According to industry analysts at Gartner, software vendor audits were up significantly over throughout 2010 and 40 per cent of midsize and large enterprises can expect an external software licensing audit. The risk of software audits therefore looms large for most enterprises. With this in mind, Patrick Gunn, Flexera Software, weighs up the pros and cons of event-based software licence compliance against continuous compliance.

This increased software audit activity is not only from dominant software vendors such as Microsoft and Adobe, but includes other smaller software vendors too who have awakened to the fact that in a difficult economic climate, this may be a profitable activity.

Software licence compliance within many enterprises tends to be event driven, usually initiated by an impending software vendor audit. And software asset management, in general, is driven by events such as annual true-ups and licence renewals.

In such situations, enterprises that take a comprehensive approach to software licence compliance, as opposed to simply counting software installations and manually comparing this to purchase counts, not only avert stiff financial penalties from software vendors, but also find that they are able to optimise the use of their software licences, saving significant amounts of money.

For instance, a global manufacturer faced by an Adobe audit adopted a next generation software asset management solution to defend itself, and was able to optimise its Adobe licence consumption - reducing its licence liability by more than $5 million.

However, enterprises that undertake continuous software licence compliance which is only possible by adopting a enterprise licence optimisation approach, reduce the risk of software vendor audits and benefit from on-going cost savings, better utilisation of IT resources and a strengthened negotiating position:

Cost savings

There are several key areas for cost savings. Instead of assessing the state of an IT estate only at true-up times, following next generation software asset management processes on an ongoing basis can lead to significant cost savings for enterprises.

For example, say an enterprise purchases 1000 computers and has a Microsoft Enterprise Agreement, which allows it to roll out the software on the new machines. By appropriately timing the roll out of the software, the enterprise may avoid a six month retroactive software assurance payment for the new installations.

The potential for costly errors also grows when organisations are reactive rather than proactive toward audits and other licensing events. In one case, an audit incorrectly determined that the company was under-licensed for Flash Professional, a costly Adobe application, when in fact what they had installed was the free player software. This mistake would have cost this company more than $3 million had it not been picked up in time.

Another area of cost savings is licence reharvesting. It can reduce the net number of true-up licences by reclaiming and reallocating unused software licences and in doing so, defer new purchases.

Also, quite often, some software becomes ‘shelf ware’, and organisations continue to pay maintenance on it. For example, there may be computers in storage that contain installed software. In these cases, maintenance costs can be reduced going forward, resulting in significant savings.

Additionally, continuous software licence compliance enables enterprises to take advantage of software licence optimisations on an ongoing basis. For instance, software vendors typically specify product use rights that define licence entitlements provided by the purchase agreement and/or product.

By applying product use rights, enterprises can reduce their licence consumption dramatically in many cases, leading to cost savings at true-up time. Other optimisations include maintenance cost reductions associated with unsupported, older versions of the software.

Better utilisation of IT resources

Software vendor audits can be incredibly time consuming and complex activities, preparation for which can take up to several months without the proper processes and tools in place.

In addition, the risk of human error greatly increases in audit situations, not only because of the complexity of information that needs to be gathered, but also due to the stress of performing ‘under the gun’.

Enterprises that take an ad hoc, manual approach to software licence compliance and asset management often overlook the drain on their IT resources, which could be better utilised for the more business critical projects.

As an example, preparation for a software vendor audit at an Australian bank took less than one month with the use of an automated solution. An audit at another bank of similar size required a year to collect all the necessary data.

Strengthened position for negotiation

Continuous software licence compliance allows enterprises to keep their finger on the pulse of their IT estate. Unlike in an audit situation, where enterprises don’t have any leverage for price negotiation for additional software, enterprises can have the upper hand when re-negotiating licence agreements by having a deep understanding of their licence position.

This applies to merger and acquisition situations too, which in the current climate are increasing. In fact, software vendors are known to target companies undergoing mergers and acquisitions for audits because they know that these businesses are at high risk of being out of compliance.

Mergers provide vendors with opportunities for increased revenue. Businesses must scrutinise the licence position of the acquisition target and understand the licence implications for the merged entity.

The challenge facing most large enterprises today is how to do more with less. But, taking action only at the time of an audit, renewal or annual true-up is a short sighted approach.

An audit-led approach to software compliance is reactionary as opposed to continuous compliance, which is a best practice approach. By adopting next generation software asset management technologies to ensure continuous compliance, enterprises reap the full reward of software licence compliance - one that translates into on-going, quantifiable cost savings as a matter of course.