BSA: nearly a third of SMEs knowingly underlicensed

A new survey from the BSA/Software Alliance has warned that a significant minority of firms are knowingly cheating the system when it comes to acquiring software licences

Small businesses are commonly using unlicensed software  in an attempt to cut costs and save money but as a result run the risk of being slapped with substantial fines, according to a survey from the BSA | The Software Alliance.

Growing businesses are particularly likely to have too few licences for their software and businesses going through a merger and acquisition process are particularly susceptible to falling foul of copyright law.

The research reveals that 30% of UK small businesses knowingly have too few licences for the number of users or are purposely using the wrong kind of licences for their organisation. In both cases they are infringing the Copyright, Designs and Patents Act 1988. 

It also points out that half of businesses acquiring other organisations fail to carry out due diligence software audits, further exacerbating the problem. However, set against this, the survey revealed that 78% of businesses feel they need to be more educated on the risks of becoming under-licensed following M&A activity.

The research suggests that growing businesses are particularly likely to have too few licences for their software.  Well over a third (39%) of businesses surveyed often allocate additional PCs and software to employees before paying for additional licences.

BSA | The Software Alliance, is a leading global advocate for the software industry and understands that while cost cutting is a major incentive for infringing copyright law it can have damaging effects for those caught doing it and often leads to enforcement action.

BSA regularly takes legal action against companies for unlicensed software use, which results in the companies paying hefty financial damages.

Last year, safety specialist First Choice Facilities Ltd paid damages to the BSA as well as purchased valid licences, amounting to almost £100,000, after acquiring another company and allegedly inheriting a substantial amount of unlicensed software. This came to light following an informant's tip-off.

Michala Wardell, UK committee chair, BSA says: "It's shocking that almost a third of small businesses are infringing the Copyright Act when it comes to managing their software. And simply bewildering that many of these businesses don't change their software management practices until they face a legal challenge. Given the costs involved, you'd think the job of sorting out software licences would be a priority from the word 'go'."

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If it’s true that 30% of SMEs are knowingly under-licenced, then that’s difficult to defend. But it also suggests that these same SMEs see it either as a risk worth taking – i.e. the chances of getting caught and the consequences of getting caught are deemed less ‘dangerous’ than the cost of licensing properly – or just a not priority for them.

In order to cut piracy among SMEs, the BSA needs to change tact and paint pictures that are more likely to resonate with their target audience. For example, if a small courier firm had three of its vans taken off the road for not having insurance, could it still do business? Probably not; that’s why the firm accepts that van insurance is a necessary cost of doing business. But that same business may not realise that its vans only go to the right places and they can only conduct their business (invoicing, payroll, scheduling etc.) because they use commercial computer software. If those applications were not available due to an audit identifying they were not licensed, the impact on the business would be just as severe. SMEs need to stop viewing software as ancillary to their business activities, and instead realise their business relies completely on it. Failing to licence properly is not an option.

What they can – and should – do is minimise the cost of software and avoid over-spend. Just like you hunt for the best insurance prices, so proactive management of your software licencing can deliver significant cost savings while also removing the risk of being found non-compliant.