A software licence is a legal agreement, which governs the use and distribution of software. A licensing agreement is legally binding and software license compliance means only using a software in accordance with the software developers conditions of usage.

Some small scripts are frequently released without specifying a license. For example, the website Userscripts.org hosts more than 52,000 licence free user scripts. Similarly, GitHub reported in 2015 that 85% of the projects it hosts are unlicensed. With licence-free software, you can back it up, compile it, run it, share it and even modify it as necessary, without permission from the copyright holder. The same is not true for licensed software. In general, you purchase the right to use the software according to the terms of the software agreement, however, you do not own it and you are not permitted to modify or re-distribute it.

Usually, software ownership remains with the software developer and end-users licence a copy for private usage. Proprietary ownership of both the original software and the software copies remains with the software developer (or software vendor) and the software is essentially ‘rented’ by the end-user. Software licence compliance essentially means not breaching any of the conditions set out in the software licence agreement associated with the purchase of a software. The terms of a software licence usually dictate whether the copyright is retained by the software developer plus usage restrictions governing;
✅ right to perform
✅ right to display
✅ right to copy
✅ right to modify
✅ right to distribute
✅ right to sub-license

In enterprise environments, comparing the number of software installations and concurrent use with the number of software licenses purchased is a core component of software licence compliance. End users should only be using software that they are legally entitled to use, which usually means only using what they have paid for.

An unauthorized installation of software is more commonly known as software piracy and this is the most publicised example of software licence non-compliance. However, non-compliance can also be accidental, for example where there is a mistaken belief that having a license for an earlier version of the software will suffice or in large organisations where it becomes difficult to reconcile software deployed against permitted allowances. Mergers and acquisitions can also introduce software licence compliance issues.

Software licence compliance is a very prevalent business concern. Software audits will always uncover non-compliance and trigger ‘true-up’ charges and possibly fines. 56% of software audits result in additional charges to compensate for historical under-licensing and according to the IDC “true-up” charges exceed 1 million dollars in more than 20% of cases. Software licence compliance is often regarded as a CIO issue, however, company directors are ultimately responsible for the commercial agreements associated with the purchase and use of software by their organisations.

Software can be very difficult to track manually and investment in tools that help you manage your software assets automatically is a no-brainer. If you’re an ISV these tools will help secure missing revenues and also guarantee compliance for your end-customers.


See Also

Entitlement Management

Software Copyright

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