BSA fines First Choice Facilities after licence shortfall following an M&A

Safety specialist First Choice Facilities has been fined £18,000 for unlicensed software following completion of an acquisition

Safety specialist First Choice Facilities has been fined £18,000 for unlicensed software following completion of an acquisition.  

First Choice Facilities must also pay an additional £81,000 to buy the sufficient software licences covering unlicensed Adobe, Autodesk, Microsoft and Symantec products to address the shortfall.

It is unclear whether the company First Choice Facilities acquired was under-licensed, relating to the Adobe, Autodesk, Microsoft and Symantec products, but CIOs and IT directors need to be aware of their software licence terms and conditions, including relating to whether the licence is transferrable if their business is acquired or merges with another company.

A recent paper from Deloitte noted that software companies were becoming more aggressive in seeking out licensing discrepancies due to the economic downturn, which has seen many suffer a significant drop in revenue. 

The report stated: "The substantial drop in software revenues has compelled suppliers to become more creative in the generation of new revenue streams. While end-users may argue that this activity is opportunistic, suppliers argue that this is a necessary action to ensure shareholder value protection.

“During the merger or acquisition of a company, the issue of the software is regularly overlooked,” the BSA said in a statement.

The BSA recommends that the acquiring company asks for the licensing information for all software installed on the IT network of the company it is interested in buying. This should be undertaken during the evaluation of assets and liabilities, prior to the final merger or acquisition decision.

“It would be essential for the acquirer to identify how and what software the acquiree was licensed for, before the acquirer was able to take a view on its value, but also how it might integrate with their own software estate. This would provide the opportunity to discover any instances of illegal software, which they might subsequently become liable for,” the BSA stated.

When asked whether software licences from the acquired company would be valid, the BSA said: “There is no single answer for how a company must deal with this, ultimately the terms and conditions of the product licence will vary from supplier to supplier and from product to product, thus so will the value and future use of the software.”

Software mismanagement makes mergers and acquisitions a risky business. But, in this case, the BSA was tipped off.

 Julian Swan, director of compliance marketing EMEA at BSA, said: “It is worth noting that the First Choice Facilities’ case came to the BSA's attention following information from a whistle-blower. 

"Companies should always be on their guard. It only takes one disgruntled employee to place a company at the centre of a legal battle. The best advice I can give to any business is to strive to be whiter-than-white. They should contact their software providers to ensure they are properly licensed before it is too late and they come to the BSA's attention. 

"Help is always at hand - as long as they seek it at the earliest possible opportunity," Swan added. "They might even find they can save money in the long-term by helping to identify duplications and surplus licences."

When it comes to licensing compliance, it seems software companies are going after easy targets. According to analyst Gartner, audits by software suppliers are continuing to increase.

Forrester senior analyst, Stephen Mann said he was receiving far more enquiries now from Forrester's clients on the area of software audits.

In its latest report, Make Software Audits Less Painful and Costly Through Effective Governance and Teamwork, Gartner research director Victoria Barber recommended that the IT department pull together a team to manage software audits from suppliers. This team should comprise someone from the business, a technology manager, the finance team, a contract manager, software asset manager, IT security specialist and a legal advisor.

Smaller firms that cannot afford to run such an extensive team, can hire specialist software audit experts to run the the audit on their behalf.

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