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Businesses should view open source indemnification as critical: Yankee Group

With open source and Linux gaining more ground in the market, indemnification has become crucial to businesses, and The Yankee Group is advising organizations to review the terms and conditions of their licensing contracts with legal counsel to determine if they have adequate coverage for indemnification. Businesses without indemnification coverage could be the target of intellectual property lawsuits, and they would have to defend themselves with their money, resources and time.

“The minute a corporation gets sued, it loses,” said Laura DiDio, a senior analyst, application infrastructure and software platforms at The Yankee Group in a press release. “A corporate Linux or open source user that lacks indemnification and product warranty will expend its own time, money and resources fighting legal action. In addition to the potential monetary costs associated with protracted litigation, a corporation risks incalculable loss to its reputation, which could deter existing and prospective customers from signing on new business.”

According to The Yankee Group, businesses that use free open source, beta test or steeply-discounted software could find that they are not protected by vendors. In many of these cases, the vendor can’t justify the cost of indemnification for its customers, and so a lot of open source is sold as is. The customer often ends up taking the risk.

However, some vendors that deal in open source do have indemnification in their customer contracts. Novell’s SUSE Linux, for example, does provide some indemnification for its enterprise customers. The indemnification has a cap of $1.5 million (U.S.) per customer, though.

On the flip side, Microsoft provides some of the most specific and comprehensive indemnification provisions in the entire software industry, according to The Yankee Group.

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