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Software Audits On The Rise: Fact or Fiction?

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When the global economy first sank into recession, dozens of reports were published in which technology analysts speculated that software vendors would rely more heavily on software audits—and the resulting financial settlements—to compensate for lower revenues. In tandem with this, organizations targeted by vendor audits were expected to have a higher rate of non-compliance because software asset management initiatives would be back-burnered—along with the true-ups that frequently come as a result—until budgets were once again secure.

So did these predictions bear themselves out? From a philosophical standpoint, one could just as easily argue that software companies have a lot more to lose during uncertain economic times by terrorizing their customers. But the answer would appear to be “yes,” at least in the United Kingdom, where a fair amount of research has been conducted on the topic. (I have yet to come across any specific research suggesting a US or overall global increase in vendor audits.)

As early as May of last year, a UK study suggested that software audit activity had already escalated by 35% over the previous year. Perhaps more alarmingly, among organizations polled:

  • 91% of senior IT managers and directors of large companies believed their “handling of software assets” had been impacted by unfavorable business conditions. (I interpret this to mean that companies can’t afford to be as vigilant about license compliance due to a scarcity of resources.)
  • 67% of large firms had cut back staff responsible for software license management, and mid-sized and small businesses had reduced headcounts by 78% and 58% respectively.
  • A paltry 17% of those polled said they were confident that if audited, they would be found compliant with vendor license agreements.

None of this should come as a surprise in poor economic times. But one thing it seems nobody counted on was a spike in audit activity fueled by workers “snitching” on their own companies in order to take advantage of the BSA’s cash rewards for reporting illegal software use. (The BSA offers financial incentives to employees who rat out their employers—up to $1 million in the United States, up to £10,000 in the UK—as well as a guarantee that whistle-blowers’ identities will remain anonymous.) A recent BSA study conducted in the UK suggests that the rise in audits has been driven, in part, by employees who feel stiffed by layoffs or salary cuts or are hoping to earn some additional income by taking advantage of the BSA’s cash rewards. Among the findings:

  • 70% of British employees are willing to report their companies for “improper business practices.” An additional 17% would do so if there were a financial incentive.
  • 38% of respondents indicated they would be even more willing to blow the whistle if they had been made redundant, and 31% said big payouts to board members would anger them enough to pursue a compliant.
  • Nearly 50% of British workers agree their employers should face legal action for using unlicensed software.

In retrospect, 2009 was plagued by a confluence of economic woes: software vendors scrambling to shore up flagging revenues, companies lacking resources to properly manage their license positions, and employees trying to compensate for lost income. Put it all together, and you have the perfect storm.