Software license compliance audits are an established industry practice by which vendors are allowed to investigate customers’ actual software usage, and seek additional compensation in the form of a “true-up” penalty if use exceeds licensing terms. According to Flexera Software’s 2012 Software Pricing and Licensing Survey, prepared jointly with IDC, software vendors are continuing to exercise their rights to audit their customers and true-up. 64% of enterprises reported that they have been audited over the last 18-24 months. And large enterprises (those with greater than $1billion in revenue) were audited three times or more over the same period. Moreover, 24% of enterprises said their total true-up paid over the past year was more than $1 million.
Part of the problem however can be traced to challenges companies face tracking and managing software licence use, and reconciling that use to ensure compliance with licensing terms. According to the survey, one third of enterprises surveyed said they are either dissatisfied or very dissatisfied with their current method for managing software licenses and usage.
And the reason for that dissatisfaction is clear — 38% of enterprises indicated that 11% or more of their application spend is associated with applications that are overused, and therefore out of compliance, up from 26% one year ago. Hence, vendors are looking to recapture some of that revenue leakage due to noncompliance via software audits and true-ups.
The major software vendors – those that typically account for a significant portion of most organisations enterprise application spend – are also the most aggressive auditors. Enterprises reported that over the last year, they’ve been audited most frequently by Microsoft (51%), Oracle (275), IBM (24%), SAP (22%) and Adobe (19%).
“Software usage that exceeds the negotiated licence terms can represent significant lost revenue for software vendors,” says Amy Konary, research vice president – software licensing and provisioning at IDC. “There are many factors that make licence compliance difficult, including licence and IT environment complexity, lack of automation, and decentralised IT. IDC expects that vendors will continue to enforce their licence agreements with audits, and advises enterprises to pro-actively track and manage usage of their software licence assets.”
Clearly, organisations are facing tremendous challenges tracking and managing software licences, the end result being that they are having to fork out huge amounts of money by way of unbudgeted expenses annually. Adopting technology that facilitates the optimisation of software licences can not only take away the pain of software licence management, but also ensures costs savings in an IT environment that encompasses traditional, cloud, virtualisation, enterprise appstores and more.
This licensing and pricing survey is the eight in the series. Since 2004, Flexera Software has produced the Key Trends in Software Pricing and Licensing Survey in conjunction with several industry partners such as the Software and Information Industry Association (SIIA), the Centralised Electronic Licensing User Group (CELUG), and Electronic Design and Automation (EDAC). In 2009, Flexera Software joined forces with analyst house IDC for the survey. Executives and managers at 334 software vendors, intelligent device manufacturers, and enterprises participated in the survey.