Software license audit activity has steadily increased over the last decade. But there are troubling indicators that IT vendors will be targeting customers more heavily in the coming weeks and months. What’s behind this shift? What can companies do now to prepare?
Throughout 2022, there have been several subtle shifts in the software vendor landscape. Some of these are byproducts of M&A activity while others have been caused by growing economic headwinds. As we enter the second half of the year, Procurement, SAM and IT executives need to take a moment and consider the implications of these shifts and the risk to budget impact.
For the first time in a while, tech companies are finding they’re not immune to the economic volatility of the moment. A tech-stock market correction is evident and even the largest software vendors are feeling the pressure as they warn of lower-than expected financial performance in the coming weeks and months. It’s not surprising many are responding with the usual measures to increase revenue and minimize loss – price hikes, licensing changes and software license audits.
While it’s not always possible for customers to mitigate the impact of these measures on their business, there are some things customers can do to fortify cost management of their IT ecosystems. One obvious example is performing IT price benchmarking on all purchases and renewals to mitigate (or even negate) price increases. Another example? Preparing for what is becoming – and is expected to continue to be – above-average frequency in software license audits.
NPI believes there are indicators of a yet-again increase in software publisher audit activity in the coming weeks and months. Examples include:
Combined, these events point to an increased focus on generating revenue through both formal and informal software license audits. Informal audits – also known as “soft” or “backdoor” audits – typically come in the form of an offer to help clients optimize their environment. In reality, however, they are an audit where software publishers leverage an internal team closely aligned with service implementation and delivery.
In the best of circumstances, software license audits are highly disruptive and punitive. They consume operations resources, increase executive anxiety, and have the potential to result in a substantial unbudgeted financial impact (typically 7-figures). With the frequency of audits on the rise, NPI recommends companies take the following actions to protect and prepare:
While Procurement, SAM and IT executives may not be in a position to prevent software audits, they are in a position to anticipate and remediate potential exposure well before a notice or request is received.
NPI’s license position assessment services can help you proactively assess your compliance risk and remediate accordingly. Additionally, if your organization is already engaged in an informal or formal audit, we can validate licensing data prior to submission to eliminate unnecessary self-incrimination or data inaccuracies.