According to The ITAM Review, July 4, 2011, Gartner, Inc., a leading technology research company, reported in March 2011 that 61% of their survey recipients were audited by at least one software vendor in 2010. This number was the highest percentage of any comparable Gartner survey. Respondents identified the following companies with the most audits: IBM (41%), Adobe (40%), Microsoft (35%), and Oracle (17%).
These percentages have been steadily increasing over the past 10 years, and that trend is likely to continue for customers of all sizes.
IBM has launched an initiative to audit all customers worldwide while Microsoft has considerably increased audits conducted by its Global Compliance Group.
Why would a company be targeted for an audit? It may have been a disgruntled employee acting out of revenge, or a software vendor decided it was your turn, or perhaps an IT compliance agency such as the Business Software Alliance (BSA) selected your enterprise as part of a random series of audits. The bottom line is that routine, periodic audits are the only way for software companies to ensure full payment for their intellectual property, and they are counted on as a new revenue source when new license revenue is decreasing. Sooner or later, your company can be expected to be selected.
Many organizations mistakenly conclude that they are protected against software audits due to policies that forbid the installation and use of authorized software. But any enterprise can unwittingly fall out of licensing compliance over time for a variety of reasons: annual changes in licensing rules, software company mergers, true-up clauses in licensing agreements, outsourcing, use of new hardware, and many other causes.
Beyond the direct financial costs involved, software audits also impact organizations by disrupting normal business operations, by drawing IT and executive personnel away from the needs of their customers. The financial impact of an audit may include damage to an organization's brand reputation, and can draw the attention of other software vendors seeking additional revenue.
Is your company at a high risk for non-compliance? Gartner has assembled a short list of the following questions to help you make a determination. If your answer to any of these questions is "no" or "I don't know," then your enterprise is at high risk.
1. How long has it been since a meeting was held on contract compliance and asset management?
2. Does the CIO know who is responsible for IT asset management?
3. Are personnel trained in software license negotiation managing the technology contracts?
4. Is there centralized technology procurement within the enterprise?
5. How long has it been since a desktop audit was performed?
6. Are asset management projects funded?
7. Does the enterprise have written procedures on software procurement processes?
8. Does the enterprise have written policies on software licenses that are not legally procured?
If your company receives the dreaded letter from a software vendor demanding an audit, preparing an effective and comprehensive strategic response is vital. Retaining attorneys who are well-versed in software audit defense can be an invaluable resource in setting the stage and tone with the software vendor, structuring the terms of the audit, protecting your company's rights, and achieving the best possible resolution. It is imperative that your legal counsel understands the complete set of resolution frameworks that software vendors use to enforcing their licensing agreements, and just as importantly, where there are gaps and ambiguities that can greatly benefit your company, including avoiding a vendor's "fuzzy math."
If your company has not yet received the dreaded letter, and you are at high risk of non-compliance, conducting a comprehensive review of your existing technology licensing agreements to determine the software vendor's auditing rights is paramount.
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