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Tips to Get Ready for (or Possibly Avoid) Software Audits

By Rich Hein, CIO
February 10, 2014 10:21 AM ET

CIO - You've gotten your letter from the vendor. The audit is coming and you've got to balance what licenses you have on your systems versus what you're licensing contracts allow. The difference could cost your organization big money so you've got to get it right but systems are so displaced or complex or evolving so fast that it seems like a full time job.

Preparing for a software audit and software compliance.

Software compliance audits are always a headache, especially when it comes to time, resources and money. The best way to prepare for an audit, experts agree is to avoid it all together by implementing a software compliance plan.

Software compliance is a complex and interpretative process that if not done correctly and with forethought can cost organizations millions. How much money are we talking about? In a 2013 study performed by KPMG, a contract compliance services company, 52% of companies felt that their losses through unlicensed use of software amounted to more than 10% of their revenue. They can also take a long time. According to Christof Beaupoil, co-founder and president of Aspera Technologies Inc. a provider of software license management solutions, they can take up to 18 months.

+ ALSO ON NETWORK WORLD How to survive an IBM software license audit +

In a report from Gartner on software audits, organizations surveyed said that they were audited by at least one vendor in the previous 12 months. This was up over 60 percent from the previous year. Now more than ever software vendors are auditing their clients, so much says the KPMG survey, which it has become part of the sales process. And the larger your organization the more at risk you are. "Why you ask?" Because there is more money on the table for the software vendors. Non-compliance is making them money so you've got to do what you can to limit your risk and that starts with implementing a software compliance program.

What is Software Compliance?

"In its simplest form," says Beaupoi, "compliance is the comparison of a company's software usage to the licenses it owns. If the company uses more software than its licenses cover, it is under-licensed and out of compliance with the licensing contract. If the company owns more licenses than needed to cover its usage, then it is under-licensed and can save millions of dollars, as is the case with global and very large organizations."

Common Mistakes and Non-Compliance Issues

Many times in the rush to move forward an organization's business objectives, the licensed software and technologies gets used in ways not covered under the current licensing structure resulting in a non-compliance issue. This means that as your systems and the way your technology is being used evolves, so must your licensing structure.

Depending on your licensing structure you could also have to deal with differentiating between installed software versus purchased software. This is what's known as a bucket level assessment; installed versus entitled.

"Many times the root cause of non-compliance is administrator rights on local machines. This is something that companies need to take a long hard look at this topic," says Houghton.

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