How to avoid software licensing headaches

There is no doubt that software has become an integral part of a modern business’ operations, increasing efficiency, communication, and decision making.

More businesses are adopting more digital tools, that position them to compete and succeed in diverse and evolving markets. However, the process of licensing, where organisations and vendors agree the terms and conditions for the use of critical software, can be confusing, complicated, and challenging. Not only are software licence agreements difficult for organisations to navigate, but non-compliance creates a number of serious financial and technical risks.

What are software licence agreements?

Software licence agreements (SLAs) are legal contracts between a software vendor and user, that outline the terms and conditions under which the user is allowed to use the specified software.

Software licence agreements will typically cover a number of important aspects regarding the use of a software application:

• Permitted use of the software: Specifies the number of devices and users that are allowed the use the software, alongside the scope and purpose of permitted use.
• Restrictions on use: Any restrictions on the software use, such as reverse engineering, copying, distributing, or modifying the software. It will also include restrictions on the illegal or unethical use of software.
• Intellectual Property Rights: These outline the ownership and rights of the software vendor, as well as any proprietary and copyrights.
• Warranty and Liability: Warranties, disclaimers, or limitations of liability regarding the software including any available remedies in the event of defects or issues.
• Termination or Cancellation: The conditions under which the licence agreement may be terminated or cancelled, such as breach of contract or non-payment of fees, will be outlined.

Software licensing complexity

It’s difficult to determine the exact number of software licences that the average organisation has, varying depending on the size and type of the organisation, the industry it operates in, and the specific software applications it uses. That said, the majority of organisations will use multiple software applications to support their day-to-day operations. Companies use software for writing, communicating, emailing, accounting, customer relationship management, project management and more, and each application in use will have its own SLA. It is not uncommon for medium sized businesses to hold dozens, if not hundreds, of software licence agreements, and the largest companies will have thousands.

Software licences themselves are complex and often difficult to understand, with their own unique terms and conditions. While violating licence terms can be very expensive, organisations need to also make sure that they aren’t overpaying for the software licence in the first place. Combine this with the number of agreements thats organisations have to manage and the fact that the conditions of an SLA can change over time, and software licensing can very quickly cause a massive headache for an IT team – especially one without a centralised system in place.

Non-compliance carries a number of financial and technical risks

1. Financial risk

The most obvious risk of software non compliance is the financial element. Depending on the severity of the violation, non-compliant organisations will face fines and legal fees from the software vendor. It’s difficult to accurately predict an average cost due to the range and variability of non-compliance issues, however it is important to note that the sums are usually significant. Depending on the case, it can cost a business into the millions.

2. Loss of productivity

Non-compliance can also lead to the withdrawal of software updates and support. This can have a major impact on the functionality of the software, and if the SLA non-compliance turns into a legal dispute can cause distractions from the core operations of a business.

3. Reputational damage

Negative publicity stemming from non-compliance can cause long term damage to a business’ public image, alongside a risk of losing customers, clients, and revenue.

4. Increased Security Risk

As non-compliance can result in support and updates being withdrawn, the challenges facing IT teams from a security perspective mount. Unsupported or out of date software typically contains numerous weaknesses that malicious actors are constantly seeking to exploit for illegal gain. Data breaches are one of the biggest financial risks currently facing organisations due to their high legal and remediation costs.

How to ensure compliance

1. Keep track

Businesses should maintain an up to date, detailed inventory of all the SLAs that they currently own. This inventory should contain the number of licences, the number of licensed keys, and any expiration dates, which will help the business to keep track of their agreements and help to prevent any unlicensed software use.

2. Ensure understanding

This part can be tricky. As discussed, software licences can be incredibly long and complicated. However, it’s essential that an organisation reads the licences before agreement, as the SLAs will include the terms and conditions of software use, and any restrictions, limitations and obligations.

3. Use licence management tools

License management tools can help a business to manage its software licenses more efficiently, tracking any usage and expiration dates and optimising license usage to ensure that they are not overpaying for unnecessary licenses.

4. Employee training

Relevant employees should be trained on software license compliance, ensuring that only authorised employees use the software, avoiding non-compliant copying or distribution of software, and encouraging the reporting of any license violations.

5. Regular auditing

Businesses should conduct regular audits of their software licenses to ensure compliance, which can include checking license usage against the number of purchased licenses, verifying that licenses are only used on authorised devices, and ensuring that employees are using the software in line with the license agreement.

Take control of your software licensing estate

Celerity's managed software licensing service is designed to be proactive and efficient, leveraging insights, analytics, and reporting to ensure that your business is only paying for the software that it needs. By doing so, this service helps to mitigate operational risk and promote compliance, with often the added benefit of driving down administrative costs at the same time. Backed by the expertise of the Celerity Service Desk, organisations can gain a better understanding of their licensing models and establish policies and procedures to ensure long-term compliance and peace of mind. To learn more about how Celerity's Software Service Portfolio can help your business maximise the value of its software estate, get in touch with us today.