December 07, 2012, 1:38 PM — Facing a trying economy and decreasing new license revenue, enterprise software vendors are turning to more frequent license audits to turn up missing revenue.
A Gartner survey revealed increasing license reviews, with 60% of respondents in 2010 reporting being audited in the previous year compared with around 30% in 2007. And a 2011 IDC/Flexera study revealed that 56% of large enterprises were audited in the prior year--17% of them saying they had been audited three or more times. "The difficult economy and resultant ongoing enterprise IT budget constraints means that large software deals are becoming less common," says Dr. Jonathan Shaw, a principal with outsourcing consultancy Pace Harmon.
"The worst mistake that an enterprise can take is to sit back and passively accept the audit terms, process and results."
Meanwhile licensing use-rights are being applied to increasingly complex IT envrionments that have evolved beyond their long-standing software agreements. "Software providers' reaction to infrastructure advances had led to a proliferation of abstract and potentially confusing licensing metrics in contemporary agreements, which have made entitlement tracking considerably more difficult with a risk that simple technology refreshes and environment optimizations will cause an enterprise to fall out of compliance," Shaw says.
[Related: Compliance 101: All You Need to Know]
When a software provider wants to conduct a license compliance audit, it formally notifies the enterprise of its intention and then works with the customer to examine the enterprise environment to identify any license shortfalls. Anything from use of software on non-named servers to lack of centralized software asset management processes to inadvertent including of software on a base image can raise red flags.
Any gaps uncovered form the basis of a settlement and a requirement that the enterprise rectify the situation within a certain period of time. But there are steps a corporate IT organization can take long before the auditors arrive to limit potential damages, from choices made during contracting to management of the software life cycle to preparing for the audit itself.
Pick the Right Licensing Structure