Software audits cost customers money and time while limiting innovation

BLC helps clients achieve compliance and manage the challenges of software audits
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BLC helps clients achieve software compliance and manage the arduous challenges of software audits.

BLC’s experience with Microsoft, Oracle, SAP, Adobe, Microfocus, IBM, HP, CA and other software companies has proven invaluable in deeply understanding vendor audit process and strategy.

Transparency in asset ownership, deployment, and financial options contribute to better outcomes through data-driven decisions. An adopted governance structure for purchases and installations improves budgeting, reduces financial risk, and increases total value for the organization.

The 8 points below describe how software audits cost customers money and time while limiting innovation.

Software vendor audits cost customers money, time, and innovation

1. Wasting resources to defend audits

The average software audit lasts 8 to 10 months, consuming an average of 400 hours of IT team time. Some technology team leaders simply give into the demands from the vendor because they don't have resources to dedicate to the audit activity.

Copyright theft is real and vendors absolutely have the right to collect fees for installed products. In the early days of software audits there were triggers that gave vendors legitimate concern about license compliance at a customer site. The resulting audit was focused on a true-up, educating the licensing team, and ensuring accurate outcomes. Today, however, the audit process is used primarily to persuade customers to adopt new products, subscription plans, or to buy additional unnecessary licensing. That is, audits drive revenue and product suite adoption.

2. Software vendor strategy

When the customer receives an audit notification the easiest way forward is to forfeit internal strategic plans, adopt the vendor’s product strategy, enter into a new agreement, and write a big check. Of course, doing so is not in the best interest of the customer and will limit options and halt innovation. The result is a vendor determined strategy that diminishes long-term customer value.

Ideally a customer should have a robust software compliance process that is fully adopted by the enterprise. It is in their best interest to authoritatively know the Enterprise License Position at all times. The more typical case, however, is that IT departments are largely reactive during a software audit. They forage for purchase history, deployment details, and often share incomplete or inaccurate information with auditors. Despite the massive amount of money spent on vendor software and asset management solutions most customers simply don’t know what they own, have installed, or if product use rights have been applied correctly. Issues are compounded when environments are distributed across multiple locations/countries increasing the knowledge gap and associated risk.

3. “Independent” auditors work for the software vendor

Software vendors partner with audit providers to create the appearance of an ‘independent third party’ audit. The auditors, however, are trained and paid by the software vendor - removing any trace of independence. The approach of every auditor studied by BLC has been to: 1) maximize the appearance of the vendor software footprint, 2) launch a relentless campaign to place the customer in a defensive position in order to persuade adoption of a new proposal, 3) promote confusion about the technology environment - opening the door for ‘extrapolation’ and other fabricated outcomes, and 4) extend the audit timeframe and resource drain for as long as possible. Think of this as a ‘softening up’ period before the vendor presents their proposal for new purchases.

4. Using audits to force product adoption

Software vendors have long struggled to drive new revenue because, for the client, technology is expensive and painful to implement. Once software products adopted by a customer they stay as-is for years to come. As a result vendors learned how to offer maintenance and support plans to keep the cash flow alive. These plans are still an important part of vendor revenue. However, if you need to demonstrate company growth there must be a source of ‘new’ revenue.

Today the most popular vendor strategy is to introduce cloud technology into your enterprise. The vendor usually starts by asking you to make a small commitment to their cloud offering as part of your enterprise agreement or while undergoing an audit. This may sound innocent enough but can lead to spiraling cloud growth. Unchecked deployments easily spread through the environment resulting in unplanned expense.

5. Bundle products into suites

The typical enterprise creates business solutions by assembling select products from various vendors. This diversity enables a ‘best of breed’ environment that is tailored to the needs of the business. For example, a customer might purchase database server software, an optimizer, and backup solution from three different vendors.

A popular strategy for database software vendors is to sell the customer their own database optimizer and backup solution as part of a bundle. Usually it is a bundle that can never be disassemble and includes other items that you will never use.

An audit is a great opportunity for a vendor to intimidate the customer into purchasing the bundle. Typically the vendor offers to stop the audit or forgive any over deployment if a new agreement is signed.

6. Move customers to a subscription model

It is not unusual for a customer to run software for many years. Eventually maintenance might be dropped because there is no need to install software upgrades. As implementations mature the revenue stream for the vendor evaporates.

The subscription software model is intended to solve this revenue shortfall. But, how do you sell a subscription version of software to a customer who already owns the licenses that they need?

An audit is the perfect chance for a vendor to present a proposal for switching to the subscription model.

7. Complex and changing vendor rules increase compliance risk

Complex and changing vendor licensing rules require expert focus and a deep understanding of available models and strategic alternatives. Each software product has nuances, product use rights, and rules impacted by hardware environments, interaction with other software, company size, installation and usage locations, authorization administration, and other factors.

The most cost effective way to obtain expert guidance is to use an external service to assist your team in planning a deployment strategy for each technology that effectively utilizes your software and hardware investment. Gaining compliance confidence and avoiding missteps will reduce the risk of large unplanned or unnecessary spend.

8. Stay on top of your compliance strategy

Adoption of a consistent compliance strategy enables flexibility for making free market choices, opens the door for innovation, and limits the unwanted influence of vendors. In addition, command of your environment and software strategy sends a strong message to vendors that often results in a more collaborative relationship.

In summary, proactive compliance management practices will help prevent wasting resources on audit defense and puts the customer back in the driver’s seat.

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Partnering with BLC puts your resources to their highest use: Your teams stay focused on mission-based, profitable and strategic initiatives while we focus on savings. Those savings can then be directed to priorities within IT, organizationally, or to the bottom line.

Maximizing value is all we do: We review and negotiate hundreds of license and maintenance agreements, true-ups, audits and proposals annually. Individual organizations manage these events as they arise - we see them every day.

Broad insight: Our clients span a wide range of industries including healthcare, insurance, education, banking, logistics and retail. With over a decade of experience, we have insight into best-in-class agreements, arrangements and solutions to position IT as a value-driving entity.