The Business Software Alliance (BSA) has come under fire following its recent scheme to double the size of rewards for tip-offs about software piracy to £20,000. Critics said the rewards encourage disgruntled staff to inform the BSA of licensing infringements rather than notify their employer.

The organisation said the scheme – which ended last month and prompted a 175 percent increase in the number of informants– was justified because it made firms more aware of the risk of being reported.

The BSA added that most staff try to notify their employer first and that it encourages them to do so, but warned it could still investigate even if staff had not taken this step.
However, Rob Scott, managing partner at US legal firm Scott & Scott, which specialises in representing US and UK firms being audited by the BSA, said the "overwhelming majority" of his clients only heard about licensing problems when a letter arrived from the BSA.

"The size of these BSA payouts create a perverse financial incentive for IT employees to not inform their managers," Scott added. "In the UK, we've seen the beginning of the inflation with whistleblower payouts doubling to £20,000, but in the US we've seen the top pay outs go from $50,000 to $200,000… I would predict further inflation in the UK."

Paula Barrett, partner at law firm Eversheds, agreed the BSA was taking an aggressive stance. "There is a distinct possibility… it encourages people to pick up the phone and collect a reward, rather than report the problem internally," she added.
Informants are also often partly responsible for their firm being under-licensed in the first place, according to Scott. "With firms with a relatively small IT team it is easy to work out who has informed if someone has just left or been fired," he claimed. "As it is a small department that person is also likely to have had some responsibility for the situation developing."

BSA legal counsel Robert Tam insisted in an emailed statement that informants are thoroughly vetted and rewards are withheld if they are found to have intentionally incriminated their employer. He also argued that "the majority, if not all, cases involve informants acting in good faith: they may have come to realise a party is operating unlicensed software, and so they urge that party to correct their licensing position – only to be ignored."

However, Tam admitted that while the BSA asks informants if they have notified their employer of the problem, failure to do so "is not in itself a bar to investigation as the onus remains on the licensee to ensure they are properly licensed".

Mike Davis of analyst Butler Group argued that the BSA’s strategy of offering rewards for informants to protect its members against software theft is not very effective. "The BSA likes heavy-handed tactics as they think that is the approach that gets results," he said. "But while it might help with bad IT managers who are knowingly stealing software I'm not sure it is helping with the vast majority of good IT managers who do not intend to be under-licensed."

Alys Woodward of analyst Ovum said most licensing infringements were the result of honest mistakes rather than intentional criminal activity, and the BSA should therefore focus more on educating firms on the value of good software asset management.

"Incentivising informants damages relations between users and vendors and because the resulting audits are rarely publicised it doesn’t even encourage others to sort out their licensing," Woodward said. "There is a better way of tackling the problem and that is in talking up the financial benefits of compliance."

Responding to the criticism in an emailed statement, Siobhan Carroll, regional manager for Northern Europe at the BSA, said the organisation invests heavily to educate and offer guidance on software asset management and the importance of licensing and it only uses legal action as a last resort.

But Carroll added that a whistleblower scheme is also necessary. "Despite all the help and encouragement that the BSA gives to UK businesses, the fact remains that there is still a piracy rate in the UK of 27 percent. Many businesses are only motivated to ensure compliance by the risk of being caught, which justifies the existence of the BSA's enforcement programme," she argued.

Jim Shepherd of analyst AMR Research agreed the BSA was within its rights to try to appeal to informants and denied that IT managers' ignorance of under-licensensing was a reasonable defense.

"Unless you are very naïve it is disingenuous to claim you didn’t know you were under-licensed - it is theft by any measure," Shepherd said. "There is a strange attitude to software where people who are not in favour of theft generally think it is OK when it comes to computer software. If you can’t show these people there is a real danger of being caught they won't do anything about it."

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