Costof ITMismanage

26 February 2002

Mark O'Conor

A recent article in the Financial Times (published 26 September 2001) stated that mismanagement of IT was costing UK companies £17 billion per year. KPMG had undertaken a survey of senior board members of around 200 UK companies to arrive at this figure.

From a legal perspective such wastage manifests itself in a number of ways. Often, organisations will have an uncertain contractual relationship with a large number of IT providers. Sometimes there will be no contract in place or the organisation will have signed a supplier's standard terms, or (as we sometimes see at this firm) we will be asked to review a contract which, it turns out, has already been signed.

The rule of thumb is, the more complex the issues and the greater the value of the contract, the more the need for a written contract. Specifically with regard to IT contracts where typically there will be a licence of rights to use software, it is important to get the scope of licence right. Putting aside arguments of implied licences for a second, the basic rule is that if a right is not granted expressly under the software licence, then that right may not be enjoyed by the licensee/recipient of the software.

At the other end of the problem is the issue of software audit. Organisations such as the Federation Against Software Theft and the British Software Alliance police the worldwide software industry and compliance by organisations to licensing stipulations. Both organisations have brought legal proceedings on behalf of their members for use of unlicensed software. It is therefore incumbent upon all organisations to have a clear chain of title or clear licence of rights to be able to identify the number of licences in place and the number of copies in use. This is necessary in order to be able to identify the licensed documents themselves so as to ensure clear licensed rights. A useful by-product of such process is that an organisation will find that it can seriously rationalise the number of licenses it currently holds boiling down multiple licenses for similar products into one enterprise-wide licence and thus saving money as a result.