In general, software license audits are conducted under numerous disguises, and most software publishers continue to audit their clients, in order to establish that they haven’t crossed their software usage limit. In the meantime, if you haven’t faced any kind of software license audit yet, high chances or probability remains that you will face in the near future.

Nowadays, audits have been the major concern for all the large enterprises based in North America and USA. As these corporations invest millions of dollars on software purchasing and support on a yearly basis, as a result, for the software publishers, it appears to be a no-brainer to target all those corporations as relatively minor mistakes in software licensing by an enterprise customer can easily leads to huge settlement fees.

In the recent period, most of the big organizations have learnt their lessons the hard way, making huge payments for licensing audit settlements, and the officials who wrote the cheque simultaneously often responded with heavy investment regarding internal audits and license management, thus, they hired third party resources.

In the meantime, the revenue that is invested due to compliance audits in the market has diminished by a significant level, thus, forcing the software publishers target-driven compliance teams to move down the ladder and further beyond. As a result, in the last 12 months or so, one may have witnessed a huge rise in the software auditing works, especially in the mid-market space and also in the regions like USA and North America.

In the meantime, the revenue that is invested due to compliance audits in the market has diminished by a significant level, thus, forcing the software publishers target-driven compliance teams to move down the ladder and further beyond. As a result, in the last 12 months or so, one may have witnessed a huge raise in the software auditing works, especially in the mid-market space and also in the regions like USA and North America.

How Exactly a Software License Audit Work?

When organization buy a software, one should sign up to a license agreement with an audit clause, and by doing this one provides the permission for an inspection from the publisher. When the time comes where the publishers suspect that one owes them money, they will enact the audit clause, notify an organization in writing, and send in the auditors, as these can be their own compliance teams or independent audit firms. At times, the auditors will collect information’s to measure the exact license usage of a particular organization, also they will make corrections of the figures to the quantity of license entitlements that is owned by a particular company. If the audit report suggests that the company is noncompliant, then one will get a hefty bill amount by the end of the auditing.

Which Vendors Audit the Most?

In general, the biggest software publishers follow active compliance programs globally, and according to a 2021 survey conducted by The ITAM Review, the top publishers mentioned by organizations who perform auditing work includes those of IBM, Oracle and that of SAP. At the same time, the similar survey suggests that most organizations receive two to three audit notification requests on a yearly basis.

What Happens If You Are Found to Be Noncompliant?

If an organization is found with unlicensed usage of software, that will automatically result in huge financial penalties, and the final figure include that of buying the licenses you owe at a full list price without any type of discounts, as a result, you will be pressured to purchase new software (often cloud products) that you do not need, also, the cost of support & maintenance payment owed from the time of over usage and legal fees (if you decided to take the matter in front of the court, and if you lose the case).

Why Would You Be Noncompliant?

Nowadays, organization may think that they have a relatively small and straightforward IT environment, and do not have a huge investment in software, therefore how hard it can be to count installs and users? You are partially correct, counting software installations and computer users is straightforward and most capable IT administrators should already be doing this.

More often, software licensing happens for numerous software application, and it has gone way beyond the age of 1 install or 1 user requires 1 license. Some IBM contracts, for instance needs that every device should be capable of running their software to be licensed, including the devices with no actual software installation, and other “production software”, like your website software and databases, are often licensed on the processing power of a server (which is different for every processor model) that is hosting them. On the other hand, one might have some “odd” software contracts that measure license requirements by the number of monthly invoices generated or the number of hours your employees work on a typical weekday.

If your average IT administrator does not happen to also be a software contract analyst, the chances of getting some of these wrong are at high stakes. There could be other challenges that organization faces including those of rapid organizational growth causing software license restrictions to be exceeded, lack of control over software installation, so everyone can install whatever they want on their PCs, poor record keeping leading to difficulty locating proof of license ownership, and lack of resources to perform an internal audit of license positioning.

Where Do You Start?

So do your company suffer from an IT problem, a procurement problem or an operational problem? It appears to be the most popular questions that were asked by clients who just came out of an audit and tried to “do something”. In fact, the implementation of a successful Software Asset Management (SAM) practice requires changes to all these areas.

At All Blue Solutions we have years of experience addressing licensing issues and provide a wide range of Software Asset Management services to help clients minimize the risk of software license noncompliance and make tangible savings from better use of your acquired software assets.

Do you want to be compliant regarding software license agreement, connect with us for free consultation!