Are You Selected for a Software Audit?

Hi there. I'm Mike Austin, CEO of Metrix Data 360. In this video series, we're going to talk about the process of defending yourself through a software audit and the steps that you need to go through in order to be successful in doing so. Also, don't forget to download our guide that outlines these steps that has a lot of detail on the steps that we're going to talk about in these videos. The reason why we decided to make this course is that software audits are a big business for these software publishers. They are massive revenue generators and they're not going to go away anytime soon. Now a lot of the times people might say, yeah, but I'm moving everything to the cloud and so does the software audit matter to me anymore? The answer is yes. What's going to happen is the way that audits are conducted are just going to shift. They're going to shift from looking for what you're using on premise to checking to make sure that you have the right license types to use these vendors products in the cloud. So audits not going away, they may just change. So the best defense against an audit is to not get audited in the first place. So I thought before we get into the process, let's talk about the reasons why you may actually be nominated for an audit by a software publisher. We see six main reasons why companies get audited. The first is that you've changed your spend with the software vendor. The second is the complexity of your organization. Three is the complexity of the agreement that you have with the software vendor. Four is that you do frequent mergers and acquisitions. Five is that you've decreased your spend, but that doesn't align to the overall growth of your organization. And six is actual information that your sales team has collected about your organization. Okay, so let's talk about each of these in detail. First is change of spend. Change of spend actually could mean an increase in spend. We what the software vendors are looking at is the pattern of how you've been spending over the years. So for instance, if you've spent 10% increase year over year for the past five years and all of a sudden you jump to 40%, they're going to question why. Does that mean that you found something in your environment? Does it mean that you've been under reporting? You really want to make sure that any changes in spend are actually articulated to your account team over at the software publisher so that they understand why. Two, the complexity of your organization, your IT infrastructure. Obviously the more complex you are, the harder it is to control what's happening in the environment. So if you're a single small organization that maybe has a couple of thousand people in one building with a fairly simple IT infrastructure, the likelihood of getting audited because of that is pretty low. But if I'm a global organization with hundreds of thousands of users all over the world, with multiple divisions that operate on their own, that actually can cause confusion, as the vendor will be able to find different opinions on what's going on in your environment from different account teams around the world, and they will use that to their advantage. Three is the complexity of your license agreement with the vendor. If your license metrics are fairly straightforward and easy to count, that's one thing. But if you've got a highly customized agreement with lots of different ways that you count licenses, obviously the vendor is going to assume that you don't have any processes in place in order to actually count and keep track of that. So in order to stay out of audit trouble with a complex license agreement, you want to make sure that you've communicated with your vendor, what process you use and how you're validating that you're actually compliant, and make sure that they understand that so that again, they don't use this as an audit trigger. So four is if you conduct frequent mergers and acquisitions, obviously throughout mergers and acquisitions, it's very hard to keep track of licenses that are coming in. Were they properly acquired? Did you actually transfer them? Same with anything going out. So if you're an organization that's involved in frequent M and A, that's a great target for a software publisher, because those processes of understanding what licenses are being transferred, particularly if you only buy, say, a subset of a larger organization, often don't get documented properly. And so the vendor, again, is going to use that to their advantage. We suggest that you make sure that you audit that incoming organization to understand what's needed right away so that you are assured that you actually have the licenses that are required when you acquire them. The same on a divestiture to divest out correctly. Number five is decreasing your spend with the vendor, but that doesn't align to actual growth that you've had in the organization. Don't forget that these software companies are watching your organization, especially if you're a public company. So if you've announced that you've hired, you know, 10% new headcount, but your software spend doesn't align with that, let's say you've decreased it 1 or 2% because you've done some things to get more efficient in how you license, they're going to see that as a disjoint and they're going to use that as an opportunity to audit you. So again, communicating with the vendor is key. If you've done things to optimize your licensing and growing at the same time, make sure that you communicate that with them so that they can't use that as an excuse to audit you. So the sixth main reason that we see people getting audited is information that your account team has gathered on you. Quite often you've got sales teams of multiple people from these vendors that are running around within your organization talking to different people. If they hear information that then doesn't come to fruition, they're going to use that against you as an opportunity to audit you. What do I mean by this? An example is maybe an account team member was sitting in on a meeting where you were talking about refreshing a number of desktops. And he said you're going to grow from 10 to 12,000 during this refresh period. And so they don't see a true upcome for 2000 PCs, and next thing you know, you've got an audit coming. Well, what they didn't understand is that you weren't actually growing to 12,000 PCs. You had 2,000 that were also coming off the network. That's a simple example. But we see information that's gathered by account teams that they make assumptions on that is incorrect being a cause of audits all the time. So if you think that anything like that is happening in the organization, again, make sure you communicate with your software rep about what's going on so that they can't use that to audit you. Outside of communicating with your software rep about these six main points, there's a couple of other real simple things that you can do. So obviously I've talked about talking to your sales team a lot about what's going on in your organization. That is key. Key. Make sure that you have an open and honest communication with them about everything that's going on in your environment. Another thing you want to make sure is that you truly understand your licensing contracts. Do you understand all the terms and conditions, not the legal T's and C's? Yes, that's important. But what I mean by terms and conditions are do you truly understand how to count licenses? Do you truly understand what the metrics are that you need to be counting? And the next thing is, do you know how to go and get that data to actually ensure you're correlating that to the way that you need to license correctly. And the final thing is just make sure that you have a solid process around software asset management. And in fact, I suggest with your big publishers, those top three, four, five vendors that you spend most of your money with, that you actually have an annual update with them around your software asset management process so that they understand that you're on top of this stuff and you know what you're doing. That'll avoid them coming in to audit you for sure. Thanks for watching this first video in our series on the software audit process. I hope you found the little tips and tricks about how not to get audited to be of value to you. Please make sure to check out our next video where Jay will walk you through receiving an audit notification letter and the actual steps in the process of defending yourself through an audit. And I look forward to seeing you again in some of our future videos in this series where I talk about some of the different steps within the process. Until then, have a great day.

Receiving a software audit notification can be a scary thing, but as long as you don't hide your head in the sand and you follow these steps, everything's going to be fine. Many companies use a third party to perform their own.