! Do I have your attention now?

Software license compliance is big business for business these days as a host of software licensing service companies have cropped up over the last few years.  Over the last decade, software vendors have banded together to form organizations like the Business Software Alliance (BSA) and the Software Information Industry Association (SIIA) to combat that sometimes innocent (and often times not) pirating of software licenses. They’ve beefed up licensing rules and launched thousands of audits to protect their intellectual property and make sure that businesses are in fact paying for what they’re using.

Is your business compliant?

With the advent of desktop and server virtualization, it’s critical that corporate IT departments know the rules and abide by them. For larger organizations (1,000 employees and up), total software licensing is often the single largest IT operating expense element after payroll. Each of these applications may have complex EULAs (End User License Agreements) that are highly sensitive to virtualization and can lead to very significant penalties.

A survey by King Research revealed that two out of three IT executives are not confident their departments are compliant with software licensing agreements. As such, they are turning increasingly to Software Asset Management (SAM) tools to manage and optimize software within their networks. A good SAM program will track the number of licenses purchased with the number actually used, conduct a regularly scheduled inventory and review how the software is being used, and check to make sure that all is being used in a legal manner. Most importantly, SAM programs track when licenses are up for renewal.

Software License Advice

Perhaps an Infrastructure Assessment is in order to make sure your house is in order.  If not, IT communications consultant Abhinav Kaiser offers the following prerequisites for implementing an effective license management system.

  • Make a List: Put someone in charge of licensing and make them responsible for inventorying everything you have purchased, where you bought it, and where it resides on your network. Then give them the digital resources to manage it.
  • Software Asset Management Tools: Invest in database software capable of recording various types of licenses against their respective owners. Kaiser suggests FlexNet Manager by Flexera Software, Software Asset Management by Microsoft and License Manager by License Dashboard but there is also free software available for download.
  • Software License Auditor: Audit software deploys along with the SAM tool, documents what you have, and consolidates a list of the total licenses residing on the network.

But what if the auditor comes calling before you have everything in order?

Most likely, you’ll only have a short time to prepare so be sure to gather proof of purchase information (copies of paid invoices are best), OEM installation manuals to show authenticity, and records of software patches or upgrades you may have purchased along the way. Keep in mind that the typical audit results in a settlement between two and four times the cost of the original software (that’s per instance of non-compliance) but is subject to negotiation. Most audits do not result in public court battles.

You will of course have to purchase the software licenses found to be out of compliance and that may be the opportunity you need to renegotiate a more all-encompassing agreement. I recently negotiated an overall 30% reduction in the ultimate cost of a Microsoft Enterprise Agreement for a customer that was facing a yearly, multi-million dollar licensing fee by incorporating products that allowed the customer to consolidate usage and sunset a number of different vendor platforms. Properly aligning customer application requirements with a software vendor’s specific product focus leads to maximizing existing platforms and lowers overall licensing costs and exposures.

There’s an old saying that “it’s easier to ask for forgiveness, than to ask for permission.” But in the case of software licensing, forgiveness will cost you.