Software Licensing - What Should You Know?

by Scott Lewis

There are powerful advantages to open-source software. However, there are also some disadvantages that need to be considered. Open-source software doesn’t have a single source provider; it is an accumulation of several developers. This is one of its advantages, but from a risk-mitigation perspective, you have to ask yourself about the quality of the work performed and who is responsible if your business is somehow damaged by using a multisource program that was free to begin with.

Business logistics – basically business workflow – is on the business owner.  Business owners must have an intimate firsthand knowledge of how their businesses work and operate in order to access the real power of open-source software. This becomes a problem as businesses grow and the owners become less and less knowledgeable about how their businesses operate both technically and clinically, which limits the effectiveness of open-source software.

You won’t own the software or the intellectual knowledge that is developed on your behalf. It is open-source, which means it is open to other businesses and developers that want to take advantage of what you have developed. I call it accumulated knowledge.  That is a great and powerful advantage of open-source software, but don’t assume that you own the software or have a legal claim to it because you don’t.

Having been involved in many legal cases regarding risk mitigation, ownership of intellectual property and security of data, I have concerns about software that may or may not have been developed with the highest standards with a legal entity standing behind the quality and security of the product. Open-source products certainly have a place in the market, but as I advise many of my clients, open-source is much like proprietary software development: Once you start, you have to have the fortitude to continue for years and years to come. You have to budget wisely, you have to make certain that if you are interfacing with other commercially released programs, when they upgrade you are ready to invest in upgrading your software to match the requirements. It will be ongoing and never-ending, and there is a cost to free.

There are many types of licensing agreements. With a perpetual license, once you purchase, you have the right to use the software as long as you like. However, keep in mind that if you upgrade a perpetual license, you may be charged for the upgrade. So if staying on the current version of software is important to your business, then perpetual licensing may not be an option.

Then there are term licensing agreements that have to be renewed – typically every year, but that can vary from software vendor to software vendor. When it comes to software licensing and picking the correct licensing package for your organization, there are things you need to be aware of. One of the biggest reasons companies end up in software trouble is that software rules change regularly, and it is the responsibility of the company to be aware of those changes and to make sure you stay in compliance. Another area that can create software licensing issues is basically not understanding your software assets and not properly managing these assets to ensure that you don’t overspend and that you are licensed properly.

Let’s talk a little about mistakes companies make in managing software licenses. One of the first things to remember is that it is your responsibility to prove you own the licenses you have on your system, so yes, you have to prove yourself innocent, not be proved guilty. With that in mind, some of the things to watch out for might include:

• Making ad hoc purchases. Employees should not be allowed to purchase software and load it. The documentation of software purchases is the only real defense you have against being in noncompliance.

• Not tracking installation and use. It is not recommended that you allow people to manage their own software; that leads to overspending in licensing, and it leads to system compatibility issues and again easily can put you in a situation of noncompliance.

• Not tracking renewal dates. This can lead to allowing your open licensing or enterprise licensing to expire, which then could result in having to purchase all new licensing when it is time to upgrade.

Have a central repository for all software licensing and proof of licensing. If for some reason you get audited, not having the licensing in one place can make it difficult and expensive to prove your compliancy. One of the biggest mistakes is assuming that licensing rules don’t change. They do change, and on a regular basis, software companies update and modify their agreements based on discontinued versions, change in market approach or separation of software packages. Do not assume that the rules you purchased your software under still apply. Make sure you read the agreement and understand it.

The Software Alliance: What is it, and what authority does it really have over software agreements? When you click on the “agree” button or check the box or sign an open licensing agreement or enterprise agreement, you are actually entering into a legal contract that does have binding rules. The most likely reason the Software Alliance would be interested in you is that someone reported you to the group, with evidence that you are violating software agreements.

Who is that person? In most cases it is one of your employees – typically someone who is basically knowledgeable about how your business is managing software assets. The Software Alliance does pay – well – for people to report software violations to it so it can pursue through the legal system resolution and restitution for violations to the agreement.

Scott Lewis is the President and CEO of Winning Technologies Group of Companies.  Scott has more than 30 years of experience in the technology industry and is a nationally recognized speaker and author on technology subjects. Scott has worked with large and small businesses to empower them to use technology to improve work processes, increase productivity, and reduce costs. Scott has designed thousands of systems for large, medium and small companies. Winning Technologies goal is to work with companies on the selection, implementation, management and support of technology resources. Learn more about Winning Technologies at www.winningtech.com or call 877-379-8279.