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INTERVIEW: Bill Monk “Time to Make a Stand against Vendor Audits”

I recently spoke with Bill Monk at LOCS about the current status quo in the software market. We discussed why it is the perfect time for companies to make a stand against compliance audits and licensing obscurity from vendors.

Q. Why do vendors make licensing so complicated?
Software licensing programs remain complex to enable publishers to be flexible to different customer scenarios and to differentiate themselves from their competitors. Inevitably, the influence is purely commercial to make sure that we, the users, are not using products to an extent and in a way that we have not paid for.  Unfortunately the days of the ‘Martini’ licence (‘any time any place anywhere’ for those of us old enough to remember the advert), are long gone. The result is licensing by platform, hardware type, host size, number of users, usage, locations, company structure etc. The aim is to allow the vendor to cater for the needs of the clients and also to maximise revenue to pay for the development. The result is more product part numbers and licensing rules.

Unfortunately, licensing changes are usually made from quarter to quarter with no adherence to any conventions and in isolation to any other changes – the reasons for changes are inevitably purely commercial. Terms and conditions can change by vendor, by product and by the month in which you signed the agreement. Vendors do little to help end users who often have to fathom it out themselves.

Bill Monk

Bill Monk

Q. Is this a case of ‘Where there’s Mystery there’s Margin’?
Yes, that’s the way it works out unfortunately and that applies to both the publisher and the customer. It could be argued that it’s not in the vendor’s interest to provide a simple licensing structure, as the complexity allows for more bites of the licence fee cherry. However, it does mean that both customer and publisher have to have licensing expertise on hand and endure regular audits to make sure that licensing is not abused. Because the publisher generally knows more about the licensing intricacies they do have the upper hand in negotiations and can upgrade the client and lengthen their contractual commitment.

Many software vendors purchase record keeping is not as accurate as it could be, yet by virtue of the licensing terms the onus is on the user to ensure that their records are perfect otherwise they may be punished financially.

Companies do not help themselves when they have no awareness of their software agreements or any form of control of the huge amounts spent on software. We have seen countless organisations renewing agreements with no acknowledgement of the terms and conditions – allowing them to be audited and the contracts to rolled over at a later date.

However, we are seeing a sea change as more customers are becoming more aware of the implications and are negotiating more balanced deals.

Q. What steps can an organisation take to make a stand against future vendor audits?
Start by pushing some of the accountability of licensing back towards the vendor – ask for a regular update on what they think you have bought and compare this with your own records. Any such information supplied by the publisher or reseller/vendor constitutes proof of purchase provided it has the originators logo and is not open to change.

Legally speaking the end users of software are responsible for adhering to the terms and conditions, but it is a buyer’s market – if the vendor wants to keep you as a customer then he must shoulder some of the responsibility for helping you remain compliant. Especially if they have licensing programs that are difficult to interpret.

The new international standard should help with this process, at the anniversary of your software contracts insist that your vendor is working towards adoption of the standard identification and tagging standards for both software recognition and entitlement. (See more about this here)

As a customer, you have the greatest leverage with the vendor just before you sign the renewal. Sales people will move mountains and cut through red tape in order to get the deal closed, use this to your advantage to secure as much clarity over licensing. Be careful, quite a few account managers from software vendors don’t understand all the licensing detail themselves – so make sure you get it in writing.

Use this point of leverage to also negotiate more favourable terms and conditions. If you are finding it time consuming and costly to track and manage licensing for a certain vendor despite your best efforts negotiate terms that push back the costs to them. You should be able to secure this if you commit to keeping accurate records and following processes and procedures to maintain compliance.

As an industry, we need to get as much support from the publishers and vendors to help with the licensing burden. Legally it is the end users who must maintain compliance but we should include in the licensing negotiations as much as we can to push back to the publishers to clean up their licensing programs and make things easier to manage.
Bill Monk is founder and managing director of LOCS.

What do you think? Do you agree with Bill?

About Martin Thompson

Martin is owner and founder of The ITAM Review, an online resource for worldwide ITAM professionals. The ITAM Review is best known for its weekly newsletter of all the latest industry updates, LISA training platform, Excellence Awards and conferences in UK, USA and Australia.

Martin is also the founder of ITAM Forum, a not-for-profit trade body for the ITAM industry created to raise the profile of the profession and bring an organisational certification to market. On a voluntary basis Martin is a contributor to ISO WG21 which develops the ITAM International Standard ISO/IEC 19770.

He is also the author of the book "Practical ITAM - The essential guide for IT Asset Managers", a book that describes how to get started and make a difference in the field of IT Asset Management. In addition, Martin developed the PITAM training course and certification.

Prior to founding the ITAM Review in 2008 Martin worked for Centennial Software (Ivanti), Silicon Graphics, CA Technologies and Computer 2000 (Tech Data).

When not working, Martin likes to Ski, Hike, Motorbike and spend time with his young family.

Connect with Martin on LinkedIn.

3 Comments

  1. Craig Wilson says:

    Hi – another great article Bill!

  2. Tina Wilson says:

    Bill – excellent recommendations. Prior to contract signature is where the leverage is at.

  3. As always a

    splendid article! In these trouble economic times, more and more publishers are speculatively landing end users with audit requests.

    Whilst in the SME world that can be an inconvenience, in a large global enterprise it can become a major undertaking.

    At the point

    of renewal, when as Tina confirms there is the greatest leverage, demand some clauses to your contract that protect you and make the

    publisher think twice before landing that audit request at your CFO’s door.

    1. Agree a timescale for the publisher to adopt the

    new international standards, get them in the contract along with guarantee from the publisher that all future releases will be ISO

    compliant. Not only does this formalise the responsibility of the publisher to ensure their software is easily managed; it also shows the

    publisher that you are serious about SAM and whilst prepared to do your bit, you expect the publisher to do theirs too. As Bill states,

    if they cannot or won’t then the publisher should be punished commercially as you will have to pick up the tab to ensure you stay

    compliant and protect your organisations interests.

    2. Insist on a ‘Burden of Proof’ clause in the contract. This will eliminate

    speculative audits, that generally pop up when sales figures are low and your account manager is a few thousand short of his sales

    target. Also, if your publisher has to operate under such a clause and believes that something is amiss, he is unlikely to let it ride

    for too long and any ‘Anomaly’ is likely to be smaller, rather than larger…

    3. If a publisher does insist on a regular audit,

    IBM is one where regardless of proof they will insist on a regular audit, insist on a clause that allows for all / some of your costs to

    be recouped. This can be by cash payment or more likely via service credits or enhanced discounts on new spend. Knowing there is

    something coming back can make it a lot easier to get your technology owners on side and complete the audit as swiftly, and painlessly,

    as possible.

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