Small businesses tempted to use unlicensed software could find themselves receiving a substantial bill for damages. The total amount of such penalties paid by small- and medium-sized enterprises (SMEs) rose by almost 20% last year, says the BSA, a software industry trade association, amid an effort by IT suppliers to crack down on illegal use of their products.
BSA says as many as one in four pieces of software currently used in the UK is not properly licensed. The group offers rewards of up to £10,000 to whistle-blowers who report the use of unlicensed software in the workplace, and this appears to be encouraging more people often disgruntled employees to report software piracy. Last year saw a 58% increase in the number of reports filed with the group. Among smaller businesses, this increase in reports saw fees and penalties rise to £915,000 in 2016, up from £770,000 a year previously, with several firms landed with bills of tens of thousands of pounds.
The BSA's campaign against software piracy suggests it is becoming more likely that SMEs using unlicensed software today will get caught. By contrast, as recently as ten years ago, such cases were rare. The group also warns that the damages it cites are only a small portion of the full costs incurred by businesses caught out, since firms may also be forced to pay legal fees, meet the costs of business disruptions and to pay for legitimate versions of the software they use. Reputational damage may also be costly.
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Businesses that are tempted to continue running the risk of using unlicensed software may also be putting themselves at risk of cybersecurity breaches. Research published by the BSA and market intelligence firm IDC last year found a strong correlation between the use of unlicensed software and the presence of malware on company IT systems perhaps reflecting the fact that pirated or "cracked" software that comes from questionable sources may often be infected with malware.
Many SMEs may not even be aware their current use of software breaches the law, says the BSA. An awareness campaign that the group ran recently in London found many businesses had not realised their software was unlicensed for example, licences may have expired or the software may subsequently have been installed in new parts of the business.
Six steps to make sure your firm stays within the law
Small business are among the worst offenders when it comes to using unlicensed software. This is often because they don't have proper IT policies in place to make sure that they comply with all relevant laws. The BSA suggests firms should take the following steps to make sure they are not putting themselves at risk.
Audit all software currently installed on your business's IT systems, even if it isn't used regularly. Make sure that you understand exactly what programs need licensing.
Check the status of all software identified and assess whether licences are in place. Check that your firm is not breaching the terms of such licences for example, the software is not being used by more users than it should be.
Where unlicensed software is identified, take immediate action to remedy the problem. You should include an investigation into whether use of software from unreliable sources has increased your firm's exposure to cybersecurity threats.
Put in place a software asset-management policy that will ensure your business remains on top of its licensing requirements.
Communicate such policies to all staff, so they understand how to comply with the software licensing requirements and do not expose your firm to a potential breach.
Take external advice if necessary on how to comply with your licensing responsibilities. The BSA offers free tools on its website that can help see BSA.country/uk for details.
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David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.
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