Software Audits are Inevitable and Everyone is Responsible

By Abinaya Govindarajan

May 18, 2018 at 7:47 AM

No company is immune to software audits. Poor leverage with top software vendors, suppliers’ focus on audit income as a source of additional revenue, complex software contracts and licensing models, technology changes like virtualization, etc. – all these factors can contribute to non-compliance being a major cause of concern in the software lifecycle management.

There are ways to remove the pain from the process and to ensure a successful audit.

Software Asset Management (SAM) teams maintaining a centralized list of license entitlements and deployments is important, especially with software purchases happening through multiple channels – directly from OEMs, resellers, end-user downloads etc. The usage list needs to also include software that is not licensed on user or install basis and non-windows, test/dev servers.  In a mature SAM organization, the emphasis will start to shift toward driving cost savings. Utilization of purchased software can be tracked and savings can be achieved through re-allocating additional licenses, opportunities from not continuing support, reduced renewals.  Optimizing IT contracts, enterprise licensing considerations and improving utilization of software assets will reduce overall cost of software ownership. Utilization checks are especially critical for concurrently licensed applications to ensure compliance. End-users of software should also be educated to handle requests from software vendors for data, access to systems, and license usage. Vendor’s audit results will need to be thoroughly evaluated for oversight, especially in the areas of licenses purchased through resellers, evaluation licenses, applicable suite licenses and downgrade rights.

Negotiating contractual audit provisions and continuous improvement: The audit approach for software vendors is specified in the governing contractual document. It is important to negotiate fair and equitable audit clauses upon purchase of any new software.  The terms that can be negotiated include notice period for audit, restricting frequency of audit, audit process, license consumption reporting, access controls, number of software titles that can be audited at any given time, acceptance of true-up documentations, allowing no audit for the first few years in a new implementation, end-of-life software retirement practices, scope of use provisions, audit costs and in some cases even consequences for a failed audit. For the top 10 vendors, it is important to understand existing audit provisions and look at opportunities to renegotiate when awarding additional business. As applicable, the software licensing agreement should address partitioning of servers, dual processing, number of instances etc. Software restrictions and limitations like the number of virtual systems the software is installed on will need to be addressed during purchase (Typically non-compliance in the area will result from scalability/performance measures). Procurement will also need to make sure that the contracting terms do not license metrics that are difficult to measure, especially in cases where there is no license consumption reporting built into the software. Existing contracts need also to be revisited wherever SAM has direction on future requirements based on usage and business user feedback.

Set Yourself Up for Success

Considering the above, it is imperative that the procurement, software asset management and legal teams work together to ensure compliance, reduce risk of exposure and successfully navigate a software audit. The teams need to clearly define roles and responsibilities before and after software purchases to ensure that opportunities from demand management are tapped into, and risks from overuse are effectively mitigated.

Tags: audit compliance procurement audit software audit audit preparation
Category: News Article

Abinaya Govindarajan

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