Ottawa - Billions of dollars are lost each year to illegal and unlicensed software installations. In KPMG's "Software License Compliance Survey 2007", 87 percent of software industry executives indicated that their companies suffered such losses, with 34 percent of them estimating those losses to be more than 10 percent of total revenues.

However, harm caused by software piracy doesn’t stop at publishers’ bottom lines. Companies and individuals with insufficient licenses are also at risk. Not only are offenders subject to potential legal and financial consequences, they are susceptible to security risks or having no access to vendor support in the event of a product malfunction or breakdown.

Are you fully compliant with your vendors’ license requirements? It is not at all difficult for even the best-meaning companies to become over deployed in the course of regular business. Some common, usually unintentional causes of unlicensed installations include:

Complex, vague, and ever-changing licensing and pricing rules

In order to meet changing market demands and provide more flexibility to customers, publishers frequently change their license models. Confusion around an already complex matter can be resolved by continuously educating customers of their current usage rights.

Disconnect between the Buyers and the Users

When Procurement is buying the software and IT is actually using it, misunderstandings can result in inappropriate deployment. Examples include installing the software on more machines than licensed or hosting applications on the Internet without permission.

Changes to IT environments

When changes are made to a company’s hardware, software is typically allowed to be moved from one server to another. However, if the software should be removed from the old hardware and is not, a company can quickly become over deployed.

Mergers and acquisitions

When one company acquires another, the acquirer does not automatically inherit the acquisition’s software licenses unless the contract expressly allows it. Since oftentimes the acquiring company has no way of knowing what software is being used by the new entity, a thorough due diligence should be performed to properly assign all software assets before signing on the dotted line.

Despite the increased ability of software companies to protect their software from unlicensed use, it is unlikely that publishers will ever be able to fully protect their property. However, these 10 measures taken by both users and publishers can help to reduce intentional and unintentional piracy.

Interested in recovering some of your company’s lost license revenues? Let’s look at 10 successful practices:

Educate customers—ensure both Procurement and IT understand the license agreement and are kept abreast of changes that affect their rights.
Require self-reporting—this reminds customers of their entitlement, and providing a template can help ensure that customers are using the proper information to determine compliance.

Consider a contract compliance program—this can help address the risk of under-reporting by customers, and is also a great way to educate and better understand your clients’ needs.

Include audit provisions—audit provisions in the license agreement states your intentions and rights. Even if you choose not to audit the customer, the clause may encourage compliance.

Make it a top-down priority—senior executive support signals to everyone, customers included, that compliance merits serious attention.

Use a risk-based approach to select customers for review—although statistical random selection may reveal the extent of noncompliance, a risk-based approach can be a more efficient way to uncover your losses.

Use a third-party to conduct the reviews—independent third parties can bring resources, experience, and objective execution to an otherwise demanding process.
Leverage the customers’ information—this is often a more efficient approach and also promotes a healthy long-term relationship and trust between the publisher and customer.

Make it a learning experience—compliance reviews provide opportunities to teach customers how they can better manage their software assets.
Request payment for over deployment—it is important to establish from the outset that over deployment is no different from receiving additional packaged products, and be clear that you expect to be paid.

Jocelyne Lafreniere is Leader, KPMG's Contract Compliance Service Line in Eastern Canada