Software License Audits: Vendors Are From Mars, Customer Are From Venus
By Vic DeMarines, VP of Product and Strategy, Revulytics
Audit clauses are a necessary part of enterprise software license agreements, but can often strain even the best customer relationships. It is rare to enter an agreement without the intention of living up to its terms, so when a vendor makes the often difficult decision to invoke an audit clause, customers often feel that they are being wrongly accused of acting in bad faith.
For vendors, audits have traditionally been the best way to confirm if a customer is complying with its license agreement. The vendor often has a legitimate suspicion of misuse – regardless of whether it was intentional or not. Maybe the customer has grown beyond the number of licenses it is paying for, or perhaps there are reports of pirated usage. Despite this, customers can view audits as an attack on their integrity or cynically as money grab by vendors.
The World Looks Different Depending on Where You’re Standing
David Eastwood, Senior Managing Director of FTI Consulting, an independent global advisory firm that has represented both software vendors and customers, recently shared some interesting insights into the disconnect between what vendors say and what customers hear. He also suggests ways to alleviate the miscommunication and improve the audit process. Eastwood breaks down these disconnects into four categories: objectivity, independence, interpretation, and completeness.
Objectivity. What is the reason behind the audit? Is there actual evidence or is it based on suspicions?
Vendor Says: “We are writing to inform you that we will be conducting a software audit as part of our ongoing good governance program.”
Customer Hears: “You are speculatively auditing us in the hope that you find us non-compliant so you can send us a big invoice.”
Independence. Even when an independent third party auditor is used, audits can seem adversarial.
Vendor Says: “The audit will be conducted by an independent third party auditor.”
Customer Hears: “The audit will be carried out by a third party who works for you specifically to find non-compliance issues.”
Interpretation. Contracts and licensing agreements are meant to define the terms of a relationship, but the interpretation and understanding of those terms can evolve over time.
Vendor Says: “The audit found that you are non-compliant with the terms and conditions of the license agreement.”
Customer Hears: “The terms and conditions have been interpreted in a way which results in us being considered non-compliant.”
Completeness. Audits are often time and resource intensive, and the scope of an audit can become contentious.
Vendor Says: “We need to audit the part of your business that you have declared doesn’t have our software deployed, to confirm completeness.”
Customer Hears: “You don’t trust us,” “You want to see what other publishers we buy from,” “You want to see what software you can sell us.”
At the heart of this disconnect is the asymmetry of information that exists between vendors and customers. So how can vendors bridge this gap to bring them closer to their customers and achieve long term value? Gartner has predicted that by 2021, 75% of software vendors will rely on insights from software usage analytics to measure customer health. Sharing actual data with the customer on who is using applications and how they are using it can help establish a stronger and measurable understanding of the software’s value.
Gartner defines software usage analytics as “the detailed tracking and analysis of users’ interactions within a software application.” It is used by software providers to understand users’ behavior and gain insights that are used to improve user experience, prioritize feature enhancement, measure user adoption, track compliance and provide real-time user help.”
How to Get on the Same Planet and Not Be Worlds Apart
For software license audits, software usage analytics gives software vendors the opportunity to have more transparent and informed relationships with customers instead of basing interactions on profiling or other more subjective bits of information. With data-driven insight in hand, vendors can proactively help customers improve how they use the product and gently point out that they’re using more versions than their license allows – or perhaps not using it enough.
Think about that last point for a moment. It may seem risky for a software vendor to expose “shelfware” to a customer, but the days of selling as much software as possible and leaving it to the customer to figure out how to use it are long gone. But striving for transparency and sharing usage data with customers yields fewer disconnects and better long term relationships.
Usage analytics takes the guesswork out of pinpointing license overuse and allows vendors to be proactive in addressing issues. Without having to use the word “audit,” vendors can reach out to the customer with the confidence that a resolution and an enhanced relationship is within reach.
Strong customer relationships can often outweigh the product itself. While individual consumers put a premium on a customer experiences – this is increasingly the case in B2B relationships, too. Gartner’s finding that 80 percent of a company’s revenue will come from 20 percent of its existing customers has held up over time.
With deeper insight into customers’ usage patterns and advice on how to maximize its total cost of ownership, usage data puts the vendor in a position to strengthen those connections. Even in the potentially sensitive case of pirated use, the vendor can use the opportunity to alert customers to malware risks that BSA | The Software Alliance estimates can cost a company $2.4 million on average and can take up to 50 days to resolve.
C.S. Lewis wrote, “What you see and what you hear depends a great deal on where you are standing.” But it’s hard to argue with data – especially when it is shared transparently. What vendors say and what customers hear becomes less prone to disconnects and misinterpretation when the goal is mutually beneficial outcomes. With the growing ubiquity of usage data being made available to customers (think mobile phones, utilities, loyalty rewards programs, etc.), software vendors are well-positioned to build long term customer value and land on the same planet.
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About The Author
Vic joined Revulytics in 2006 as a founding member of the team. He is responsible for the strategic direction of the company’s broad portfolio of compliance and usage analytics solutions and its global piracy identification and deep data analytics capabilities. Vic brings his extensive product management and marketing experience in the security industry to the role. Prior to Revulytics, Vic held senior product management positions at RSA Security (now part of EMC) where he drove product strategy for the company’s strong authentication, Smart Card, and enterprise Single Sign-On client products. He has also held senior product roles at Authentica where he was instrumental in defining product strategy for the company’s enterprise rights management and secure email solutions, and at AXENT Technologies and Progress Software.