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Many modern companies these days use a plethora of software in conjunction with one another to create their tech stack or arsenal of technologies to do their jobs. However, this usage can lead to software license compliance risks the more you use them.

To help keep things on track, here are some tips that will make you more aware of the risks and what you can do to prevent them.

1. Understand contract terms and penalties

As with any contractual obligation, don’t undertake one if you won’t read the contract terms and the penalties that may come from it thoroughly.

If you don’t do anything to avoid or protect yourself from these risks, you’ll have to face legal disputes, financial penalties, reputational damage, and even loss of business opportunities.

To avoid such risks, it is imperative to thoroughly review and comprehend the contract terms before entering into any software licensing agreement. Understand the elements of the deal like:

  • Usage rights
  • Restrictions
  • Renewal requirements
  • Any specific obligations or responsibilities imposed on the licensee

Equally important is grasping the potential penalties associated with non-compliance.

Contractual penalties may include monetary fines, termination of licenses or services, or even legal action. By being aware of these consequences upfront, companies can have more motivation to put up proactive measures to ensure compliance throughout their software usage lifecycle.

Once you know more about contractual obligations, conditions, and penalties, you will have a better idea of what procedures you need to pay attention to ensure you keep up-to-date with your software license compliance.

8 Essential Tips to Avoid Software License Compliance Risks

2. Implement a software license policy

Whether you’re developing software for internal use or one to send to potential customers, you must implement a software license policy.

If you don’t know what it is, a software license policy or agreement outlines the terms and conditions that users who plan to use the software should know about. Most of the time, this policy would cover the restrictions on how a user can use and distribute said software.

Organizations can limit their liabilities by having a clear policy in place as other users use their software.

Implementing a software license policy will serve as a framework for your organization to manage licenses, track usage, and conduct regular audits. It’s also a way to inform all employees and end users are aware of their responsibilities regarding software usage.

By implementing a comprehensive software license policy, you can manage your licensing needs and reduce the chances of accidental non-compliance. It is essential for maintaining transparency, accountability, and adherence to licensing agreements within an organization.

3. Keep track of your software licenses

If you’re developing software in-house or using a lot of other software within your organization’s tech ecosystem, it’s a good idea to keep track of all your software licenses.

The benefits of keeping track of them start with knowing when to renew them, especially if using third-party software. It can also let you know if there are any updates so that you are using the most secure version of said software.

Also, keeping track of it lets you know how you use the software and whether it aligns with the licensing agreements. This way, it will be much easier to identify discrepancies that could lead to non-compliance.

When you’re more aware of the software you use, you can quickly identify unused or underutilized licenses and either reallocate them or negotiate better licensing agreements with vendors.

4. Conduct regular audit

A meaningful way to avoid dealing with the consequences of some software license compliance risks is by conducting regular audits.

Since you don’t know how your employees may use the software, regular audits will make it easier to nip any unwanted usage in the bud.

By conducting these audits, organizations can identify any potential non-compliance issues and take necessary actions to rectify them. Usually, you’d be able to easily find compliance gaps as long as you do an audit.

Furthermore, conducting regular audits promotes transparency and accountability within an organization. It ensures employees understand the importance of complying with software license agreements and discourages unauthorized usage or piracy.

5. Educate your employees

Either you are the one who signed up to use specific software or someone else, but that usually means that employees don’t know the agreement included in the use of said software. That’s why, if you want to ensure that everyone is on the same page regarding software license compliance, then it’s a good idea to educate them about it.

Start by creating a clear software usage policy that outlines the rules and regulations regarding software licensing. This policy should be available for all employees to access at any time. It should also clearly communicate your organization’s legal and responsible software use expectations.

Conduct regular training sessions to educate employees about software license compliance. These sessions are when you can emphasize that compliance is not just a legal requirement but also an ethical responsibility.

6. Only use the latest approved versions

Again, whether you’re using software made in-house and specifically for your company or software from a third-party source, you should make sure to use only the latest versions.

If your IT team sends a notice to update the software, do so immediately. Most of the time, these updates contain up-to-date security patches or patches that comply better with software license regulations.

Also, these updates usually include better performance and updated features that your team can benefit from. Therefore, there are no downsides to keeping your software updated.

It might be a hassle for a few minutes, but keeping your software up-to-date is not only the most secure way to use it but also the most efficient.

7. Know how many users are covered

Software developers usually indicate in their software policies and agreements how many people should be using or are allowed to use the software.

If you’re a business owner using the software, it’s understandable that tracking how many users can use it might be tricky. Still, doing so is essential so you don’t have to pay a fine if found doing otherwise.

Luckily, if you do regular audits and keep track of all your software licenses, you should also be able to track how many users use each software agreement you’re in.

8. Don’t resell licensed software

It might be obvious, but it bears repeating: don’t resell in any way, shape, or form licensed software. That’s a significant violation of the software license agreement you probably agreed to when signing up for said software.

It would be best to mention to your employees that letting someone outside the company use the software may also be a violation.


By keeping track of these tips, you can keep your software usage more secure. At the same time, you can avoid some of the most common software license compliance risks that businesses commit. Thus, if your company uses a lot of software all at once, prioritize software license compliance so that you don’t have to pay fines in any way.