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The Importance of Software License Audit Preparation
Companies like Microsoft, IBM, Oracle, SAP, Salesforce, Adobe, and ServiceNow are increasing the frequency of software audits.
Audits can be significant revenue drivers for software companies. 22% of IT leaders surveyed admitted paying more than $5 million resulting from audits over the past three years. Before providers come calling, conducting an internal software license audit (also called a self-audit) is smart business, ensuring your legal and financial accountability as well as avoiding fines or penalties.
What is a Software License Audit?
A software license audit is a systematic review of your software assets and corresponding licenses. It involves a comprehensive assessment of all software, including the number of instances, types of licenses held, and the terms and conditions governing use.
The primary objective of a software license audit is to ensure that you are compliant with the licensing agreements you agreed to with software suppliers. Violating the terms or using unlicensed software can result in significant penalties.
Why Are Internal Software License Audits Important?
Few companies have full visibility into every software deployment in their environment. This is particularly true for large software estates from vendors like Microsoft, IBM, SAP, Salesforce, Oracle, and Adobe. Not knowing what you own, where the software is installed and how it’s being used can put you at risk.
The Business Software Alliance (BSA) reports that as much as 37% of software in use is unlicensed. For the most part, the use of unlicensed software in enterprise environments is unintentional - it goes back to not having full visibility into usage and deployments.
Violation of the use rights terms within enterprise software license agreements can result in severe consequences, including hefty fines and forced upgrades. When discrepancies are uncovered by the software providers, 64% of companies had to pay additional fees for non-compliance according to a survey by Unisphere Research.
In NPI’s experience, these fines can easily reach 7 and 8-figures. The solution is to perform an internal or self-audit to determine your compliance position before the vendor gets involved. Benefits include:
Cost Savings
Internal software license audits can uncover significant cost savings. With accurate tracking of usage and licenses, you may be able to identify shelfware and re-profiling opportunities to reduce costs . One recent survey estimated that enterprise customers wasted an average of $18 million on unused applications. BSA surveys show that companies with a robust software optimization program can often save as much as 30% in annual costs.
Such savings are common, especially with SaaS products. Gartner estimates that 30 percent of cloud fees paid by enterprises for licenses are dormant or include features not being used. This toxic spend can often be uncovered and eliminated during a license optimization assessment.
Risk Mitigation
Internal software license audits also uncover non-compliance with software license agreements that expose organizations to significant risks, such as unbudgeted costs and operational disruptions.
There are also security risks. Malware is common in unlicensed or pirated software. If employees are using products they bring, such as BYOD software, you could be exposing your network to risk. If there is a breach due to unlicensed software, any cyber insurance policy you have may limit coverage.
An internal software license compliance audit helps mitigate these risks by giving you full visibility into usage, including who’s using what and for what purposes. This allows companies to validate adherence to their licensing agreements. By proactively performing internal license assessments for your on-premises and SaaS platforms, you can significantly reduce your risks.
Benefits of Performing an Internal Software License Audit
Conducting regular internal software license audits produces several key benefits, including:
- Enhancing cost management and elevating budgetary precision
- Mitigating the risk of non-compliance fines and legal entanglements
- Fortifying software asset oversight and transparency
- Streamlining the deployment and retirement workflows for software
- Pinpointing unutilized or underutilized software license holdings
- Optimizing investments in software and negotiating advantageous licensing arrangements
Common Factors Leading to Non-Compliance
Despite the best intentions, organizations can inadvertently fall into non-compliance due to a wide range of reasons.
Virtualization Challenges
The complexities of virtualized environments can make it difficult to accurately track software usage and licensing requirements.
Varying Use-Case Definitions
Software licenses are often complex. Managing compliance across multiple vendors makes it even more challenging. For example, different software vendors may define use in different ways, leading to confusion.
Inadequate License Management
Lack of a proper software asset management process and tools can result in licensing oversights and non-compliance. As employees come and go or shift to new positions, it’s not uncommon for licensing to get out of sync.
Operating Outside of Limited-Use Licenses
Some software licenses have restrictions on usage scenarios, and inadvertently exceeding those limitations can lead to non-compliance.
Shifting Product Use Rights and Online Services Terms
Software vendors may change their licensing models or product use rights over time, and organizations may not be aware of these changes, leading to unintentional non-compliance — meaning you could be compliant one day and not the next.
The complexity of software licensing models, such as perpetual licenses, subscriptions, and virtualization licenses, can lead to misinterpretations.
Ignoring New License Requirements for Software Upgrades
Upgrading software versions can introduce new licensing requirements that organizations may overlook.
Mergers and Acquisitions Complications
Mergers and acquisitions can introduce new software assets and licensing agreements, making it challenging to maintain compliance during the integration process.
Best Practices for Maintaining Software License Compliance
To ensure ongoing compliance, organizations should adopt the following best practices to minimize software license audit risk:
- Identify software vendors that present the greatest risk: Typically, your largest deployments are most at risk as these software vendors have built entire revenue strategies and resource groups around audits. They’re also highly motivated to move large portions of your estate to upgraded SKUs.
- Implement Software Asset Management (SAM) processes: Establish diligent processes for managing software assets, including procurement, deployment, and retirement.
- Conduct regular internal software audits: Perform periodic internal audits to assess compliance and identify any discrepancies or areas for improvement.
- Train staff on licensing requirements: Educate employees on software licensing policies, terms, and conditions to foster a culture of compliance.
- Maintain accurate software inventories: Keep detailed records of all software installations, licenses, and usage patterns across the organization.
- Leverage software license management tools: Invest in specialized tools and solutions to streamline license management, optimize usage, and ensure compliance.
- Stay informed about vendor updates: Monitor software vendors' licensing model changes and product use rights updates to ensure ongoing compliance.
- Establish clear policies and procedures: Develop and enforce comprehensive software licensing policies and procedures to promote consistency and accountability.
- Seek expert guidance: Consider partnering with experienced software license compliance experts to provide guidance and support throughout the audit process.
- If you’ve received a license audit notification, you want an expert on your side to help. Performing an internal software audit or license position assessment on your own is time-intensive and complex.
Software License Audit Services
At NPI, we understand the complexities and challenges associated with performing an internal software license audit. We offer comprehensive software license audit services tailored to the unique needs of your organization. With our expertise, you can navigate the intricacies of software licensing, ensure compliance, and optimize your software investments.
Contact us today to learn more about our software license audit services and how we can help you avoid and mitigate non-compliance.
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