A recent survey by King Research revealed that 69% of IT executives are not confident about being compliant with their software licensing agreements. Even though IT executives in large corporates usually implement Software Asset Management (SAM) programmes, they are not always effectively run. This means that they are not really in control of their software estate and are not able to establish a solid audit trail to prove compliance. When a Software Vendor puts in an ad-hoc request for data and large corporates cannot provide data that reflects the agreed license terms, the risk of a formal audit skyrockets.
Interestingly, a recent Flexera survey showed a pattern of auditing by Software Vendors. In particular, Flexera stated that:
“Software vendors are continuing their aggressive practices of auditing their customers for software license compliance. 63% of respondents report having been audited in the last 18-14 months […] Moreover, respondents report that audits are not isolated incidents. 37% say that they were audited two or three times over the last 18-24 months.”
The Flexera survey also emphasised that large corporates are being targeted particularly heavily. For example, for companies with US$3 billion or more in revenues, 33% of respondents reported being audited three times or more (versus 25% for US$1-3 billion corporates, 14% for US$101-999 million and 3% for organisations with less than US$100 million in revenues).
Software Vendors alleging non-compliance demand payment of fees for licenses and back-support for truing-up and also issue penalty fines. The larger the corporate, the higher the costs: for example, 21% of respondents to the Flexera survey stated that their organisations were charged US$1million or more in audit true-up costs. Furthermore, there can be damaging consequences for the business in terms of disruption to daily business operations and negative PR.
The Campaign for Clear Licensing reported in November 2014 on Oracle licensing concluding that:
- 88% considered that Oracle audit requests were not clear and easy to respond to;
- 92% maintained that communications from Oracle as to changes in licensing practices were not clear or straightforward;
- Only 24% thought that working with Oracle LMS would lead to a better relationship;
- 78% said that Oracle LMS had not been helpful during the audit, contract and renewal process.
For public sector eg government or local authorities, any non-compliance can be unacceptable, reputationally.
Large corporates and public sector bodies are being hit hard by audits/license reviews. And indications – and Cerno’s experience – point to the fact that the audit trend is a long-term one. Many software vendors see their existing customer base (generally cooperative and loyal) as largely helpless in defending against heavy true-up demands.