Don't take let your business take software for granted. After you pay for the package, your obligation to the manufacturer doesn't end -- ever. Part of your agreement in buying software involves pledging to carry out the terms of the manufacturer's license and warranties.

And watch out if you violate those agreements.

Having too many users for too few computers or letting staff copy software onto their home computers may be a violation of those terms that could cost your business. The Business Software Alliance (BSA), a Washington, D.C.-based industry group, sometimes audits firms for members. Fines can run up to $150,000, paid to the manufacturer, which adds up to a costly piece of software.

Software is an intellectual property, like music, books, and art, and the real cost of the software is not the actual software, but the license to use it properly. The sooner companies understand and comply with the fine print in licensing agreements, they better equipped they'll be in avoiding the consequences of software violations.

Avoiding violating software terms

Here are tips to avoid software licensing problems -- and potentially costly fines -- at your business:

  • Set the tone from the top down. Top management must communicate to their staff the importance of keeping up-to-date with software licenses and must stress that violations will not be tolerated. Jenny Blank, BSA's senior director of legal affairs, says employees must be informed of their company's software policy so they can avoid the "I just didn't know" excuse many violators commonly use.
  • Appoint a software manager. This person's responsibility is to retain files on all the software licenses and warranties, conduct audits, keep up with tools, resources and upgrades, take inventories, and distribute software property rights information to the staff.
  • Use a managed software provider (MSP). Since managed service providers host their client's software, software compliance is generally assured. Janel Ryan, product manager at SunGard Availability Services in Wayne, Penn., says that as a Microsoft Gold Partner, they have a blanket license key that reports to Microsoft how many licenses and customers they have. When companies hire an MSP to keep track of their long software key identifiers and work directly with software vendors, then the burden of software compliance doesn't have to fall on a few people at a small company.
  • Use BSA's tools and resources. On BSA's website, businesses can access the organization's "Tools and Resources" page, which offers free 30-day trials of automated software audit tools, IT manager tracking/compliance sheets, guides about software piracy, and more. 

On the software side

R. "Ray" Wang, principal analyst for Forrester Research, says software companies can also make compliance easier by allowing companies to add users with the touch of a button, instead of having them wait weeks for approvals and contracts. "Doing so would save the vendor a lot of grief and the companies would add additional users as they grow," Wang says.

It's easy for small businesses to ignore software compliance because some might consider software a support function that doesn’t directly affect their bottom line. Wang says most people don't go out of their way to commit software violations, since some don't know how many licenses they should have or what compliance laws they have broken. However, these excuses won't exonerate a business that violates these agreements.