SOFTWARE LICENSING AND LIABILITY – MANAGING RISK

In a world increasingly reliant on technology, software licensing and related liability is a crucial issue for many firms. As organisations seek to expand their global presence, particularly via mergers and acquisitions, they become more reliant on a variety of different software products to help run their operations. However, due to the wide disparity between companies and the software packages they employ, effectively managing related software licences can be a burden with inherent risk, particularly if adequate steps are not taken to streamline the process at an early stage.

Historically, the risks associated with software liability and compliance have often been overlooked.
The complexity and sheer number of software licences held by firms can make it difficult for acquiring companies to fully comprehend which licences should, or even can, be transferred as part of any asset acquisition. Indeed, software licence concerns tend to be misunderstood and marginalised in favour of other more obvious or ‘mainstream’ issues.

Firms engaged in mergers and acquisitions usually undertake detailed due diligence processes. These processes scour a potential target business in great detail. Yet one area often overlooked is software – the very tool which helps to keep the organisation afloat. Pigeonholing issues such as software liability and licence compliance into basic IT problems is symptomatic of a wider failure to fully grasp the importance of the issue. For many organisations, failure to comply with software licences could lead to companywide operations grinding to a halt or significant financial penalties from software vendors. Accordingly, companies need to give software licensing the attention it deserves. Licence management and software compliance should be dealt with like any other potential liability associated with an acquisition.

Apr-Jun 2014 Issue

Richard Summerfield