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Understanding the risks associated with non-compliance

IDC : 28 September, 2009  (New Product)
IDC report details the risks run by organisations which don't comply to software licensing requirements
Over 60% of IT managers perceive a business risk to the organisation they work for because of unmanageable IT estates, according to research undertaken by IDC and commissioned by the Software Industry Research Board (SIRB). The SIRB was founded by FAST IiS; its membership consists of some of the largest and most influential organisations in the software industry today.

The fourth and final White Paper, Avoiding the Dangers of a Poorly Managed Software Estate: Spotting the Signs of Risk identified four main areas of risk to an organisation - legal, commercial, operational and reputational. These four areas encompass:

* Commercial risk: the over-purchasing of software assets subsequently not used by the organisation; buying outside volume licence agreements, under-licensing which can lead to costly reconciliations.

* Legal risk: the risk of legal action to defend against use of unlicensed, unauthorised or pirate software.

* Operational risk: the possibility of disrupted service because of system failure due to a virus. This is especially common in the case of counterfeit software.
* Reputational risk: the impact of unfavourable publicity through lack of legitimate licensing, which could result in poor customer perception and even a drop in share price.

Fred Broussard, Senior Analyst IDC, commented: "Over the course of our research we have identified the areas of risk that IT management and general management associate with software licensing and software asset management (SAM). This has highlighted a difference in perception in key areas, driving a disconnection between IT and procurement that results in the ineffective management of software licenses within corporate UK. Previously published White Papers demonstrated that procurement and IT disagree on who is responsible for software asset management, and this lack of a combined approach causes inefficiencies and leaves an organisation open to potential risks. This White Paper, clearly illustrates that effective SAM can address each of the four main risks in turn, while delivering cost savings within a compliant framework."

Key findings:

* Procurement is responsible for buying software in 70.4% of organisations, the Board accounts for 15.4%, line of business managers 14.5% and the IT department itself 13%.

* And yet when it comes to who is responsible for SAM it is the IT Director at 47%, then the CTO at 16%, line of business managers also at 16%, procurement at 10% and CIO at 9%.

* The picture becomes even more blurred when it comes to who owns software licence management with 31% of organisations claiming it resides with the IT department, 21% with finance and 47% with procurement.

* Only 48% of general management staff in larger organisations believed that compliance was a risk to their business, compared to 60% of their IT colleagues.

* 38% admitted that they had only a basic understanding of their software licenses.

Alex Hilton, Chairman of the SIRB stated: "The research demonstrates that confusion exists over who owns SAM within corporate UK. SAM must be taken seriously at Board level given the severity of the legal, financial and security implications that are associated with poorly managed licenses."

The Board needs to ensure that the areas of the business that are responsible for the implementation and on-going development of SAM are accountable and the effectiveness of the processes and procedures are measurable against the SAM policy.

Petra Van Beneden, Senior Director, EMEA Licence Management Services, Oracle concluded: "We recommend that setting a SAM policy needs to be a Board level responsibility, due to the high level of the risk implications. This by no means diminishes the critical role that IT and procurement play in the overall SAM programme. But both departments need to not only fully engage, but work in sync."

Julia Uttley, Software Business Line Director, Computacenter, commented "Increasingly a large proportion of IT investment and critical business asset, software is increasingly becoming a cost saving focus areas for most organisations. To benefit from savings through alignment of software management to business needs, Computacenter recommend that organisations identify ownership and establish roles and responsibilities for the ongoing management of obligations and entitlement - taking a progressive approach and focusing on their most significant investments as a starting point".

Michala Wardell, Anti-Piracy Manager, Microsoft Corporation added: "There are three critical factors that are essential to the successful implementation of an effective SAM solution. First; improved processes, policies and procedures that enable the SAM solution. Second; improved licence management knowledge and skills across the organisation; including a focus on increased collaboration between IT and procurement. Third, but by no means least; a Board level champion who can ensure SAM processes are successfully integrated across the organisation."

John Lovelock, Chief Executive of The Federation Against Software Theft and Investors in Software (FAST IiS) added: "Both cost and risk can be reduced by implementing the right processes. Companies cannot financially afford to continue to over-purchase software licenses in this climate and legally cannot risk under purchasing for the reasons outlined in the White Paper. These have to be the most compelling arguments for adopting effective SAM policies in the current market."

This is the final of four White Papers based on the results of the SIRB 2008/2009 research. The 2009/2010 research is currently underway, the results of which will be available later this year. The previous White Papers provide more detailed analysis of the level of maturity of SAM in the UK and offer readers' expert guidance on how an organisation should go about implementing an effective SAM solution and the pitfalls to look out for.
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