BERKELEY - Years ago the big software companies dreamed up something called the TCO or total cost of ownership.

They then pushed numbers around to somehow show (and I'm still flabbergasted by this) that buying software from Microsoft and other big companies was cheaper than using free software available from Open Source vendors.

Man, these are some amazing bookkeepers!

Many large companies took this nonsense in, hook, line and-sinker. But recently their relationships with the big companies has becoming more and more strained because of the software police nagging them with threats and legal action over licensing arrangements.

It all begins with a demand letter from a software company or the BSA saying that they have information which indicates you have stolen their product. They want an audit and they want it now. Domestically over 1000 companies are audited each year.

"These companies are getting fed up with this and are considering Open Source more and more," according to Rob Scott, managing partner of Scott & Scott a law firm with offices in New York and Dallas which specializes in software licensing compliance. They also run the website www.bsadefense.com.

Scott says that it costs $150 a seat to run a full audit using his firm's services and most audits fail because of nothing more than not having the right paperwork for the software. This can even mean that the wrong name is on the receipt. A fine for one unaccounted copy of Microsoft Office can be $2,000 according to Scott.

The main enforcement group is the Business Software Alliance, the BSA. But all the major software companies from Microsoft to Adobe have their own enforcement people too and Scott thinks that about 40-percent of all businesses will get a nasty note at some time or another demanding an audit. Another group, the Software Information Industry Association, also gets in on the action.

The BSA says there is no one fine for anything, it's all negotiated. "According to the law it can be as high as $150,000 per instance," said the BSA Senior

Enforcement Attorney David Majors. But he mentioned that that is for a willful violation. Accidental violations can be as high as $30,000. That makes $2,000 look like such a deal!

Debbie Mayster, the BSA communications manager says everything the BSA does is clearly laid out on the website at www.bsa.org. This includes lists of violators, fines and the fee schedule for people turning in their company.

Now what's all this about the total cost of ownership?

The way the law is set up with the license agreements companies are inviting this sort of aggravation. It's nothing new. Any company that decides to use commercial software when readily available cheaper (free!) alternatives are available is simply asking for trouble unless they are very careful.

Investors should take note of a company called Altiris which produces inventory management software specifically designed to keep track of all the computers in the company. That would help a little. But Altiris can't make you store the receipts in the right file cabinet.

But what would help the most is to eliminate both the dependency on expensive commercial software and also eliminate the company-owned computer. If, like master mechanics in machine shops, the employee owned his or her own tools, none of this would be an issue. That means the company would require its knowledge worker to purchase specific tools and he or she would then own them. A company store could sell these products and even buy them back at the end of an employment period.

Employee-owned equipment and software and the intermixing of Open Source products could easily become an IT department nightmare. That seems to be the big fear. But is it a worse nightmare than $150 a desk for an audit and $2,000 a desk (and up!) for missing receipts?

Along with nuisance suits and Sarbanes-Oxley, software license compliance aggravation makes you wonder how any actual business gets done in America.