Software misuse costs Nutanix $11 million after internal investigation

Nutanix, a cloud-computing software and services provider, said an internal investigation into its misuse of third-party software—software intended for evaluation and available at no cost—has resulted in $11 million in estimated payouts to the vendors involved.

The San Jose, Calif.-based company said on Wednesday that the software, which Nutanix was supposed to only evaluate, was instead used for business purposes by “individual departments,” and certain employees intentionally concealed their actions to one of the vendors. The inquiry also revealed a “material weakness” in internal controls on financial reporting, which led to an “immaterial understatement” of expenses and liabilities going back to August 2014, Nutanix said.

Nutanix’s audit committee concluded that software from two vendors was used in a “noncompliant manner” over multiple years. Those misuses included “interoperability testing, validation and customer proofs of concept, training and customer support,” the company said.

Nutanix estimated cumulative expenses of $11 million as a result of the noncompliant software usage, representing “the estimated accumulated amount for past usage of evaluation software” over a multiyear period, a spokeswoman said. The company also expects to spend low-single-digit millions for “ongoing usage of the software on an annual basis.”

Chief Executive Rajiv Ramaswami said during Wednesday’s earnings call that management discovered the misuse during a software purchase review, and that it continues to use the software for “non-production use cases.” Rukmini Sivaraman, the company’s chief financial officer, said Nutanix is in contact with both vendors, which she didn’t name.

“We’re pleased the investigation has been completed. We determined that it was not material to our previously issued financial statements and, we believe it will have minimal impact going forward,” a Nutanix spokeswoman said.

Read the rest of the article for free on our website: https://easysam.co.uk/news/software-misuse-costs-nutanix-11-million-after-internal-investigation/