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Software Licensing: What You Don’t Know Can Hurt You

You’ve just hired a new employee, so you buy a new computer and find a spare desk. You also dig up an old Microsoft Office installation disc so she can get started right away.

You already used to same disc to install Office on another system, but who’s going to know, right?

A few weeks down the road, the employee doesn’t work out. You let her go and move on. The next thing you know you’re in court, being ordered to pay thousands of dollars in fines. You can’t make payroll, you’re cancelling your vacation, and your kid’s tuition check might bounce — all because you tried to save $300 on a piece of office software.

How did that happen?

Does it sound a bit far-fetched? It shouldn’t — it’s a lot more common than you think. The Business Software Alliance offers whistle-blowers rewards of up to $50,000 for reporting businesses using unlicensed software. And most of the time, it’s a disgruntled ex-employee blowing the whistle.

The penalties for software licensing violations can be severe. In April 2011, two Indiana businesses agreed to pay fines totalling almost half a million dollars for using unlicensed versions of Microsoft, Symantec, Corel, and Autodesk software.

If you think your business is too small to matter, you’re wrong. In 2006, NorCal Moving Services, a San Francisco Bay area firm, paid a $75,000 fine for having “more installations of Microsoft software programs on its computers than it could confirm it had licenses to support.”

If you’re using unlicensed software or violating a software licensing agreement, your business is at risk. And the impact of a licensing violation lawsuit on a small, underinsured business can be devastating.

The BSA contends that one-fifth of all software in use today is pirated. That number is far lower at large enterprises, which for a number of reasons tend to use unlicensed software less often than small businesses. They buy far more software licenses, which means they can negotiate bulk-priced deals with software makers. Enterprises are typically far more sensitive to anything that poses a legal liability risk, and they’re also more willing to invest in procedures and systems to monitor software usage.

In a 2009 research paper, the BSA found that “software piracy rates are generally higher on consumer PCs than those of other segments of the market.” Since many consumer PCs double as small business computers, it follows that many of these users are more vulnerable to software licensing-related legal risks.

What’s worse, a stunning number of small businesses don’t just use unlicensed software, they’re absolutely crazy about the stuff. Of the five IT managers surveyed for this article, three admitted to knowingly installing unlicensed software on their machines. The other two provided “clean” systems to new hires but looked the other way as the employees “customized” their machines.

Not surprisingly, none of these managers would speak on the record, for fear of an audit.

While two of these managers said that a lack of support resources contributed to their use of unlicensed software, all five agreed that price was the biggest factor. Look at a list of retail prices for some popular applications, and it’s easy to see why:

Some of the managers noted that their employees often download pirated games and music to company-owned PCs — activities that could expose their employers to legal liability. There’s also confusion over whether a business can be held responsible for unlicensed software on employee-owned devices that find their way into the office.

When asked for a list of suggestions to help small businesses avoid software piracy, the BSA declined to comment. But there are still some widely accepted guidelines you can employ to reduce your risk without sacrificing business productivity:

Publish a policy. No matter how many employees you have, your employee handbook should include a very specific software licensing policy that lays out a zero-tolerance stand on using pirated content or unlicensed software. This may not reduce your liability if an incident happens anyway (you’ll want to check with your attorney about this). But such a policy will educate your workforce, show good faith on your part in the event of an audit, and reserve your right to discipline employees who flout the rules.

Lockdown PC account controls. Every modern desktop OS supports multiple user accounts. Use them. Reserve administrator status for actual administrators, and assign everyone else to accounts that don’t allow them to install the software. If your business uses network storage, consider limiting users to read-only access on their local hard drives.

Tread carefully with employee-owned devices. More employees now bring their own smartphones, tablets, and laptops to work. There are advantages to allowing or even encouraging these “BYO” technology policies. But you should also set policies that strictly control how employees access your network using their own devices and set out acceptable-use guidelines.

Conduct your own audits. Snooping on your employees all day would be counterproductive and annoying. But you should set a regular schedule for internal software inventories and audits. Several of the IT managers we surveyed regularly examine employees’ systems to check for performance problems and upgrade software. These reviews are also a good time to perform software audits and remind employees that company-owned machines are exactly that — your company’s property.

Go to the cloud. Cloud-based services such as Google Docs (free for up to 10 users, with scaling payment plans above that) provide nearly all of the same features as Microsoft Office, with none of the licensing drawbacks. Google Docs is actually better-suited to multiuser file editing than Office, so you may actually improve productivity by eliminating risk.

Other cloud offerings, such as Salesforce.com and Google Apps, charge subscription fees but also provide a robust set of business features. Better yet, using a cloud-based application means never having to worry about software licensing issues, since you never have to install the software in the first place.

Evaluate open source options. If cloud apps aren’t right for you, there are plenty of open-source, client-side alternatives as well. OpenOffice.org is a free, serviceable Office alternative, and for your more technical users, certain flavours of Linux can provide a performance boost without any licensing costs.

Unlicensed software is tempting, especially when it promises to save your company thousands of dollars in licensing fees. Just remember: A single disgruntled employee could turn what seems like harmless corner-cutting into a financial and legal disaster for your small business.

Article Credit: https://www.allbusiness.com/

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