What we can learn from the lawsuit between Microsoft and the Dutch police

27 mar '17 - Mark van Wolferen - share: LinkedIN Mail
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The Dutch police brought Microsoft to trial but failed in their attempt to recoup 3 million euros they paid for software licenses that were never used. This case is interesting for many different reasons and holds some valuable learnings for companies willing to benefit from other’s missteps in license management.

On March 20th, Microsoft and the Dutch police appeared in court as opposing parties. The reason: the police wanted to regain 3 million euros they paid for Office Suites that were never used. Microsoft refused to do so. Neither party was interested in a settlement so it was up to the judge who ruled that the Dutch police will not get any money back from Microsoft, as the wrong purchase was fully legal. Not a surprising outcome, but interesting nevertheless.

Some Background

In 2002, Microsoft and the Dutch police signed a license agreement for software programs, including the well-known Microsoft Office Suite. The police paid around 1 million euros per year for this, based on an overview of the employees who were using the Microsoft product. In 2008, more than 13,000 users of Microsoft Office Pro Work at Home were accidentally added to the yearly overview by an employee of the regional police. Nobody used the software, but the costs did appear on the invoice the police received. They had to pay around 3 million euros extra.

Only a few months later the police discovered the administrative error and ever since both parties argued about the amount. The police felt that Microsoft should have noticed the increased number of licenses and not invoice this amount.

Microsoft, on the other hand, said they are not responsible for checking the number of software users. Moreover, the American software giant already paid back 765,000 euro to the police in 2005, when a similar error was made, and warned that was a one-time "offer", as there was no legal basis for this request.

The ruling 

The court took into account that the police is a professional organisation with an ordering process that includes several approval levels. Each order was thus seen by various officials within the police before it was completed. Furthermore, the court specifically stated that one of the important aspects the police didn’t take into consideration was that they obtained the right to make use of the software, regardless whether they actually used it. Microsoft delivered the product and the police is liable (whether the software is  used or not). Besides the fact they will not get any money back, the police will also have to pay 10,000 euros in legal fees. All in all, an expensive lesson to learn.

No exception

Although an accidental order of licenses might seem ignorant, it is not an extraordinary situation. These types of administrative mistakes often happen in companies and government organizations. I see similar cases on a weekly basis, but they hardly ever turn into public news. Organisations prefer it not to become common knowledge that they lost millions because of poor administration. At the same time, software publishers want to prevent being seen as villains. For this reason, most parties want to come to a settlement to avoid the situation of appearing in the press. Apart from financial losses due to accidental orders another common area in which unnecessary payments take place are support payments for a product or a product version that is no longer eligible for support.

Thanks to research conducted by NU.nl we could witness this case. It is the ideal illustration of why software asset management or at least solid software license management is important for organizations. Of course, Microsoft could have acted more tolerant, but technically it’s the police’s fault. Lack of control and responsibility made possible that one employee’s small error led to a loss of millions. The question is: what do you choose as CIO? You have two options: complain afterwards and hope to get your money back, or prevent these mistakes proactively by bringing your administration in order.

Prevention

Nobody wants fuzz, costs for lawyers and a deteriorated relationship with the software publisher from whom you also purchase other products. Moreover, a proper administration prevents not only that you un-intendedly pay for software that you do not use. It also prevents that you unintentionally use more licenses than contractually agreed with a hefty additional payment as a result.

To end on a positive note, at least the police learned from their mistakes. A spokesperson said that a comparable administration error could no longer occur in 2017. IT is now centralized and an expertise center is established to always have correct usage numbers at hand.

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Ongoing license control is difficult to achieve, but periodic self audits can help you stay in control, remain compliant, and stay one step ahead of software publishers. Conducting these audits requires sound understanding of common mistakes and where to look for them. This can be especially challenging in a continually changing environment with new products and versions of products being deployed.

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