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Dave Foxall Understanding the 4 Legal Aspects of Open Source Payroll Software

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 By Dave Foxall

4 Legal Implications for Open Source Payroll Applications

With their low up-front costs, the relative ease of which the applications can be deployed, and perceived reputation for security the number of open source payroll applications is growing in the business software marketplace. Yet one of the most prevailing pitfalls of open source payroll software is that because access to the code is free it must be “unlicensed”. In reality, an application can only be defined as “open source” when it is published under a license approved by the Open Source Initiative (ONI)—an official designation that means all open source licenses share the following characteristics:

  • The software’s source text must be comprehensible for people;
  • The software may be copied, distributed and used as desired; and
  • The software may be amended and distributed in its amended form.

However, as pointed out by a Ernst & Young (E&Y) report, Open Source Software in Business-Critical Environments, beneath this straightforward surface lie a number of legal questions, including “What are the differences between the different open source licenses? What legal conditions and consequences are associated with the use of open source software? What effect does open source software have on license management? What kind of license is suitable for publishing your own software?” As such, any organization seeking to fully leverage their open source payroll opportunities (including the access to the source code) should consider the following legal implications as part of its strategy.

Open Source Payroll Legal Implication #1: License Types

There are at least 70 licenses currently officially acknowledged by the OSI; which (beyond the three fundamentals listed above) differ markedly in their details. These are the three most common licenses together with the percentage of currently existing open source projects.

  • GNU General Public License (GPL)
    At a 46% usage rate, The GPL is the most common type of open source license and grants four freedoms: unrestricted use, reproduction free of charge, free access to the source code, and the distribution of any changed versions. The GPL has a viral effect in that altered versions of software originally licensed under the GPL may only be distributed under the GPL. This approach safeguards the freedom of availability but also represents a legal risk to a company as software developed proprietarily and then combined with GPL code must be published together with its source code in accordance with the GPL.

  • GNU Library or Lesser General Public License (LGPL)
    At Roughly 8% usage, the LGPL reflects the fact that some components are explicitly intended for repeated use in software applications. As such, in order to avoid essentially forcing the publication of the entire source code for the application (as the GPL would do), components licensed under the LGPL may be used in proprietary software.

  • MIT, BSD and Apache Licenses
    At 7, 6, and 5% respectively (giving a combined 18% usage share) MIT, BSD and Apache are so-called “liberal” open source licenses and originate with different open source communities. Their common distinguishing feature is that they allow the source code to be directly incorporated into proprietary software. Often the only condition is that mention be made of the copyright to ensure that the open source software libraries are mentioned by name as stand-alone components of the proprietary software.

Open Source Payroll Legal Implication #2: Copyright

Open source payroll software is subject to all the usual legal provisions. This also applies to the usual protection of software by copyright (i.e. developers of open source software do not waive their copyright). The license (whichever form it takes) is the manner in which the software’s owner grants contractual permission for use. In the case of open source, instead of a fee, rights of use are granted in exchange for certain obligations regarding changes to the source code, incorporation of the source code into third-party software, publishing the changed source code, and further distribution of the changed source code. As such, organizations looking to leverage this medium should be aware that open source payroll software may have copyright protections afforded that are under the radar.

Open Source Payroll Legal Implication #3: Dual Licensing

While the above implications are undeniably important, where open source licensing can truly become complicated is in the area of license compatibility. For example, Apache licensed software might be incorporated into GPL software but not the other way around, because the GPL is the more restrictive of the two. Likewise, some software producers may utilize a dual licensing strategy—offering the same original software with a choice of either an open source license (such as the GPL) or a ‘traditional’ proprietary license. E&Y explain the benefits like this: “On the one hand, the software enjoys more rapid distribution thanks to the free open source version [which creates a larger user base, thus aiding testing/fixing and hence stability]. On the other hand, selling the software under a proprietary license generates revenue. Meanwhile, the proprietary license is in the customers’ interests if they wish to use the software within their own proprietary software.”

Open Source Payroll Legal Implication #4: License Compliance Checklist

For organizations interested in fully embracing open source as a fundamental part of their payroll strategy; including managing their own software development (either through in-house talent or via hired third party expertise); the following checklist is recommended by E&Y as a simple but far-reaching guideline.

  • We know whether open source software is used at our organization
  • We know what license the open source software concerned is subject to
  • We have identified whether and when we can use GPL software in development
  • Our programmers are aware of the consequences of integrating GPL components into our software
  • When we release our own software, we carefully consider which open source license to use
  • Regular monitoring ensures that our internal regulations governing the use of open source software are adhered to

Open Source Payroll Legal Implications – The Bottom Line

Naturally, the above legal aspects are particularly acute for organizations that have embarked on a route of changing, amending and developing their own payroll software at the code level and are interested in open source possibilities. However, even smaller enterprises just seeking to test open source payroll via solutions such as TimeTrex, Easy Time Control or PayPunch may at some future point decide to commission some code-changing amendments—actions that dictate an awareness and accountability of the above licensing implications. End

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In reality, an application can only be defined as "open source" when it is published under a license approved by the Open Source Initiative (ONI)—an official designation that means all open source licenses share common characteristics.




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