The past decade has revealed an increased concern in maintaining license compliance. Although software companies have traditionally put their foot down on pirated software, they’re leveraging new tactics to eagerly track software license compliance. Data-driven strategies for dealing with noncompliant consumers are taking the driver’s seat and are as accurate as they are effective. The chances of an audit are higher than ever for under-licensed organizations.
The repercussions of license noncompliance are not just about the immediate costs to your business, but the various consequences that result from a failed audit. There are more costly outcomes of an audit than most people suspect, and it’s essential to know each one.
The License “True-Up” Process:
The “true-up” process is a long road of license reconciliation in which a business gathers all their active software instances and squares them up with the number of licenses they have. In many cases, an organization is under-licensed, and they are liable for a few costs:
- The total cost of accurately licensing all of their software in accordance with the software provider
- If a company is out of compliance, they risk having the full price of all software and licenses placed on them, as opposed to having a discounted or negotiated bulk price.
- In some cases, a business has to pay for any maintenance owed since the software had been in use (e.g., updates/upgrades).
A Break in the Budget:
There are few things worse for a company’s finance department than an unexpected cost, which is precisely how a surprise audit will feel. Audits are not cheap, and a significant portion of the budget (depending on company size and software in use) needs to be allocated to the audit services, especially in the case of noncompliance.
Cost of Resources:
As we mentioned above, audits are expensive; they require immediate actions from a variety of your departments — IT, C-level, legal, PR, and so on — which can result in the highest cost of the entire process. The hours lost during a software manufacturer’s audit are immense, and can always be avoided by a well-structured and manageable internal audit.
Loss of Credibility:
When they’re deemed noncompliant, one of the biggest blows is the hit to their credibility and trustworthiness as an organization. The entire relationship between the company and its software provider changes, and it can be hard or impossible to restore the partnership that existed before the audit.
Loss of Reputation:
A negative audit reflects poorly on any company and disrupts the reputation they have with their customers, stakeholders, and the general public when they’re dealing with a non-disclosure clause. A negative audit is just the first domino to fall, and the entire procedural efficiency and reliability of the organization can be called into question due to noncompliance. As a result, extra time and resources are allocated to maintaining the company’s reputation.
All of the above consequences of a bad audit and noncompliance accumulate into one big result: loss of opportunity. Your organization’s ability to take advantage of business-growing opportunities fall to the wayside when an auditor comes knocking on the door and your licenses are out of compliance. The opportunities aren’t just sales wins or new contracts either, numerous departments lose out on potential opportunities that would have proved beneficial for them, but the resources delegated to the audit cost diminished those.
The ways a company loses when their software licenses aren’t compliant stretch way beyond the confines of IT and end up affecting various departments in a number of unexpected ways. Understanding the implications of noncompliance opens the door to maintaining strict software license management, documentation, and, most certainly, usage. It pays to be compliant, and it pays to do your due-diligence around software licenses by following license management best practices and policies.
If your company is struggling to maintain software license compliance, feel free to contact us here or reach out to us via the comments below. Our software license experts have decades of experience and hold an in-depth knowledge of licensing rules, regulations, and audit protocol no matter the software manufacturer. We’d love to help you gain license compliance!