Businesses today rely on an ever-changing and expanding software suite simply to run. Open-source software, now approaching a 50% share of the business market, is driving innovation speed and reducing development costs. Although a net positive, significant financial exposure can result from both open-source and traditional proprietary software misuse.

Large software companies actively police their rights with license audits and true-up demands. Non-compliance is frequently found, and getting caught flat-footed on a software audit can be a million-dollar-plus problem. Even seemingly unrelated events, like moving to a cloud-based solution, can have a cascade effect on existing software licenses, and not proactively recognizing that creates unnecessary risk. Similarly, the free open-source software tools and applications used to efficiently create new products may need to be re-licensed on paid commercial terms when transitioning to a distribution or SaaS deployment phase.

Recent M&A experience has highlighted the value of intelligent software-licensing management. Do not get caught in a situation where you lose negotiating leverage and are forced to pay your way out of an audit, or have a transaction stalled (or worse), while remediating license compliance issues that are identified in due diligence. Being aware of the threat environment and getting ahead of these issues preserves leverage in negotiations and keeps you in control of the process.

Takeaways

  • Have an effective software license compliance plan that includes ongoing evaluation of existing licenses as you grow/change
  • Use open-source software responsibly and be aware that, when the use-context changes, licensing may need to follow
  • Document negotiations with software vendors so that the use case and recommended licensing are clearly set out
  • Use new licensing discussions as opportunities to true-up any historic compliance exposure