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Time bombs ticking in the cupboard

By Adam Turner

A rarely opened cupboard lurks in the back room of many businesses - stacked with discarded software and its packaging and paperwork, too boring to read yet too important to throw away. These software licensing agreements and manuals cover the applications that are vital to the day-to-day running of their business, but many organisations find it easiest to ignore the cupboard while they deal with the pressing issues of the day.

Meanwhile, they are ignoring important matters such as how much software do they own?

Do they have too much, or too little?

Warren Platts ventured into the software cupboard last month when he became financial controller for the Australian arm of the British manufacturer Chloride Power Protection.

Platts is responsible for the company's 45 desktop PCs and five servers spread across five cities.

"My primary role here is financial controller. I'd like to be involved more in the numbers than in IT," he says. "Licensing does seem fairly complicated, and it was slightly daunting to start with. I've got a cupboard full of software out the back here."

A software licence usually entitles the owner to install and use a specific copy of a piece of software. The most basic licence is for a single-user, issued on a piece of paper with each boxed single copy of an application - known as "the full packaged product". Buyers are required to keep the box, the CD and the paper licence as proof of purchase.

Server-based applications also require licences, often in conjunction with a "Client Access Licence" for each machine or user connecting to the server.

Software pre-installed on a new computer may have a paper "original equipment manufacturer" (OEM) licence. This software is often cheaper than the full packaged product equivalent but cannot be sold to a customer who intends to install it on an existing PC.

Rather than end up with a cupboard full of single-paper licences, many organisations buy software through volume licensing programs, which allow the software vendor to issue electronic licences.

Platts turned to Sydney licensing management specialist Clearsoft Australia to help audit and streamline his company's software licensing.

Clearsoft managing director Bart Crowther says software licensing is a ticking time bomb small and medium-sized enterprises are ill-equipped to manage.

Crowther started the company 12 months ago to focus on small and medium-sized enterprises after working as a national sales manager for Fujitsu's software solutions team and as a licensing manager for IT integrator Data#3.

"I've specialised in software licensing for 10 years and I'm reading every day to try to keep up with everything," Crowther says. "Even somebody who is also a technical specialist or a hardware specialist, I can't understand them thinking they can keep up with it."

A software management plan can be as simple as storing details in a spreadsheet, but many organisations don't even have that. Common honest mistakes include buying OEM software for existing machines and failing to understand client access licenses.

Microsoft says the Australian software industry loses $264 million a year through illegal use of business applications.

Resellers and retailers lose a further $286 million, according to the Business Software Association of Australia.

BSAA chairman Jim Macnamara says about 30 per cent of PC software used by Australian businesses is "illegal", because of counterfeiting and - mostly - mismanagement.

"We understand that SMEs are short-staffed and quite often work long hours. The fact is, things like software management fall well down the list of priorities," Macnamara says.

The BSAA aims to educate business about software licensing, but it is also the long arm of the law on behalf of software vendors. A 60-day amnesty 18 months ago resulted in almost 2000 organisations coming forward, and the BSAA is considering repeating the exercise next year. In the meantime, Macnamara says, those concerned that they may have broken licensing agreements can come forward without fear of prosecution.

"They've got to be genuinely committed to cleaning up and they've got to not already be the subject of an investigation," he says.

Along with the hefty fines facing non-compliant organisations, the complexity of licensing has cost software vendors money, says Brad College, licensing expert with Data#3.

"I think vendors have learned over the past few years that by offering no flexibility and making it so hard means customers may become non-compliant simply because they don't understand the licensing programs," he says.

College says software vendors are making the licensing programs easier through initiatives such as Microsoft's Licensing 6.0 program.

Although 6.0 received a lot of negative publicity through the introduction of Software Assurance - which requires organisations to pay maintenance on top of licensing fees for the right to access upgrades at discount prices - it "got rid of a lot of the complexity in terms of the licensing options that were available", College says.

Microsoft Australia licensing marketing manager Thomas Kablau says the software giant concedes that its licensing has been too complex: "We found from our research that customers were finding it all too difficult, that there were just far too many decisions they needed to make every time they wanted to upgrade."

Alongside full package product and OEM licences, Microsoft offers three tiers of volume licensing, each with several options. Microsoft has issued a Guide to Software Asset Management, which includes a guide to establishing a software management plan.

"It's a common belief that Microsoft will knock down the doors and come in charging with baseball bats with non-compliant customers, and it's not the case at all," Kablau says. "It's in our best interests to help that customer keep up and running - they're users of our software so it's important to us that they continue to be a customer."

Your licence and registration, please

Warren Platts landed the unenviable task of managing Chloride Power Protection's software licensing when he took over the reins as financial controller five weeks ago. With fewer than 50 Australian staff, the company has no dedicated IT manager and the responsibility for IT falls to the financial controller.

Platts confesses to "not having a great deal of experience in IT, coming from a finance background", and has turned to Sydney licensing management specialists Clearsoft Australia for help.

"I want an IT system that a financial controller can run. I don't want to have complicated administration and management systems for looking after software. I want something fairly streamlined and straightforward," he says.

He is confident that Chloride Power Protection's software licensing is up to date, but the accountant within Platts sees licensing as a financial risk-management issue.

"Given that we're making an effort to get this under control, I would hope that if there were any anomalies in our software licensing that our voluntary disclosure would be viewed favourably," he says.

Platts is assessing the company's IT needs and is moving towards open licensing to eliminate the build-up of paper software licences accumulated over years of buying software one copy at a time.

Having been thrown into the deep end, Platts recommends that others in his situation immediately examine their software licensing arrangements.

"Don't just think of IT as just hardware and don't think of software as something you just load. Software is something you have to buy and be licensed to use. Make sure those licensing arrangements are correctly in place and make sure you talk to the right people," he says.

Clearsoft Australia managing director Bart Crowther says that in most cases the use of unlicensed software is due to honest error, but sometimes attributable to bad advice. A common example is resellers providing organisations with original equipment manufacturer software, which is only licensed to be pre-installed on new PCs.

"For the larger organisations the big software specialists are prepared to run in and see them, but small and medium enterprises are dealing with the little corner PC supplier, who thinks he knows everything about licensing," Crowther says.

Catching the mistakes that could label you a pirate

Manually checking the software installed on each computer on your network is an arduous task, particularly if that network reaches interstate or around the globe.

Applications that scan your network, cataloguing installed software, are the easiest way to keep track of your software licences, says Brad College, licensing expert with Brisbane-based IT integrator Data#3.

"People evaluating such tools should look for ease of installation, deployment and use," College says. "Flexible reporting and data base options are also important."

Such a tool might install a client on each machine on a network to report back on hardware and software specifications. Better yet, is if it looks at software versions, licensing details and even how often each application is used. Such flexibility is essential on sprawling corporate networks.

"Usually it gets to the point where the network has grown to the point where no one has definitive information about what's on there".

As such, licensing infringements are more due to mismanagement than piracy.

"Volume licensing is such a complicated thing to manage and control that there is always the risk of software bring copied unknowingly or incorrectly and then put on machines it shouldn't be."

"Companies are understanding there is a liability attached to this and hence there is certainly a lot of focus over the last 12 months on inventory tracking tools so they can demonstrate compliance should Microsoft, Adobe or the Business Software Association of Australia come knocking on the door."

First published June 3, 2003





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