Software Licensing: Why It’s Important and 3 Ways It Can Help You

Software Licensing

Software licensing helps protect the software company and the end-user.

Did you know that unlicensed software accounts for 37 percent of software installed on personal computers?

Large and small businesses are at risk too. Organizations and individuals often use unlicensed software unknowingly. Using unlicensed software is illegal and can cost you time and money. It can also hurt productivity and efficiency.

Here is everything you need to know about software licensing and 3 reasons you should use licensed software.

What is Software Licensing?

Most software is licensed, not sold, meaning there are terms the end-user must follow. The terms and conditions are often described in the Software License Agreement and usually include rules and restrictions on using the software.  

Software Licensing Agreement

For example, how long you can use the software for (e.g., 12 months), how many computers you can install it on, what types of uses are permitted (e.g., educational vs. commercial use) and restrictions on reverse engineering, selling, or transferring the software are usually included in the Software License Agreement.

Why is Software Licensing Important?

Software licensing protects the software company’s intellectual property and the end-user. 

Software agreements protect the software company and the end-user

For instance, someone could purchase the software, reverse-engineer it, and sell a knock-off version. The software company misses out on revenue, and the end-user receives an illegitimate copy of the software, which could lead to performance issues and cybersecurity threats. 

If an end-user violates the terms of the software agreement, they could lose the right to use the software or be forced to pay a fine.

Individuals and organizations should read and fully understand the terms of the software license and ensure compliance.  

3 Reasons You Should Use Licensed Software

1.Using Unlicensed Software Is Against the Law

Using unlicensed software exposes you to legal and financial risk.

Using unlicensed software is considered software piracy. Software piracy refers to the unauthorized use, duplication, or distribution of copyrighted software.

The copyright owners can take legal action against you, and the government can force you to pay damages.

Legal Risks - Picture of a Judge

Depending on the severity of the violation, they could also choose to seek personal liability, meaning they could hold you personally accountable. Especially if you are a manager or director and knew about or encouraged the use of unlicensed software.

Some people think they won't get caught using unlicensed software. Unfortunately, they are mistaken. 

Companies have a financial incentive to enforce software violations. According to the Business Software Alliance ("BSA"), software companies lose about $46 billion a year due to unlicensed software. There are tools and services that identify unlicensed software users and help companies recover revenue.

Software Licensing Enforcement

2.Licensed Software Offers Better Protection from Cybersecurity Threats

Licensed software decreases the risk of cybersecurity incidents. 

Did you know that you face a nearly one-in-three chance of encountering malware when you obtain or install unlicensed software?

Reports have shown that people and organizations who use unlicensed PC software generally encounter more malware than those who don't. Why? Because cyber criminals can pre-install or embed malware in the software and use it to gain unauthorized access to your information.

Important of Software Licensing - Using Unlicensed Software can expose you to malware and cybersecurity threats

In fact, a survey conducted by BSA revealed that users rated malware among the top three reasons to avoid unlicensed software.

BSA Global Software Survey Results

Source: BSA

3.The Right Software License Can Save You Money

Licensed software can save money and increase efficiency.

According to the BSA, fixing problems with malware from unlicensed software can cost more than $10,000 per infected computer. 

Malware Costs
Unlicensed Software Malware Costs

It is more efficient to pay for the licensed software and avoid any issues.

Types of Software Licenses

Furthermore, there are different types of software licenses that can fit your needs.

Buying multiple licenses for multiple people can get expensive. However, there are usually multi-user packages or volume licenses available that can save you time and money. 

Furthermore, some software is in the public domain and is available for free. 

How to Select the Correct Software License

Before downloading software it is important to understand what you will need it for, how you will use it, and how many computers it will be used on. 

When purchasing software, try to go through official channels and websites. Most legitimate software companies have customer service lines or trialware that you can use first. Don't immediately trust an offer or a website because the price is lower. If the price seems to good to be true then it probably is.

Take the time to read the software licensing and fully understand the terms and conditions. Watch out for unusual restrictions or obligations. 

Remember, even free and open-source software can include obligations for reuse. 

If you are part of an organization or business then it can help to have a policy on software licensing and discourage the use of unlicensed software in writing. 

Being smart about software licensing can put you in a position to be successful and can save you a lot of headaches in the long run.  

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