How do you handle software audits and avoid penalties and fines?

In the past, companies often implemented Software Asset Management (SAM) in response to costly software audits by major publishers. These audits typically uncovered licensing compliance issues that resulted in significant financial settlements. SAM provides the shields against all this unplanned expenditures which will do zero value addition for the organizations. Recently SAM function has earned the title of "Cost saver" or "Cost Optimizer", but its origins lie in addressing the challenges exposed by software audits.

SAM is indispensable in the era of remote work and digital transformation. As organizations increasingly rely on a myriad of software tools for day-to-day operations, the complexity of managing these assets grows exponentially. SAM ensures that you're prepared for audits by maintaining proper licensing, thereby avoiding costly penalties and legal repercussions. Additionally, it provides valuable intelligence for negotiating vendor contracts, allowing you to secure more favorable terms based on actual usage data. In essence, SAM serves as the backbone of an organization's IT strategy, facilitating efficient, compliant, and cost-effective operations.

Audit handling is a specialized skill and it is always helpful to assemble a group of experts who have experience on handling audit related communications and manage the end to end process. The frontend Audit handling team should consist of a Legal representative, Procurement representative , Vendor Manager and License expert. The backend team can consist of EUC expert , Server expert and License reporting expert. Any organization should have a clear strategy for both internal and external communication. A pro-active approach to prepare a compliance report with clear identification of non-compliance and mitigation plan will always help.

It's vital to have a point person or a dedicated team responsible for managing the audit process. This person or team will serve as the liaison between the organization and the auditors, ensuring timely provision of requested documentation and data. Having a centralized point of contact streamlines communication and helps to avoid confusion. Also, prepare a "compliance folder" that contains all necessary documents like licenses, receipts, and certificates. This way, when the audit comes, you have a go-to repository, making the process less disruptive. Finally, consider running regular internal audits to identify any potential issues and address them proactively, to minimise the risk of non-compliance.

Before even responding to the audit letter, both the content of the response and the original audit letter should be reviewed by the legal team. Through a correct negotiation strategy with the auditor, an organization can sometimes have the opportunity to settle the audit without undergoing a full-fledged license compliance review. The trick is to always maintain a favourable position over the software auditor, as they are here to make money for themselves and for the publishers and they have zero intention to help the organization that they are auditing.

To enhance your preparedness, once you've confirmed the audit's legitimacy, consult your legal team to understand the nuances and potential risks associated with the audit. This will help you craft an effective strategy. It's also advisable to keep a record of all communications, decisions, and data shared during the audit process. Having a well-documented trail can serve as an important reference in case of discrepancies or disputes later on. Additionally, prior to sharing any sensitive information, ensure a NDA is in place to protect your organisation data. Lastly do not give in to the auditor's pressure. Always try to get enough time to properly prepare your interactions and exchanges of data and information. And do not overshare.

It's crucial to conduct a post-audit review with all involved stakeholders. This session should evaluate if the findings are correct and what's the best way to respond. It's not uncommon for auditors to make mistakes so pay close attention. Learning from the audit can help you refine your SAM processes, making future audits smoother and less stressful. Consider sharing the key findings and recommendations with relevant departments beyond the immediate audit team, such as IT, Procurement, and Finance. This ensures that the learnings from the audit are institutionalized across the organization, fostering a culture of continuous improvement in software asset management. Finally, update your documentation to reflect any changes made post-audit.

One often-overlooked strategy for preventing software audit risks is to include protective clauses in your software contracts. This can set the stage for a more transparent and fair audit process. For example, you could negotiate terms that specify the conditions under which an audit can occur, the format of the audit, or even a cap on penalties for non-compliance. Doing so will give you more control over the audit process and can significantly reduce financial and legal risks.

1. Before sharing any information please sign a Non-disclosure agreement with Auditors 2. Never ever allow Auditors to run their so called " simple" Audit script which will eventually scan the entire network. 3. Use Organization own data collection framework to capture requested data 4. Share only relevant information 5. Cross check the audit findings and agree to a mitigation plan only for valid audit findings