Oct 05, 2017

10 Steps to Cut Software Audit Risk

In my previous life, I worked as a software auditor and an audit defence consultant. I always wondered why particular organisations never had audits, while others seemed to constantly attract them.

What causes a software audit?

The majority of software audits are triggered by one or more events. Two key software audit indicators are:

  1. Growth in the organisation’s size
  2. No incremental purchases through a contract period (especially if you’re showing signs of corporate growth or acquisitions)
Keep 3 aces in your pocket: 10 Steps to Cut Software Audit Risk

However, a poor relationship between the software vendor and the organisation can also be a contributing factor for an audit. If you keep your key software suppliers at arms-length or further away using the proverbial “barge-pole”, they will treat you suspiciously. In fact, sometimes the software account manager will actually request that an organisation be audited.

Even when this is not the case, one fact is certain: more often than not, your account manager knows if and when a software audit is going to take place. Given this connection, it’s clear that you’ll secure a stronger audit defence by ensuring a solid working relationship with your major software vendors.

Get a plan for rock-solid audit defence

How to have a better relationship with your software vendors?

So how do you create better software vendor relationship without showing all your cards or sharing all of your data? Based on my experience from all sides of the Software Asset Management (SAM) game, I’ve put together 10 helpful tips to be smart about your vendor relationships and build a stronger defence against future software audits.

  1. Maintain a regular dialogue. ALL suppliers want to feel wanted and on your mind. If your account managers feel “in the know” about your organisation and that you’re working together, they may veto an audit. Consider the opposite side of the coin.
  2. Share your business strategies. Software companies want to understand your business goals so that NEW opportunities can be created. So, keep your account managers up to date with your SAM and ITAM strategies so that they can offer innovative solutions, trading license metrics from USER to CPU or to CORE or CLOUD.
  3. Build a strong and organized SAM program. Software companies want you to continue to use their software and buy more of it. That’s why having a SAM program is so critical. It took a long time for the C-Level to realize the business case for Software Asset Management. Without SAM in place, software vendors will continue to turn up each year demanding more money, since organisations aren’t able to prove correct usage.
  4. Be open with your software suppliers about your Software Asset Management initiatives. Though it may sound counter-intuitive, working together with your supplier ensures that potential issues can be resolved more easily. Give your software vendors something to help you with like clarifying complex licensing metrics. However, do not hand them all your data or give them access to your data until you have performed due diligence, and if necessary engaged with a consulting company to understand any risk and how to mitigate some of it – if not all of it.
  5. Establish your license optimisation and cost reduction goals. Most software vendors reluctantly audit their customers. Surprising? Well, let’s be honest; the audit process surely doesn’t enhance any business relationship. By setting clear expectations with your vendor, audits may be avoided.
  6. Keep communication lines open. While no one likes bad news, if a software vendor understands that you aren’t ordering new software due to downsizing or cost efficiency drives, they won’t be too disappointed – or caught off guard, when they don’t get an order. As a bonus, they may even be able to offer a better solution to meet your needs.
  7. Move to the cloud strategically. Sitting in a cloud environment supplied by a software vendor can be a risk. This is because they will now know not only your current position, but also your peak usage. Keep in mind that as we move into cloud platforms like AWS and Azure, some software vendors may start to look at “peak usage” over a period of time, changing the traditional model of “this is what I have now”.
  8. Be clear about your cloud or hybrid-cloud transition. Most software vendors now have cloud or subscription offerings. And, they all want to move you away from perpetual licenses to subscription models. However, as you negotiate cloud contracts, remember that software vendors pay their account managers higher commission rates for cloud products, so there is always a sales incentive to push you to adopt the cloud. Often vendors will offer amazing discounts that lock you in, and you end up paying more than you need. Remember to only purchase what you actually will need and use now, buy more when you need it.

  9. Watch our hybrid cloud mini-webinar

  10.  Understand how and why your vendor uses software audits. Software companies that audit regularly have traditionally used the audit clause as a revenue generator. And different vendors may vary their aggressiveness, as well as what data they require in the event of an audit. As you work with your account manager, it’s important to determine:

  11. • What is the software vendor’s stance on audits?

    • Do you consider you are at risk for an audit?

    • Value of non-compliance?

    • Data accuracy (do you have all the prices for all products etc.)

  12. Be wary of your own corporate PR campaigns. When your marketing team announces to world that you are about to embark on a cloud migration, or that your company has grown by 10% - these announcements are seen by your suppliers and they will expect more money. If there is a big announcement coming down the pipeline, talk to your vendors first so they aren’t surprised later.
  13. Always hold at least three of the aces in the deck

    The bottom line is working with software vendors is a negotiation process. As with any negotiation, always start from the position of strength. Use your SAM program to identify your real needs so that you can you negotiate discounts or better terms for your software licensing.

    Whether you need help negotiating an upcoming or current audit, or want to proactively strengthen your audit defence, Aspera can help. Talk to our expert audit defence team now!

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Topics: Audit Defense, SAM Insights




Comments (1):

wrote on

Great article Geoff, very nicely written. If I was to add an "11" it would be to draft your own terms and conditions pertaining to a vendor audit, and where ever possible, get a software vendor to agree to them. They shouldn't be so restrictive as to make audits unrealistic, but they should be time-limited exercises, that prevent audits becoming a Herculean trial.