Unlicensed software: pay now or later?

What starts out as a short-term financial shortcut can end up as a costly legal problem.

Whether it starts out as a quick way to save some dollars or a just genuine oversight, using unlicensed or expired software can quickly turn into a financial nightmare for businesses.

A recent article showcased a Western Australian business that had been fined $100,000 in settlement charges for using unlicensed versions of software. This example alone should serve as a stark reminder about the risks involved of taking shortcuts.

What usually starts as a short-term financial gain can be drawn out into a lengthy and costly process.

Today, CIOs and heads of IT are confronted with increasing licensing complexity, driven by rapid changes in the data centre and a rising frequency of software vendor-initiated licence compliance audits.

Facing time-consuming efforts for licence-information gathering, as well as huge financial risks in the case of non-compliance, those organisations need solid licence management processes supported by a process-driven licence management solution.

Licence management is a complex issue involving several departments within an organisation: IT operations, IT service management (ITSM), purchasing and financial controlling.

This is why licence management is first and foremost an organisational challenge.

It is important to be aware that about three-quarters of all licence management issues are organisation- or process-related.

Thus, any licence management project — be it driven by a specific vendor’s audit announcement or by general awareness of the need to reduce compliance risks in preparation for likely future audits — needs to have a laser focus on a process of what essentially is ‘IT bookkeeping’.

This is why it is important to remember that licence management — or any ITSM project, for that matter — is about running and supporting a business.

The simplest way to approach licensing management can be broken down into five key stages:

Stage 1: Definition of vision, goals and milestones. As always in ITSM, it is important to garner C-level/ business leadership commitment for the project at this point.

Stage 2: Binding definition and set-up of relevant processes. In the case of licence management, this stage must include complete records of the licence inventory, the definition of the licence management process and its integration with the change management process.

Stage 3: Technical implementation of a licence management tool. This project phase includes the set-up of connections to all relevant databases, as well as the establishment of data quality assurance mechanisms.

Stage 4: Putting licence management to use by way of an opening balance sheet. This stage includes the evaluation of existing contracts and licensing conditions, as well as the establishment of software-supported automatic comparison and reconciliation workflows for a specific product or vendor.

Stage 5: Ongoing operation. This final stage will be the starting point for continual service improvement as recommended by the ITIL (Information Technology Infrastructure Library) framework, as well as for expansion of the new process and workflows to additional software products and software vendors.

One way to increase the effectiveness of licensing management programs is to take what is called an ‘incubator’ approach — the organisation should establish an incubator team consisting of several regular members as well as additional members related to the individual software product or vendor to be covered.

Regular members should include the project manager, the change management process owner and the licence management tool expert; variable members — the individuals might change depending on the specific software product or vendor — should include the licence acquisition owner, the licensing terms expert and the technical delivery process owner for this product.

Establishing an incubator team of this kind allows for bridging the above-mentioned knowledge gap between various knowledge ‘islands’ — uniting the licensing expert in purchasing, IT operations and change management staff within the one team will facilitate easy transfer of know-how.

This produces the organisational foundation for effectively tackling all relevant compliance problems that might occur with one specific software product or vendor. It also enables easy delegation of tasks to the person best qualified.

The licence management solution should also tightly integrate with change management, self-service request management, purchasing and cost allocation processes, and it should cover the whole variety of software delivery methods in use today — from the desktop or the mobile device to the data centre and to the cloud.

With a comprehensive, process-driven licence management solution in place alongside the incubator team, businesses, CIOs and IT managers will have a clear view of any obstacles before they morph into bigger problems.

Image courtesy Paul L Dineen under CC BY 2.0