October 23, 2018

Helping Your Customer Back Into Software License Compliance

We live in a world of increasing complexity. In their quest to create value, enterprise customers continuously test and embrace new technologies, which come with many labels–-digital, analytics, automation, the Internet of Things, machine learning, artificial intelligence, and so on.  Software deployments now involve public clouds, private clouds, hydrid set ups, managed service providers, and/or customers’ premises.  Software licensing metrics may involve users, seats, names servers, geographies, limited timeframes, sublicensing…

As a consequence, use-rights being applied to modern IT environments have some times evolved into complex (and potentially baffling) licensing terms which has made entitlement tracking more difficult.  The risk is now higher that even simple technology refreshes will cause an enterprise to fall out of compliance.

Lock and contractAt its simplest, and from the customers’ point of view, software assets compliance involves taking a comprehensive inventory of the software being used, and comparing this against what they are legally entitled to be using.  But quite often a customer will find that IT managers struggle with visibility leaving the company under- or over-licensed.  Furthermore, compliance can be very difficult if attempted manually.  They are at risk of confrontation with the software vendor if an audit is requested.

There are steps a corporate IT organization can take long before any auditor arrive, however.  And they can work with the software vendor in implementing them and avoiding future problems:

  • Selecting the right licensing structure. For instance, for some companies with strong asset management in place, a per-named-user licensing scheme may be appropriate. If the distributed environment is too difficult to control, conversely, a per-processor could be a better option.
  • Maintaining robust software asset management (SAM) processes. Automated capabilities as they grow are a must.
  • Making software licensing part of ongoing change management. It is probably the only sensible way of coping with the accelerated transformation of technologies.
  • Engaging regularly with software vendors. Proactive remediation generally leads to product upgrades with advantageous conditions, better licensing targeting, and avoidance of punitive charges that may come with an audit.

Even with all this anticipation, there are the unavoidable grey areas that may lead to a full-blown audit. With it, things become more restrictive, particularly if the out-of-compliance situation is clear.

A vendor’s account management priority is, however, to keep the long-term relationship. Only rarely negotiation is not possible on pricing and terms, as well as other areas open to interpretation.  A settlement talk will usually be approached as an opportunity to further the relationship, particularly if non-compliance was inadvertent and reasonable.

The negotiation offered by the software vendor may take into account the following to solve the non-compliance situation:

  • An offer to upgrade existing products and services.
  • An offer to include new solutions identified as relevant to the customer.
  • An offer to migrate to the cloud when sensible.
  • An offer based on achieving and maintaining future compliance rather that back-dated compensation based on list pricing.

know the rulesOne powerful tool to achieve agreement once the dollar compensation amount is about to be agreed is the flexibility in the payment over time of said amount.  With flexible payments correctly structured, several objectives can be achieved:

  • Customer can agree to an amount that was not budgeted at all–particularly if exposed by an audit. Payments can be delayed to future budget cycles.
  • Vendor can show commitment to keep the relationship, settle for a mutually-satisfying amount, and still receive and recognize the revenue at signature.

We at Technology Finance Partners have the necessary expertise to help in structuring flexible payments for out-of-compliance situations, a win-win for all parties.