Are you on top of your software licensing? Recognition of the issue, and use of license tracking software, can go a long way toward cutting costs and warding off fines from vendors able to show licensing violations.

• Author: Palmer, Ian
• Position: IT Management

Sitting in the CFO's chair at EFW Inc., a Fort Worth, Texas-based defense electronics supplier specializing in hardware and software solutions, is Bill Augat. His company is just one of the many firms using software license management systems to keep track of what's being used in-house.

"Like any other expenditure, or a decision of any magnitude, we go through a process that evaluates whether it's the right thing for our shareholders," says Augat, who admits that he's not as up to date as the IT folks are about the ins and outs of the particular software license management tool that EFW uses. "That's how we decide, whether it's for an IT solution or whether we're going ahead with another purchase."

Managing software licenses can cause headaches for IT managers, but it can also cause migraines for financial executives who may ultimately feel the impact if their companies somehow use software they shouldn't be using and risk being fined hundreds of thousands of dollars. What it really boils down to is that keeping track of applications can save money, both from avoiding duplicative buying and from averting fines.

Although many companies are starting to grasp the importance of managing their IT assets, others--such as experts, industry watchdogs and software license management vendors--continue to warn executives about compliance issues. When it comes to properly managing software use, businesses can either pay now--forking over a little bit of money to buy needed solutions--or pay later, digging deep to pay enormous fines if caught out of compliance.

According to the Yankee Group, 90 percent of companies worldwide have had to deal with software licensing non-compliance issues. And while some 50 percent did not intentionally break the law, software vendors still often require guilty businesses to pay the applicable fines.

Even if foot-dragging firms can avoid the financial penalties, they will ultimately end up paying in other ways if they don't properly manage their software licenses. Consider, for instance, what one Gartner Group study shows: For every $100 most businesses spend on software, they typically end up spending $500 over the two- to three-year life cycle of that same software (presumably on things like labor and maintenance costs). Companies that effectively manage their software, however, can reduce their IT spending by up to 40 percent.

An IDC report released in March looks at major shifts in software licensing. Incorporating...