The Software License Pit, and Its Perils

By Anna Maria Virzi Print this article Print

Workbook: Do you have a sound software-asset management plan? It could be costly if you don't.

Does your company want to buy more software than it needs? Of course not, you answer. But just a few years ago, overspending on licenses was a popular "strategy" to avoid fees for illegal application use.

PDF Download"Companies were saying, 'we don't want to risk being out of compliance, so let's buy extra licenses to avoid penalties and fines,'" says Gartner senior analyst Patricia Adams. It seemed like an easier fix than installing software to manage inventory, she says.

Find out what unauthorized software could wind up costing you (Excel spreadsheet)
Besides being unsound, that reasoning has led to today's all-too-common scenario, in which a company no longer knows what software it has, what it's paid for, or what it's using. Licensing changes and frequent, large-scale layoffs only complicate matters.

"Companies are freeing up 500 or 1,000 desktops or laptops, yet are still paying maintenance," says Adams.

Unfortunately, it's nearly impossible to revise an existing software contract or obtain a refund, Gartner says, although some vendors will provide credit for future purchase, or allow downsizing provisions to contracts.

Companies should mostly focus on preventative planning by setting up software and policies for asset management. These tools will also help companies discover and stop unauthorized software use, a practice that can cost dearly.

This article was originally published on 2002-09-05
Executive Editor
Anna Maria was assistant managing editor Forbes.com. She held the posts of news editor and executive editor at Internet World magazine and was city editor and Washington correspondent for the Connecticut Post, a daily newspaper in Bridgeport. Anna Maria has a B.A. from the University of Rhode Island.
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