10 Tips to Taking the Sting—and Penalties—Out of a Software License Audit

More and more companies are being audited by their software vendors—and the penalties can be costly. This list of to-do’s will help firms avoid such audits.

The 80/20 rule applies, especially to software license management. There are usually a handful of software vendors that provide critical (and usually expensive) software for your organization. Even within a given vendor’s software portfolio, it is generally a subset of their products that demand the majority of focus. So when setting up software license management processes, tools and systems, focus on the “high rollers.” The “me too” applications can be addressed later.

Unless license management is part of your normal business processes, it will not be considered. License management highlights the difference between important and urgent; it is always the former but seldom the latter (unless you are facing an unbudgeted seven-figure software audit liability). Left unattended, it will largely be ignored. Therefore, license management must be included within signed-off procedures to ensure license compliance is maintained and software costs are controlled.

One of the most disruptive activities for any organization is to be audited by a software vendor. You can capitalize on the work you put into license management by letting the vendor know how seriously you are taking the subject and demonstrating that you have control of your software estate. Organizations that implement best-practice software asset management and license optimization processes and have the tools in place to help automate these processes are in the best position to defend themselves against a software audit and in many cases avoid them altogether.

Too often enterprises don’t look closely enough at their compliance position unless they are faced with a vendor audit. By this time, it is often too late because already there will have been one if not several instances uncovered in which the organization fell out of compliance. It’s these infractions that lead to unbudgeted penalty fees. Best practices dictate that organizations should always be audit-ready; they can accomplish this by adopting a “Continuous Compliance” strategy. See the next slide for details.

This involves putting into place the necessary people, processes and automation capable of tracking software license inventory, usage data and contract terms—and reconciling this data—to provide an ongoing license compliance position. A software license optimization solution, for example, can present this compliance report within a management dashboard that will show compliance positions and areas of risk on a continual basis. Achieving continual compliance is the only way organizations can take the surprise and sting out of inevitable vendor audits.

You will need cooperation from numerous parts of the organization to implement an effective license management program. Unless you have the “buy-in” from senior management, you run the risk of having to implement a flawed process due to lack of cooperation from certain areas.

There are many business processes and so much data associated with license management that it is imperative that contract negotiation (and monitoring) is carried out in the most centralized fashion. The single characteristic that differentiates the best-in-class enterprises in this space is that they have consolidated and centralized their enterprise-wide licensing activities.

Don’t wait until the last minute to begin preparations for a contract negotiation with a major vendor. The key to a successful negotiation is to be prepared, be informed and be clear on desired outcomes. Mobilizing a cross-functional team, gathering information for a fact-based discussion and defining a strategy that will meet business objectives can often take several months of careful, detailed work.

As noted already, it can be easy for license management to lose priority and focus in your organization. So unless you start with a baseline and track your results, you will be unable to demonstrate the cost savings, cost avoidance and license compliance risk reduction that accrue from these activities.

Publicizing your successes will help build the credibility of your software asset and license management program, motivate others and align their efforts. This is an important part of building a mature program over time. The most mature license management programs have the greatest return on investment.