Vendor Audits - Don't Wait Until it's Too Late
Proactive tips for minimizing licensing costs and audit penalties
Over the years, we’ve received more than a few panicked calls from IT managers in the weeks and days leading up to a big software audit. For most of us, it’s more than just a little unsettling to open your business to vendors who are actively looking for licensing mistakes.
The good news is that there are concrete actions you can take to make sure you find any critical issues before they become a problem for your firm. Over the years we’ve successfully led a wide range of clients through their audits resulting in less penalties and more cost savings. While each business is unique with different challenges, taking the time to understand your vendor as well as your contracts and making sure your internal infrastructure supports your Software Asset Management (SAM) goals will ensure that your are ready for your next audit.
KNOWLEDGE IS POWER
The more educated you are in SAM and in a particular vendor’s licensing and contract policies, the stronger your position to negotiate on your company’s behalf. For instance, taking the time to understand Oracle’s licensing rules around VMware could prevent your company from making a multi-million dollar mistake. By knowing what you need, how much you need and when you need it, you’ll be in a better position to negotiate.
BE A SMART NEGOTIATOR
An effective negotiation strategy should address key areas such as: Entity Lists, User Groups, Auditing terms, Licensing & Support policies, Virtualization, Governing Law, and Assignment. It’s common to overlook the importance of the Entity List clause in the heat of negotiation when signing deadlines are looming and the actual need for software is pressing. The effects of not tailoring this clause for your actual needs won’t be apparent until a year or two down the line when your business model changes because you either divest or re-organize within your own firm and you find yourself paying fines for being out of compliance. Making sure your software agreement terms match your company business strategies for the long term is an important way to protect yourself from paying high fees, especially since many contracts are perpetual.
KNOW YOUR VENDOR
Many vendors are more aggressive with auditing when their sales and revenue numbers are down. It’s worth paying attention to your main vendor’s earning releases and asking:. How are they doing this quarter? How is the company doing overall? What’s going on with their stock? Listening to where they are and where they want to go could give you insight into what the sales teams will be focusing on in the near future. It’s possible that audits will be more frequent and heavier in order to generate much needed revenue. In the case of Oracle, it’s very clear that the Cloud is their next big push as it has been a main focus of their last several earnings call. It’s worth asking yourself if you can use this as negotiating power in your next deal with Oracle.
KEEP YOUR HOUSE IN ORDER
A solid SAM Strategy should include clear guidelines and policies regarding Authority, Internal Resources, Trusted Inventory, Accurate License Records, License Reconciliation Processing as well as Licensing Expertise. It’s imperative that all of these parts work together. Having dedicated staff with no authority to get needed data and information in a timely manner can leave you unprepared for the inevitable vendor audit. Having accurate contracts and license information, but an inaccurate inventory of what you are actually running also leaves a missing link in your strategy. Lastly, having all the correct records and inventory, but not having the vendor expertise leaves you with no way to develop an effective licensing and negotiation strategy. Most firms find it difficult to build in-house vendor expertise and generally employ firms such as ours to set up and manage this important component of a successful SAM program.