Think of software piracy, and images of counterfeit goods being sold in shady establishments or downloaded from unscrupulous websites probably spring to mind. In fact, under-licensed software use is also a widespread and long-standing problem, and forms a large slice of the software piracy pie.
Under-licensed software is where software has been installed onto more PCs than the licence agreement allows. For example, a licence may support the software being installed on up to 20 personal computers (PCs), but it may end up being installed on 30 PCs. Its use is sometimes seen as acceptable due to a belief that it does not hurt Intellectual Property (IP) owners or the economy, but this could not be further from the truth. According to the BSA’s 2010 global software piracy study conducted by IDC, under-licensed software was installed on 27 percent of PCs in the UK with a commercial value of £1.2 billion.
Software piracy also deprives the economy of much-needed revenue and jobs – an additional study by IDC found that reducing the PC software piracy rate in the UK by 10 percentage points over four years would create 13,011 high-tech jobs, £5.4bn in new economic activity and £1.5bn in additional taxes by 2013, with 87 percent of those benefits expected to remain in the local economy.
But where should the buck stop in a business in terms of handling software licensing – and why is it not treated in the same way as other business assets?
While most companies keep track of their mobile phones or car fleet, many managers either turn a blind eye to under-licensed software use, or are entirely unaware of the problem. It is generally assumed that that the IT director or the financial director is shouldering the responsibility of managing a company’s software assets. In fact, in 2011, the BSA polled 250 Financial Directors (FDs) in the UK about their attitudes towards software piracy, and found that despite 85% of FDs being responsible for their company’s software licensing, only 7% claimed to be very confident that the software was being deployed correctly, and almost 30% admitted that illegal software could be used in their organisation.
A risk to cash flow and business operations
The Business Software Alliance (BSA), a global organisation representing the software industry, is committed to the eradication of software piracy through both education and enforcement action. Already in 2012, the BSA has taken action against companies found to be using under-licensed software. Blackpool-based building services engineering company, George Morrison, paid £10,000 in damages while Rugby-based power-conversion company, Converteam UK Limited, was made to pay £8,000 for using under-licensed software. In most cases, the price of using under-licensed software far exceeds the cost of doing things properly, and the impact on cash flow of unexpected legal costs and purchases can be very harmful to the business bottom line.
In addition, being caught using under-licensed software deeply affects brand reputation. In this increasingly competitive economy, reputation has emerged as a major differentiator between brands. Unfortunately many firms, knowingly or unknowingly, put their reputation in jeopardy by using under-licensed software. The BSA also encourages employees or members of the public to confidentially report any businesses that are breaking the law through software piracy. Reports are incentivised, and whistleblowers could receive a substantial financial reward for outing illegal software use. Incidentally, the BSA has launched a campaign in Reading this month to ensure businesses in the area hold the correct licences for all software installed on their devices. As part of this campaign, it is encouraging reports of the suspected use of under-licensed software to be made via a hotline or the BSA website, for a potential reward of up to £20,000.
While under-licensed software may appear to be of identical quality to licensed software, it carries significant potential business risks. Firstly, businesses using under-licensed software may not have access to technical support. Secondly, they won’t receive regular software updates, so may be giving away their competitive edge as they will not have the tools they need to do their job properly. Thirdly, and most importantly, they may not have enhanced protection against viruses and malware, as in some cases only critical security patches will be applied to under-licensed software.
Licence to save
More positively, effective management of software licenses can provide significant savings on staff time as well as software costs. Managing IT assets correctly through an effective on-going business process, known as Software Asset Management (SAM), can identify instances of under-licensing and also when too many licenses exist.
The long game
A double-dip recession and continued exposure to wider European economic pressures dictate that UK businesses keep a close eye on their assets and software is no exception. It is the accepted method for business interaction, crossing vertical sectors, geographic regions and business sizes, and, as such company directors must take software licensing more seriously, and audit it regularly alongside all other business assets.
By valuing the IP of software as much as other business assets, we can have a positive effect on the UK economy, as well as ensure that UK Plc is running itself on state of the art software that is legal, safe and fit for purpose.
By Julian Swan, Director of Compliance Marketing of the Business Software Alliance (BSA) in EMEA