As businesses become more digitally enabled, their operations and profitability will rely increasingly on software. But software comes with licence terms and conditions and a simple oversight can cause big problems for customers.
A brief overview of Software Licences
An End User Licence Agreement (EULA) is a legal contract between a software provider and the customer who uses that application. The EULA, often referred to as the software licence or subscription, is similar to a rental agreement; the customer agrees to pay for the privilege of using the software, and promises the software author or publisher to comply with all restrictions stated in the EULA.
Buying a licence is easy…
While traditionally purchasing and installing software was the domain of the IT department, modern technology companies have made signing up to their EULA so simple that often anyone with an email address and a credit card can get access to new software in a matter of minutes. This has made it easier for small and medium businesses who don’t have the luxury of an IT department to get access to software that will drive their business.
If the company has a strong software asset management practice – one which manages and optimises the purchase, deployment, maintenance, utilisation, and disposal of software applications within an organisation – then the purchase of the software will not cause much issue.
But without good software management, there is risk…
The result is that a business can be signed up to and paying for new software without consideration for what the software does and how it might create risk on the business, including:
Example: A New Zealand company exploring a tool for automation found one of their existing EULAs prohibited the use of automation software – both tools were strategic, but couldn’t exist together. The company had to negotiate a new, more expensive, licence agreement with the existing vendor.
Every risk has an impact… Even the best-managed businesses can come up short with licence management, often resulting in very high financial impacts, including:
Financial impacts are just one, but there is also the potential for data loss if things are not managed correctly…
Signing up to software on a credit card may seem like a good idea at the time, but what happens when that credit card expires or is cancelled? Unless you updated where the licence is being charged to, a subscription may end up being cancelled and all data held within deleted.
Additionally, staff turnover can be one of your biggest headaches. It might be tempting to use a former employee’s licence for a new employee, but that might be in breach of the EULA. However, deleting an old licence and buying a new one could cause bigger problems.
It’s not difficult to mitigate the risk around licence management.
Worried that your licences might pose a risk on your business? Get in touch and we can talk you through how to minimise the risk
Ambiguity in License Termination Provision Precludes Summary Judgement – New York Law Journal (2019)
Why Company Directors Need to Focus on Software Licensing Small Print – Computer Weekly (2017)
Software Licence Agreements – Cavell Leitch (2015)
Even an Unintentional Software Licence Breach Can be Costly – Flexera (2011)
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