Software Licensing Audits Are on the Rise – and Expensive


No longer perceived as a mechanism for cutting costs, IT is now almost universally viewed as a strategic asset. From rolling out products and services more quickly to enabling real-time collaboration and data-driven decision making, IT is capable of creating competitive advantages for those organizations that use it effectively.

There’s the catch. When best practices for managing and using technology aren’t followed, new investments in IT can introduce a new set of problems. Software licensing compliance is a prime example. Many organizations are failing to meet compliance requirements due to an inability to track software use and the complexity of licensing models.

In some organizations, this confusion leads to fear – fear that any reallocation of existing licenses will result in noncompliance. Consequently, these companies overcompensate in the name of compliance by purchasing additional licenses whether they’re really needed or not. This is a major reason why nearly one quarter of all software goes unused according to an IAITAM/Opinion Matters survey.

Many organizations, knowingly or not, use unlicensed software. In fact, the 2013 Business Software Alliance (BSA) Global Software Survey found that 43 percent of PC software installations weren’t properly licensed. The value of unlicensed PC software installations in 2013 was estimated to be $62.7 billion dollars.

Leading software vendors such as Microsoft aren’t happy, and vendor software audits are on the rise. The 2013 Software Audit Industry Report from Express Metrics revealed that 53 percent of respondents had been audited within the past two years. These audits involve inquiries and sometimes monitoring of systems in order to validate whether every copy of installed software is indeed licensed.

Although vendors still focus much of their attention on large enterprises, they’ve begun to crack down on small-to-midsize businesses (SMBs). In an increasingly competitive technological landscape, vendors need revenue, and software audits are a potentially lucrative revenue stream. A 2012 IDC study revealed that more than half of survey participants made payments of $100,000 or more to software vendors after an audit. This includes the cost of additional licenses and fines.

But the pain is felt before those six-figure payments are made. Organizations are forced to devote significant resources just to respond to a software licensing audit. This drains the already limited IT resources that most SMBs have, diverts attention from strategic initiatives, and can cause a reduction in future IT investments. Complex combinations of legacy software agreements and newer licensing, along with disparate methods for tracking software, further complicate the issue.

In addition to the headache and expense of a software licensing audit, organizations that use unlicensed software increase the risk of a security breach, which can do far more damage than an audit. According to the BSA survey, the top risks are unauthorized network access and data loss. Users of unlicensed software don’t receive the latest security updates from vendors, making these users and their devices prime targets of hackers.

In the next post, we’ll discuss what SMBs should expect from a software audit and offer recommendations for an effective software license compliance strategy.