Software license audits are a common and often stressful occurrence for IT procurement professionals. Vendors may initiate audits to verify compliance, enforce contract terms, or increase revenue. In this article, you will learn how to prepare for, manage, and optimize software license audits from vendors.
Before you enter into any software license agreement, you should understand your rights and obligations as a customer. Read the contract carefully and look for clauses that specify the scope, frequency, and methodology of audits. You should also review the vendor's audit policy and procedures, if available. Some vendors may have more flexible or reasonable audit practices than others. If you find any terms that are unclear, unfair, or unacceptable, you should negotiate them with the vendor or seek legal advice.
One of the best ways to avoid audit surprises and disputes is to plan and document your software usage. You should have a clear inventory of all the software products, licenses, and users in your organization. You should also track and monitor your software consumption and compliance regularly. You can use tools such as software asset management (SAM) or license management software to automate and simplify this process. Having accurate and updated records will help you respond to audit requests and prove your compliance.
Ideally this plan is developed before you license the software so that the contract supports the planned usage. Since usage can also include deployed software (even if no one actually uses the software) It is important to include the teams who do deployments in the development of the plan. Before paying any maintenance fees the team, including the deployment groups, should ensure that the plan is still being followed and that usage is still in compliance.
When you receive an audit notice from a vendor, you should communicate and cooperate with them in a professional and courteous manner. You should acknowledge the notice promptly and assign a point of contact for the audit. You should also request a detailed audit plan and timeline from the vendor and agree on the scope, format, and method of data collection. You should provide the required information and evidence in a timely and accurate manner. However, you should also protect your confidential and sensitive data and limit the access and disclosure of information to the vendor.
During this process, ask your license team if co-terming is an option. It can combine several license contracts into one contract (or at least one date). This helps you as a business owner be able to simplify your license needs. You should also take steps to update your licenses to a subscription model instead of per-socket/per-core license model if it’s economically feasible for you to do so. Often times these subscriptions are more flexible, offer better support, and often offer more features for the same or less than what you were already paying. A good example of this is with Veeam as they are transitioning from per-socket to subscriptions per-instance.
After the vendor completes the audit, they will present you with the audit findings and any claims for under-licensing or non-compliance. You should review the findings carefully and verify the accuracy and validity of the data and calculations. You should also compare the findings with your own records and documentation. If you find any errors, discrepancies, or disagreements, you should challenge them with the vendor and provide supporting evidence. You should also negotiate with the vendor to resolve any issues and settle any claims in a fair and reasonable manner.
Vendors may present several options to close the gap on any findings including paying for your current usage (this may include initial licensing fees, annual maintenance fees and a penalty fee for being out of compliance), offering you the opportunity to convert to a different licensing model (such as subscription or new versions of software), applying a credit to new different software, etc. It is important to consider what your future needs will be, how you may use the software in the future, and how long it may take for your finance team to approve the expenditures. Oftentimes vendors will want to wrap up the audit to meet their fiscal close so if we are aware of that you can use that to your advantage.
After the audit is over, you should take the opportunity to optimize your software license costs and usage. You should analyze the audit results and identify any areas of improvement or optimization. You should also review your software license agreements and look for any opportunities to renegotiate, renew, or terminate them. You should also consider consolidating, standardizing, or rationalizing your software portfolio and eliminating any unused, redundant, or outdated software. By doing so, you can reduce your software license costs and risks and improve your software efficiency and performance.