...on software license compliance
- FAST identifies over £100,000 in unlicensed software following takeover at British private sector business -
The Federation Against Software Theft is advising corporate UK to make sure they appreciate the value of their software assets and ensure their estates are compliant following a recent action which saw £113,222.24 spent in distress to rectify licensing shortfalls.
Having contacted the business in question three times and receiving no formal response, FAST contacted the IT department directly to tackle the reported issues. In conversations with the head of IT it came to light that the department was in a state of flux following a recent acquisition valued at £17.5m.
According to recent research by UHY Hacker Young, the accountancy firm, UK mergers and acquisitions in the private sector have recovered faster than in the listed sector and are now at a level not seen since the financial crisis began in 2008.
The research shows that the value of M&A targeting private companies has risen by 50 per cent in one year, rising by £6.1 billion to £18.2 billion in 2012. The figure sits just below the £19.5 billion worth of private company acquisitions that was recorded in the year leading up to the collapse of Lehman Brothers.
"The indications appear to be pointing to an upturn in activity and if this does turn out to be true then companies across the board need to know the value of their software estate and ensure their licenses are in order for the transaction, ” stated Alex Hilton, Chief Executive, FAST.
“Historically, there has been a tendency to gloss over the IT issues as being somehow peripheral to the main transaction. But this is 2013, and any significant business is going to be heavily dependent on its IT function and suppliers. Your preparations for any transaction have to include investigating the technology “fit”, but no less importantly verifying that the underlying legal entitlements to use that technology – hardware contracts, software licences and so on – are all in place, including post deal.
"Often there is no time to sort matters out before completion as appears to be the case in the recent work we undertook with this business. In effect this means that during the period it takes to appraise and remedy the situation, the IT department had to work with illicit copies of software installed and in use by the business. The IT manager will be expected to adopt the attitude that 'the show must go on,' but this will attract civil copyright compliance risk – and possibly a criminal law liability to those in management who consent or connive, plus the company," he added.
“Everybody involved needs to be as certain as possible that the company’s software practices are sound to ensure compliance. In an ideal world, there would be ample time to conduct a thorough software audit during the course of the transaction, and then to review the results against the company’s formal documentation in order to identify and rectify any gaps. This doesn’t often happen when the wider commercial implications of the sale/purchase: corporate transactions often take place under enormous pressure and can be very disruptive for established management practices.”
Alex concluded: “The only real protection against these risks is putting in place sound management of software licensing, and taking steps to ensure that they are followed as well as even after the conclusion of the deal. Company directors must ensure that advisers fully account for, and consider the software asset position."
