10 Common Software Licensing Mistakes Businesses Make

by Kyla Camille Nievera, Negosentro.com | For some reason, businesses tend to actively manage their hardware assets, but largely ignore their software assets. This eventually leads to the earning potential of software for businesses being seriously diminished. Although there is an increase in the awareness of the losses associated with poor monitoring and poor management of software assets, most businesses still do not seem to see the importance of properly managing and optimizing their software licenses. In this article, we’re going to explore ten common software licensing mistakes businesses usually make that ends up affecting their bottom line and efficiency.

1. Allowing Employees to Make Ad Hoc Software Purchases

One of the most common mistakes that business make when dealing with their software assets is that they allow employees to make ad hoc and uncontrolled purchases. When employees don’t buy software licenses as they ought to, it diminishes the financial value of such software to an enterprise.

2. Failure to Track Installation and Use of Software

Another critical software licensing mistake that businesses make is the failure to track the installation and usage of the software on third party systems. By tracking the installation and use of a software, an enterprise can determine the rate at which the software is being used or supported by vendors. This enables such an enterprise to determine the amount of money to be spent on the maintenance of the software. Every software comes with a maintenance cost, the critical mistake most businesses make is that they pay these maintenance costs even when the software is not being used at all.

3. There is No Central Software Repository

A huge software licensing mistake most businesses make is that there is no central software repository which can serve as a one stop location where software licenses can be kept for easy access for vendor audit requests and other types of reviews. One way an enterprise can correct this mistake is by using a software escrow service. Software escrow allows an enterprise to deposit software licenses and system source codes for easier access while minimizing the chance of fraud.

4. Not Tracking License Renewal Date

Another software licensing mistake that businesses make is their unwillingness to keep track of software license agreement details like the renewal date, among others. The consequence of this mistake is that such businesses may make critical software agreement lapses. These lapses usually come with one form of financial penalty or another. In some cases, failure to keep track of a software license renewal date may mean that the enterprise would be made to repurchase the license. This is a costly financial pit for a business as it implies that the enterprise is repurchasing the software over again.

5. Maintenance is Not Performed at the Right Time

It is a costly mistake for a business not to purchase software maintenance at the right time. If the software license agreement stipulates that maintenance is to be purchased during a particular period of every year, if such is missed, then the enterprise may not qualify for certain software upgrades meaning that more money would be spent to get the software maintained.

6. Under Utilization of Software License

The under-utilization of software licenses is another fundamental software licensing mistake that businesses make. An enterprise must designate an IT department to work with the procurement department to ensure that software licenses are not underutilized. For instance, if an enterprise makes its software available to a company in multiple locations and on multiple servers with multiple administrators while only charging fees for a single location and a single server, the company is ultimately underusing the software license.

7. Providing Inappropriate Software Licenses to Third Parties

Enterprises usually make the mistake of providing software licenses to third parties without first assessing the third party client’s needs. The specific need of a third party client should determine the type of software license that would be issued, but still, many companies still make the mistake of issuing inappropriate licenses.

If a third party client needs a Microsoft Windows access license, for instance, but would need to deploy Sharepoint in about three months, the proper license the client should get is a core client access software license. This would the most appropriate license in the circumstance. Sadly, most of the time, businesses lose money on software assets because they issue inappropriate licenses to third party clients.

8. Not Keeping Up with Changes in Licensing Rules

Licensing rules do change frequently, and it’s a crucial mistake for an enterprise not to keep up with these changes. Failure to do so results in non compliance with the terms of the software license. Not keeping up with changing licensing rules usually comes with a lot of financial consequences and might even result in a company getting audited by their software vendors.

9. Not Automating License Optimization

Another mistake businesses make when it comes to software licenses is failing to automate software license optimization. Software License Optimization enables businesses to collect all the needed data needed for the optimization of its software. This also allows businesses to be able to apply license entitlement rules to effectively manage software licenses. Software License Optimization reduces incidences of breaches in license compliance, which will attract financial penalties.

10. Not Properly Applying Product Use Right

Not properly applying product use right is another common software licensing mistake businesses make. This usually leads to inordinate software use which will lead to loss of money as more software licenses need to be acquired.

Software licensing mistakes are costly to businesses. When businesses make such mistakes, there are usually two outcomes. One of them is the financial deficit when repurchasing the license all over again and the other is the potential loss of profit due to inappropriate software use. It would be much more beneficial if businesses paid attention to software licensing like they pay attention to their hardware assets. Although there is an increase in the awareness of software licensing mistakes, there is still a dire need for increased diligence, monitoring and management of software management in order to eliminate these mistakes.

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