How Software License Mismanagement Can Hurt Your Bottom Line

Whenever you install software on your computer, you agree to certain terms put in place by the developer or vendor. Even free software, such as Google Chrome and Firefox, have terms that the end-user opts into during installation. One of the most important terms business owners need to be aware of are those that pertain to software licenses; if you aren’t, someone else will be.

How Software Licensing Works

Software licensing is everything but simple. Developers determine where and how often you can install the software, whether or not you can modify or redistribute it, and other terms. Installing the software means you agree to these terms. Most commonly, these terms are designed to protect the developer from having their software shared and distributed without them charging for it. This makes sense, it’s theft.

Interestingly enough, there have been some pretty wacky terms snuck into the license agreements of some programs. One of our favorites is Apple expressly forbidding users from using iTunes to create missiles and nuclear weapons. While we hope our clients are not weaponizing iTunes, there is a much more realistic concern that business owners absolutely need to be aware of.

Negligence Can Lead to Huge Fines

Depending on the software, when you install it and “activate” it, the software might phone home to the developer to authenticate the license. If the software sees that it’s been recently installed or is currently active elsewhere, it might report back and not let you use it. Alternatively, it might not immediately reveal that it sees multiple copies in use. The developer might even give you some lenience (sometimes you can install a copy on your work PC and on a laptop). If you don’t understand the licensing, you won’t know until the cease and desist letters come in.

Typically, software developers are prepared to catch this and offer ways for you to purchase additional licenses (although not all the time). They might even offer volume or site licensing which will help you save money when purchasing software for all of your employees. While you need to be careful not to upset the vendor by mistreating your software licenses, there are even bigger threats to watch out for.

Beware the Audit Monster

Organizations like the Business Software Alliance (BSA) issues audits to businesses that they suspect are misusing software licenses. For example, if they think you are running the same license for Microsoft Office or Windows across multiple computers, an attorney representing them will send you a very stone-cold letter that you won’t like. To make matters worse, the BSA even offers thousands of dollars to whistleblowers who report their own organization and promise full confidentiality. Got any disgruntled former employees? Organizations like this love hearing what they have to say.

Failing these audits can lead to huge, out-of-proportion fines and in some cases, jail time. If you’ve received a letter from an organization like this, it is extremely important to reach out to a trusted IT advisor immediately, as well as your lawyer. It’s best to not wait for this to happen, and make sure your software licensing is in check.

How to Prevent Software License Mismanagement

Like anything related to IT, the best course of action is being proactive. Documenting your software licenses, including how many you have, who is using it, and where it is deployed is a good start. If your software licenses include expirations or other terms, it’s important to track those as well.

Understanding the rules is crucial. Software developers aren’t out to screw you over, they just don’t want their product being stolen. If a program is allowed to be installed on a second device, it typically means the user can install it on their laptop or home computer. This does NOT mean you can split the license up across two users.

Having your network audited regularly is a good practice. Your employees might think they are being effective by sharing software with coworkers. The intentions might be good, but the repercussions can be serious. Directive can work with you to audit your network and find issues like this, and help you resolve them if detected. Don’t hesitate to give us a call at 607.433.2200 to get the process started. We’re happy to be discreet, even if you have a trusted IT provider.