New IDC/Flexera Software Pricing & Licensing Survey details vendor audit practices and resulting unbudgeted “true-up” penalties companies must pay

- 64% of enterprises reported being audited in the last 18-24 months
- 24% reported “true-up” being paid was $1m or more
- Enterprises reported being audited most frequently by Microsoft, Oracle, IBM, SAP and Adobe

Maidenhead, UK – December 6, 2012 Software license compliance audits are an established industry practice by which vendors are allowed to investigate customers’ actual software usage, and seek additional compensation in the form of a “true-up” penalty if use exceeds licensing terms. According to Flexera Software’s 2012 Software Pricing and Licensing Survey, prepared jointly with IDC, software vendors are continuing to exercise their rights to audit their customers and true-up.

Part of the problem can be traced to challenges companies face tracking and managing software license use, and reconciling that use to ensure compliance with licensing terms.  According to the survey, one third of enterprises surveyed said they are either dissatisfied or very dissatisfied with their current method for managing software licenses and usage.

And the reason for that dissatisfaction is clear -- 38% of enterprises indicated that 11% or more of their application spend is associated with applications that are overused, and therefore out of compliance, up from 26% one year ago.   Moreover, the survey shows that vendors are exercising their rights to recapture some of that revenue leakage due to noncompliance via software audits and true-ups.  64% of enterprises reported that they have been audited over the last 18-24 months. And large enterprises – defined in the report as those with greater than $1B in revenue – were significantly more likely to be audited three times or more in the last 18-24 months.  Moreover, 24% of enterprises said their total true-up paid over the past year was $1 million or more.

Finally, the survey revealed that the major software vendors – those that typically account for a significant portion of most organisations enterprise application spend – are also the most aggressive auditors.  Enterprises reported that over the last year, they’ve been audited most frequently by Microsoft, Oracle, IBM, SAP and Adobe.

“Software usage that exceeds the negotiated license terms can represent significant lost revenue for software vendors,” said Amy Konary, research vice president - software licensing and provisioning at IDC. “There are many factors that make license compliance difficult, including license and IT environment complexity, lack of automation, and decentralised IT. IDC expects that vendors will continue to enforce their license agreements with audits, and advises enterprises to pro-actively track and manage usage of their software license assets.”

“Never has the need for Software License Optimisation been more pronounced,” said Randy Littleson, Senior Vice President of Marketing at Flexera Software.  “Organisations face tremendous challenges tracking and managing software licenses and reconciling that use against their software license agreements.  If existing license management strategies aren’t significantly reducing or eliminating painful software true up penalties – optimising the software license estate often eliminates or significantly reduces that risk exposure.”