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Software Audits: Why You NEED to Care and How to Prepare

Posted by Henry Cheang | July 25, 2014 8:00 AM

Ah, software audits. They’re a source of anxiety for organizations, but are, unfortunately, a wholly necessary activity for software creators. Software producers lose at least 10% of their revenue from pirated or unlicensed software use by end users. In concrete numbers, this amounts to $34-64 billion in losses per year for software producers as a whole.

For software producers/vendors, the best way around this is the software audit, a process wherein they thoroughly validate a customer’s compliance with the terms set out in their software usage contract. Software audits are increasing in number – it takes serious resources to produce enterprise-grade software, and recouping the losses from piracy is a perfectly valid exercise. For that matter, it’s a legitimate revenue stream: Factoring in the proceeds from a software compliance program into the revenue stream can increase revenues by up to 4%. Why shouldn’t software developers earn it?

Of course, for software purchasers/end-users, the software audit can be nerve-wracking. And with good reason; nearly 5 in 10 companies (surveyed by IDG Research Services) say that they are unprepared for software audits.

What does being unprepared for software audits mean?

The events that will be challenging for the unprepared company include the following:

  • You can’t refuse a software audit.

o   In signing the end user license agreement (EULA), you agreed to the software vendor/developer’s legal right to do software audits on your organization’s software. When they’ve initiated a software audit, you have no legal recourse to stop it.

  • You will waste time trying to find your information on purchased software licences.

o   Imagine tracking the license for software on every PC and mobile device in a company, and that you’re likely in the roughly 50% of companies unprepared for software audits. That means that you won’t easily find the evidence that you paid for what you’re using.

o   The added problem here is that the software audit isn’t a single-day affair. It lasts months to years.  Imagine having to scramble every day of that period to find documentation...

  • You won’t have a plan for how to deal with software license mismatches (and believe me, if you haven’t prepared for an audit, and/or you allow BYOD in your organization, you will have mismatches).

o   Now, it’s rare that you’ll be taken to court for “failing” a software audit. That doesn’t mean that failing it won’t be painful regardless. You’ll have to take the steps dictated by software vendors in redressing any bits of non-compliance that they’ve “proven”. And honestly, when a business decision is taken out of your hands, it just hurts your organization in the long run. In similar fashion, if you’re unprepared for the audit…

  • You won’t have sufficient resources or information to counter or challenge any claim made by the auditing software vendor.

o   Now, I have said that there are legitimate reasons for software vendors to do software audits. That doesn’t mean that they won’t make mistakes in making claims against you, or that they won’t try to nudge in a bit extra in compensation demands. In both cases, if you’re unprepared, you’re not going to be able to contest their claims, even if you know that you’re not in the wrong.

  • You WILL end making unintended, negative changes to your balance sheet.

o   Remember how I said that audits can take months or even over years to do? Now imagine how much you as an IT manager will be able to do for your regular duties when you’re constantly “collaborating” with the audit team. You had a full-time job at the outset. Now you have that job plus dealing with audit proceedings. You’re going to fall behind in regular IT management, and that will cost you in the short and medium term. And then there’s the extra fees you’ll be paying when they find license/use mismatches…

What to do about software audits!

So, while you can’t refuse (or, at this point, even ignore) software audits, you can take steps to blunt their impact on your company. It’s all about being prepared:

  • Know and understand your software contract terms.
o   You must eliminate vague license metrics when negotiating or renegotiating deals.
o   CLEARLY define usage rights, and enforce them within your company! It’s not good enough to simply have paid for the software – you have to make sure that only the right (number of) people are using it!
o   If your company is undergoing any big change, revisit how your software will be used. You have to make sure that you’re only using the software as intended. If you’re not, it’s time to renegotiate terms!
o   If you’re outsourcing, demand the outsourcer be responsible for maintaining compliance.
  • Monitor the vendor’s audit activity. If they’re ramping up, the odds are good they’re coming your way.
  • Be very wary of BYOD.

o   You have to be extra diligent in dealing with added compliance issue because you likely won’t have direct control of employees’ devices…

  • Look at compliance as an ongoing discipline. Don’t be reactive, be proactive!
o   In fact, it’s in your best interests to do regular internal software audits. Anything software vendors would extract via their audits far outweighs the cost invested in internal audits. And if/when you find mismatches, contact the vendor immediately. If you’re the one who called attention to the problem, then you’ll most likely get better (re-)negotiations.
o   Invest in management tools that will allow you to regularly monitor and audit your license.

I hope that was helpful! If you have any other tips or anecdotes about software audits that you’ve performed/experienced, feel free to discuss it in the comments section below! In the meantime, contact us if you have any questions about software audits for your organization! We’re Cimpl, Canada’s leader in telecom expense management, and we know how to help you track and manage your license! Save yourself the worry and call us today!


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Topics: Bring Your Own Device (BYOD), Audit, IT Expense Management (ITEM)

Written by Henry Cheang

Henry is a dedicated technical writer, focused on conducting market research, contributing to product design, and writing clear and concise documentation for the company. He is an enthusiastic team member and is passionate about science and technology, who plays a key role in Cimpl’s product messaging. His dedication to writing is reflected in his experience in authoring academic papers, documentation, user guides, and in contributing to Cimpl’s marketing efforts.

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