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Don’t gamble your company on unlicensed software

By Eric Schmidt, CEO, iBeam Solutions

As business owners, we face the same problems -- everything from healthcare increases to falling margins and higher costs of doing business. Cutbacks, layoffs, projects on hold, and many other issues face all of us. But one area that cannot be ignored is proper software licensing.

Take Foundstone, a computer security company that worked for the Pentagon, the FBI, the National Security Agency, Motorola, Bank of America, and other Fortune 500 companies. Their very successful and highly respected business is now threatened because they are being accused of willfully copying and distributing software that they were not properly licensed to use. They face up to $150,000 in fines – the standard penalty -- for each software package violated. Their company and reputation may be lost. Many of their staff have defected, and even joined in reporting more allegations of software piracy. One of their largest clients, Microsoft, yanked their business from Foundstone – taking with them one quarter of the company’s yearly revenue.

This example made the news, but our company has been involved with many other companies that call us after the “software police”, also known as the Business Software Alliance or the Software and Information Industry Association, visit or write them questioning the legality of their software. Once you have been contacted, it’s too late. Even if you go out and buy the software, or delete it from your systems, they have the right to inspect and if they find that you took action after the contact was made, you may still be fined.

It's easy to say “Bill Gates does not need any more money, we’ll just copy the software”. Software is intellectual property, a product that was created, researched, tested and paid for by the maker, and they deserve the right to sell and protect it no matter how successful they are. If you wrote a book, would you want everyone to just copy it instead of buying his or her own copy?

Some of the most common, and overlooked, violations include screen savers that are taken to work and copied around the office, games that people share with others, and those that burn copies of software CD’s and give them to their friends or neighbors. As harmless as this may seem, it is a violation and one that could cost you or your company a lot of money.

Does your business have a Software Code of Ethics, spelling out as a matter of policy that software is not to be installed unless it is approved and legal? iBeam Solutions has one, and I would share it freely with anyone that wants a copy (email me at "eschmidt at"). And as with any policy, you should run it by your legal counsel.

Every company should have an audit done to ensure they are in compliance with their software licensing. An audit can be performed for a company with 20 computers for around $700, including a network map, a binder showing the details of software and hardware in each machine, and a matrix of licensing needed that can be compared to the licensing on hand. “An ounce of prevention is worth a pound of cure;” make it a point to ensure your business, or even your home computer is in compliance with software licensing.

First published July 25, 2003

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