When it comes to personal software licenses, many (or most) of us scroll through the end user license agreement (without reading it), click the button that says “I agree,” and go about using the software without another thought.
While that definitely isn’t an advisable approach for individuals, it can be downright dangerous for businesses. There are both legal and financial ramifications of ignoring business software licensing terms.
At Kelser, we provide full software license management as part of our comprehensive managed IT support services. But, we know managed IT isn’t the right solution for every organization.
With that in mind, we are committed to providing easy-to-understand information about technical topics that business leaders like you can use to make the best technology decisions for your business, users, and customers.
When we meet with customers, we often are asked about software licenses, so we are writing this article to answer some of the questions we are asked most often. After reading this article, you'll have the information you need to ensure that your organization's software licenses are managed wisely.
What Is A Software License?
A software license is a legally binding contract between a software developer and a user or an organization.
Why Are Software Licenses Important?
There are two prime reasons software licenses are important:
1. Legal
A software license is legally binding and spells out the rights that the developer is granting to the users.
Users
For example, the license will specify the number of users allowed to use a copy of the software. Any use outside of that specific number would be considered a breach of contract and could be prosecuted. Make sure you have the appropriate number of licenses to cover all of your users.
Terms of Use
Some software developers provide permissions to use the software as originally configured. Others may give leeway for users to adapt the software to meet the unique needs of their business. Understand what rights you have and where the limitations lie.
2. Financial
Software licenses also have a financial component.
Many organizations lose track of the number of licenses they have.
When an employee leaves, they continue to pay for that license. Then, they often hire a new employee, so they buy another license for the new employee. Without realizing it, they are paying double and have licenses they no longer use.
What Else Do I Need To Know About Software Licenses?
There are other details about software licenses that are important and need to be tracked. Here are two important ones:
1. Renewal Date
Most software companies will remind you before your renewal date, but some don’t. Track your renewal dates so there are no surprises.
Some software may lock you out if you don’t renew in time. Others may continue working but shut down certain features within the software.
As with the important elements of your technology infrastructure, software licenses need attention. The key is to pay attention because different software will expire at different times and some developers may not send a renewal notification.
The best practice is to be proactive and renew your licenses, negotiate the existing agreements, or have another solution in place before the current software licenses expire so you can minimize the impact of expired software and potential downtime.
2. End Of Life/End Of Support
Software typically reaches end of life about 10 years after it is on the market.
This means the software developer is no longer updating, patching, and supporting a particular version of software. Outdated software that is no longer supported may leave your software open to newly emerging cyberthreats.
Related article: IT Software & Hardware LIcensing: Why Understanding It Is Important
What If I Use Software Without A License?
Using software that you don’t have the correct usage rights (or licenses) for (known as pirated software) is illegal and is a form of copyright infringement.
Violation of software copyright law can lead to legal actions against companies and individuals and can result in fines (of up to 10 times the original value of the software), prosecution, and even jail time.
Is There Software That Can Be Used Without A License?
“Freeware” or “open-source software” is freely licensed and available for use by anyone.
Developers often make the source code for this type of software freely available so it can be studied or changed, make to improve or customize it to a user’s specific needs.
It is important to read and understand the licensing agreement for “free” software, too, since it may specify that the software is free for home use, but not for commercial use.
What’s Next?
In this article, we’ve explored what a software license is, why they are important, and other license details to keep in mind. You’ve learned what can happen if you use software without a license, and “freeware.”
If you don’t already have one, it would be in your best interest to develop a process for tracking your software licenses, so you know what software you have and the terms of your licenses. Track how many licenses you have (and how many authorized users you are allowed under those licenses).
As part of your process, develop a system for tracking software license renewal dates to minimize the potential for adverse effects on your business (such as down time or limited performance). Best practice is to review your software licenses at least annually, so be sure to add this step to your process.
Depending on the size of your organization, you may or may not have the resources on staff to tackle this project. Don’t let the size of your staff or a lack of expertise prohibit you from tracking your software licenses. We’ve talked about the potential legal and financial risks associated with ignoring this key part of your organization’s technology backbone.
The last thing you want is for your business to be taken offline just because a simple software license renewal was overlooked.
Organizations that don’t have the resources in-house may consider partnering with an external provider to managed your software licenses. But make sure to explore several options, so you find an IT partner that is the best fit for your organization.
Technology organizations are taxed with more responsibilities than ever before. If you are looking for more than just software license management, you may want to explore a more proactive, comprehensive IT solution such as managed IT support services. Read this article to find out what managed IT is, what’s included, and how much it costs.
Or, maybe you’re wondering if your organization’s cybersecurity tools are up to the latest threats. Click the link below for a free checklist you can use to self-assess your organization’s cyber readiness. 
