Avoiding the High Costs and Consequences of Software License Non-Compliance

As organizations grow, the daunting task of accurately tracking software assets for usage and licensing is an ongoing dilemma for IT departments. Most software packages have complex licensing structures and come in dozens of different names and dot versions, making it difficult to accurately track usage and licensing. Market changes, such as mergers, acquisitions and product EOLs, also make it difficult to consolidate support costs and manage software compliance. Besides the inherent difficulties in monitoring compliance on traditional systems, another layer of complexity is added by the increasing trend of virtualization. For example, users run multiple virtual operating systems on the same hardware infrastructure, like Windows mode on Mac and XP mode on Windows 7. All this makes license compliance ever more challenging and important.

The proliferation of software and the lack of a reliable way to track it drives many organizations to take a “best guess” approach, resulting in either overspending on unused licenses or being out of compliance by using more than what was licensed, resulting in exposure to hefty fines and penalties. According to a survey conducted by IDC1, 38% of organizations reported that at least 11% of their application spend was associated with out-of-compliance use, while 56% of organizations said 11% or more of their application spend was for under-used software.

Software products are protected by copyright laws that make it illegal to pirate them, make more copies than stipulated or distribute unauthorized copies. Organizations are responsible for enforcing adherence to these copyright laws and are held liable if found in violation. Large companies are at higher risk of being targeted for software license compliance audits just due to their size and the difficulty in inventorying usage.  Although many organizations implement software license compliance tools, they typically are complex and designed for the largest of organizations, which may leave smaller companies more at risk.

According to the Business Software Alliance, a leading software auditing firm, software audits are increasing annually. The virtualization of systems, proliferation of software packages and mergers of organizations have resulted in the completion of a comprehensive software audit becoming increasing difficult. Software companies understand this, which is why the number of audits has increased every year.

In reality, a small flaw in software licensing may not be a priority in the grand scheme of IT compliance, but even a minor misuse can cost your company thousands of dollars or perhaps you your job. Non-compliance, intentional or not, has expensive consequences, as organizations that are found using unlicensed software usually must pay a fine and then are required to purchase – at full list price – sufficient licenses to make them whole. This is why having highly reliable, accurate reporting on all software licenses is critical for organizations of all sizes. Having the capability to track software assets reliably and accurately enables organizations not only to eliminate the cost of unnecessary software spend, but also avoid non-compliance penalties.

So, what can be done to achieve and maintain compliance and avoid unnecessary license costs? One way is to develop internal licensing strategies that help your organization track all software licenses, adhere to copyright laws and reduce the spend on under-used software. Paired with good preparation work, the following best practices can help your organization successfully achieve software license optimization and compliance:

  1. 1.       Strong software asset management processes

Develop strong software asset management processes to reliably track all software assets for both licensing and usage, so you can avoid non-compliance and make sure usage is optimal. It’s important to be able to interface with a database containing the most popular applications, including version and name variations, purchase information, market intelligence and other information required, to accurately identify and track software usage and licensing. Additionally, it’s helpful to automatically map dot versions to the parent package to enable tracking of licensing and usage across dot versions.

  1. Automated data gathering
    Perform automated tracking and management of software licenses, including version numbers, and store them in one place so you know exactly what is on all machines across the network. With automated metering, organizations get a more accurate view of software usage, by allowing IT administrators to see usage information based on when an application actually runs, so they can better ensure license compliance.
  2. 3.       Re-evaluate software product use

Organizations purchase software licenses in bulk, but a significant portion of those licenses are unused or under-utilized because most organizations don’t have the ability to accurately track software utilization. It’s essential to accurately track usage so you can save money by harvesting and re-allocating unused or under-utilized assets.

A side-effect of the inability to accurately track software licensing and usage is the possibility that malware will find its way into your system on software that is unsupported or prohibited by IT. This potentially exposes a company’s entire IT infrastructure. Such an event only adds to the millions of dollars that organizations lose every year due to non-compliance and unused or under-utilized software licenses. While many companies are eager to comply with software copyright laws, they lack the right tools to enable full compliance, so they remain exposed to litigation, security risks and stiff penalties. Organizations that can reliably and accurately track software usage and licensing will reap the rewards of improved efficiency and money saved through optimized usage and compliance.


1 Software Pricing and Licensing Survey Results and 2012 Predictions, IDC


Ken Drachnik is Endpoint Systems Management at Dell Software


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