The real costs of a software audit
Gartner research studies show an increase in software audits for companies of all sizes and industries. Both the execution, as well as the results of a software audit typically generates additional unexpected costs for you as an end user. At the same time, the opposite is applicable for the software publisher – an audit usually means generating more revenue.
The 4 major publishers that perform regular audits are IBM, Oracle, SAP and Microsoft. These are conducted based on the terms and conditions of your license agreements and more specific the audit rights of the software publisher.
Although nowadays software audits have become a common practice, they’re still a source of concern for many companies. It is very common that end user organisations, especially those that use software from multiple publishers, are audited on a yearly basis; for example, one year by Oracle and the other year by IBM. But what may trigger an audit? There are many situations, like the termination of support, changes in the IT infrastructure, changes in the number of employees, mergers and acquisitions, expired agreement, audit teams from different publishers talking to each other and so on. To see the entire list of situations, you can read our article “What may trigger a software audit?”
Now that you know there is a high possibility that you will be audited (again) in the next 12 months, let’s talk about the costs of a software audit and what it means for your company. The costs of an audit can vary heavily and typically depend on the size of your organisation, the software publisher performing the audit, the scope of the audit and your current license compliance position. In order to understand the costs of an audit, you should distinguish between:
- Costs you need to pay as a result of a non-compliance finding (direct costs)
- Costs you need to pay as a result of the audit, independent of the outcome (indirect costs)
Software audits – Direct costs
The direct costs of a software audit are the extra fees (penalty) you have to pay in case the auditors find unlicensed deployment and/or use of software. You should keep in mind that – depending on the practice of the publisher and the country (and its applicable law) – these fees (license fees and support fees) may be charged at full list price instead of your negotiated price with discount(s). In addition, you may or may not be required to pay back support or back maintenance fees for the historical period in which it was determined you were making use of the unlicensed software.
Apart from these costs, you may be charged with the legal and/or audit fees for the execution of the audit. This since it’s the responsibility of you as an end user to be in compliance with the terms and conditions of the software programs you deploy.
These fees take you by surprise, it’s usually not something that you plan or budget for. These costs may therefore affect your overall business, since you may have to free up money as budgeted for other (IT) projects to commercially settle the compliance claim(s) from the software publishers.
The issue with this type of costs is the difficulty to estimate them upfront. Especially if you are not prepared and you don’t know the licenses you’re having and what you are actually using. If there is no SAM practice in place, the chances are higher to be found non-compliant.
The indirect costs may initially not be so visible for you. But think about the time different individuals within your company will need to invest during an audit. Although an audit is typically presented as a “simple” exercise, it is not uncommon that it may take 6 months to a year (or longer) from start to finish. Apart from these indirect costs, the different individuals involved are distracted from their normal activities, affecting other tasks/projects within your organization. All this has a big impact on the overall productivity and business operations, that can result in delayed projects, budget changes and financial risks.
What to do to protect yourself?
You typically cannot avoid an audit. But how can you be prepared for it in a way that will minimize these costs? The costs for an audit are high, but you can save a lot if you have a proper SAM practice in which you perform periodical license reviews to keep your software assets in control.
It is important to be proactive and to have a good understanding of your software environment. Typically, it is rather difficult to do all of this internally. Think about all the different software publishers you have contracts with. And think about the fact that you may be using multiple software programs from one software publisher, in which each program has its own licensing terms, its own included software components/products etc. Keeping track of all this is difficult. Doing everything internally is difficult. Independent software licensing firms like B-lay can help. Feel free to check our services and find the best fit for you. You can just contact us and have a discussion with one of our experts. We are here to support you!
This article was published on 25-02-2020