You will be audited soon

It’s a fact: you will be audited by a software manufacturer at least once this year.

Every day it becomes more evident the control organizations must exercise on its technology platform in regards to software licensing. In this sense, brands / manufacturers, government agencies and organizations protecting intellectual property are applying more pressure, increasing every year the number of companies that are audited or subjected to some kind of licensing analysis. These audits or analyzis range from SMB’s to large organizations, highlighting the challenges the market has in the areas of licensing.

In the chart below, originated in a study by Ernst & Young, about why software manufacturers audit, it appears that 63% of compliance programs are aimed at never realized revenue recovery, due to multiple reasons associated with weaknesses in their licensing processes.

These reasons can include: lack of studies previous to sale, customers misinformation, unclear licensing policies, urgency in the negotiations, budget constraints, etc. At the same time, this phenomenon within software consumer organizations, presents its own challenges that often leads to overruns beyond the licensing itself. Taking preventive and / or corrective action at an early stage is a good first step to prevent unnecessary spending due to software licensing inefficient administration.

why software manufacturers audit? image

Grave exposures in software licensing management are evident to questions like:

  • Do you know if the software installed on all computers in your organization is properly licensed?
  • What control methodologies your organization has implemented to prevent the installation of software that does not have the appropriate license?
  • Do you know if your organization follows a disciplined software as an asset life cycle, to the extent that it has a control over the software destination once is discharged?, or
  • Do you thoroughly know the policies governing the licensing of the software you use?

Although it seems beyond belief, it is common to get meaningless answers, many of them exposing the weaknesses IT managers face towards the knowledge enclosed by the software management discipline; others because they prefer to cut costs and live with exposures without forecasting cost overruns in the future caused by licensing mismanagement; others because they assign a lower priority to software related issues, forgetting that as an asset is the most expensive item that shapes its technological platform; and other nonsense because they fear to open its doors to companies specialized in this field that can clearly help, not only to identify operational and financial efficiencies but also to implement best practices in software management, and incidentally strengthen copyright respect, always focused on an impeccable handling of the original software.

At the present time, and despite what strategic software licensing is for any company, there are cases where employees of an organization don’t know corporate policies that exist in this regard; hence the importance of the involvement of other business units such as financial, control or governance, risk and safety.

The following chart presents a phenomenon that is more common than it seems.

Does your company have a policy about licensed software use image

Many organizations are trying to manage their IT assets more efficiently, but there are still barriers to be overcome. In this sense regions of geography that have worked hard to achieve high levels of efficiency in the management of their software licensing, overcoming issues such as inefficient budget management, implementation and compliance and corporate policies and even issues such Cultural, reaching low levels of sub licensing. Latin America, for example, is a region where there is still a long way to go, because of its high level of sublicensing, as it can be seen in the chart below.

Global average use of unlicensed software image

In my opinion, the reasons for a company to qualify as “non-compliant” in software licensing, is 50% due to causes associated with inadequate management tools and procedures and 50% because its leaders downplay the issue.

The statistics show, there is much to do and much to knowledge to transfer, in order to increase the sensitivity level that organizations should reach in the software licensing administration, regardless of industry segment to which they belong.

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