The piracy pitfalls of outsourcing

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IT outsourcing companies could risk criminal and civil proceedings if their clients do not have adequate licenses in place for their software, the Federation Against Software Theft (FAST) claims today.

FAST has recently seen its first case involving a company using outsourcing (the software piracy watchdogs refuse to say which company, sector or even country was involved in the case).

Although FAST is unwilling to talk about this particular case, it is far more forthcoming in offering general advice on outsourcing and software license compliant.

The warning, which FAST stresses also applies to enterprises outsourcing their software operations, comes as outsourcing becomes an increasingly popular option. According to the Meta Group approximately 70 per cent of companies currently outsource, and nearly all businesses will embrace the model to some extent by 2006.

FAST advises outsourcers to "conduct due diligence on any licenses it is set to control under its contract".

Existing issues - of which the customer itself may be unaware, such as unlicensed software inherited from a merger - should be identified before they cause problems, it adds. Current software licences may not allow outsourcing, so new licences may need to be drawn up, FAST's lawyers advise.

"License provider's whose pricing model is affected by the outsourcing could well want to look carefully at the proposals - and may even require additional fees before the service can go ahead," advises Simon Briskman, of FAST Legal Advisory Group (FLAG) member Olswang.

Bill Jones, of FLAG member Wragge & Co commented: "The inter-relationship between software licensing and outsourcing is generally poorly understood by users, and it can be very unwelcome when problems with existing licenses are discovered late in the negotiation of a new outsourcing relationship."

Chris Butler of Liberata adds: "Outsourcing the problem does not mean outsourcing the liability."

"It is essential that the organisation works with the outsourcing provider to ensure that complete audit records of software and hardware licensing and any shortfall are gathered during the due-diligence phase of any business take-on."

As well as making sure their own licensing is scrupulous and auditable, outsourcing companies need to prevent the 'accidental' deployment of more licenses than are strictly procured. Strict controls are needed to prevent this kind of 'license-creep' during outsourcing contracts, FAST recommends.

The FAST Legal Advisory Group is to address this issue of outsourcing at its next seminar, to be held at London offices of law firm Baker & Mckenzie at 11am on July 16. ®

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