Data proves what you know to be true—software vendor audits are on the rise

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A recent article published by industry analyst R “Ray” Wang of Software Insider and Constellation Research Group shows that software audits have risen dramatically over the past 3 years. But you probably already knew that if you are responsible for license compliance in your organization. In the Q1 2011 Software Licensing and Pricing Trends Survey, 58.9% of respondents had been audited in the past year. This was up from 26.6% in the 2008 survey. The primary reasons that major software vendors gave for audits were- to keep customers in compliance and to drive incremental license sales as well as find opportunities for new deals. So, as might be expected, audits are mostly about generating revenue for ISVs.

The article also alludes to the “pain and agony” of a vendor audit and then provides some sound advice for enterprises to help them be better prepared for a software audit or license review. Software audits are costly not only in terms of potential unbudgeted license true-up fees, but also from the standpoint of the time spent collecting the data for the auditors. One customer of ours, a large financial institution, was able to respond to a Microsoft license review in less than 2 weeks time. Another bank of similar size was audited by the same third party audit firm, and required a full year for a similar exercise. There are a lot of dollars attached to an audit process that takes your IT staff a year to complete. You need better software asset management processes and tools in place to minimize this time and expense.

In fact, deploying software license management tools is one of the recommendations in the Ray Wang article. Having the proper processes and tools in place can help you avoid software audits altogether, since vendors generally go after only those companies that they believe to be out of license compliance. That’s why audit ROI is typically very high—the software vendor is fairly certain that there is a compliance problem before they knock on your door. And by high ROI, I mean in the 1000’s of percent in some cases! They do database analysis to check for licensing anomalies that are indicators of non-compliance. For example, if a company has 5000 employees but only 3500 Office CALs, that might trigger a review. Merger and acquisition activity is another common audit event trigger.

Of course, an optimized license management program pays many more dividends than just those discussed here in relation to software audits. Software spend management and ongoing cost reduction are key benefits of optimized license management. So, even if your organization is in the 41.1% minority, and you're not facing any software audits, there are still plenty of reasons why you should implement a software asset and license management program.