Monday, April 20, 2009

Given the current economic climate it has never been more important for companies to manage costs and spending. Certainly this is also true within the IT environment given that IT projects tend to have high failure rates. Not only can project failure result in financial loss for a company but there could also be legal risks resulting from the project failure. Before looking at the legal risks associated with custom designed software this article will first look at the legal risks associated vendor software.
The greatest threat arising from the use of vendor software is the mismanagement of the licensing process. Simply put, as companies cut back on costs so there is perhaps a temptation to make use of pirated software. Often the decision to make use of pirated software stems from managers who don’t appreciate the importance of the systems that support their operations. IT is simply perceived as a cost centre, when in fact nearly all companies are highly dependent on software for their day-to-day activities.
In light of the proliferation of open-source solutions such as Open Office, companies looking to cut back on IT costs have viable alternatives to vendor solutions. Sure open source solutions often don’t have all the bells and whistles of vendor solutions. But how many of your users actually use all of those bells and whistles? Invariably most users prefer using a particular software program simply because that is all they know. The solution to this problem is to ensure that users are adequately trained on the open source program you will be moving to during the transition phase.
Those companies that want to continue making use of vendor solutions need to establish regular audit routines to ensure that they are properly licensed. Such an audit routine would follow four basic steps: establish what software your company is using; establish how many licences your company has; purchase additional licences if necessary; and repeat these steps at least once a year. It is also important to ensure not only that your audit process and the results are documented but that users are aware of what software they can or cannot install on their work computers.
The legal risks for making use of pirated software are severe. Companies making use of pirated software can face fines of up to R5,000.00 per illegal copy of a software program. In the current economic climate this is an additional cost that companies can ill afford. If you conduct a software audit and you find that there is a licensing shortfall it is always advisable to contact the vendor in question to establish how they can help you make up the licensing shortfall rather than letting the vendors contact you by means of the BSA. The bottom line is that there is no excuse for pirating software, even in this difficult economic climate.
Managing custom designed software is a different prospect to managing vendor software. The key to success when having software designed on your behalf is to ensure that the entire development process will be managed properly, both internally and externally.
What are the external considerations? Perhaps the most important external consideration is making sure that you have a proper software development agreement in place. Ideally this agreement must specify in sufficient detail what the objectives and goals of the customer are. This is necessary to ensure that the developer is aware of what is expected from him. It is also important to ensure that any agreement also contains clear deadlines for the development of the software. Closely related to these clear deadlines should be financial penalties should the developer miss any deadlines. This software development agreement then becomes the yardstick by which the developer is measured during the development process. Importantly, the agreement will also determine the liability of the parties with regards to the development of the software.
But even before concluding an agreement with a software developer it is important to ensure that the product will actually achieve the goals its designed to do. Too often software programs designed from the ground up fail don’t deliver results equal to the cost of developing the software. To ensure that the cost of the software is commensurate with the goals set there should be a fixed budget for the development of the software. This budget should be in line with the goals that the software is expected to achieve. Working to a fixed budget also means that developers and internal managers must be held to that fixed budget and if the funds run out, they run out. As draconian as this sounds it is important to prevent excessive cost overruns.
Closely related to the cost of developing the software are the issues of ensuring that the software does not contain unnecessary functionality and ensuring that you are using existing solutions effectively. Too often companies spend money developing new software solutions when existing solutions are not used effectively or existing solutions could be tweaked to meet the new requirements of a company. If money is going to spent developing new software products then IT should be required to counterbalance the added cost of the new software solutions with sensible reductions in the cost of maintaining the existing systems.
These are just a few, but important, steps that companies can take to ensure that software costs are kept under control during these difficult economic times. However, they are also useful steps that companies can use even during the good times which will come.
Warren Weertman Senior Associate in the Intellectual Property Department at Bowman Gilfillan