INTERVIEW: Bill Monk “Time to Make a Stand against Vendor Audits”

I recently spoke with Bill Monk at LOCS about the current status quo in the software market. We discussed why it is the perfect time for companies to make a stand against compliance audits and licensing obscurity from vendors.

Q. Why do vendors make licensing so complicated?
Software licensing programs remain complex to enable publishers to be flexible to different customer scenarios and to differentiate themselves from their competitors. Inevitably, the influence is purely commercial to make sure that we, the users, are not using products to an extent and in a way that we have not paid for.  Unfortunately the days of the ‘Martini’ licence (‘any time any place anywhere’ for those of us old enough to remember the advert), are long gone. The result is licensing by platform, hardware type, host size, number of users, usage, locations, company structure etc. The aim is to allow the vendor to cater for the needs of the clients and also to maximise revenue to pay for the development. The result is more product part numbers and licensing rules.

Unfortunately, licensing changes are usually made from quarter to quarter with no adherence to any conventions and in isolation to any other changes – the reasons for changes are inevitably purely commercial. Terms and conditions can change by vendor, by product and by the month in which you signed the agreement. Vendors do little to help end users who often have to fathom it out themselves.

Bill Monk

Q. Is this a case of ‘Where there’s Mystery there’s Margin’?
Yes, that’s the way it works out unfortunately and that applies to both the publisher and the customer. It could be argued that it’s not in the vendor’s interest to provide a simple licensing structure, as the complexity allows for more bites of the licence fee cherry. However, it does mean that both customer and publisher have to have licensing expertise on hand and endure regular audits to make sure that licensing is not abused. Because the publisher generally knows more about the licensing intricacies they do have the upper hand in negotiations and can upgrade the client and lengthen their contractual commitment.

Many software vendors purchase record keeping is not as accurate as it could be, yet by virtue of the licensing terms the onus is on the user to ensure that their records are perfect otherwise they may be punished financially.

Companies do not help themselves when they have no awareness of their software agreements or any form of control of the huge amounts spent on software. We have seen countless organisations renewing agreements with no acknowledgement of the terms and conditions – allowing them to be audited and the contracts to rolled over at a later date.

However, we are seeing a sea change as more customers are becoming more aware of the implications and are negotiating more balanced deals.

Q. What steps can an organisation take to make a stand against future vendor audits?
Start by pushing some of the accountability of licensing back towards the vendor – ask for a regular update on what they think you have bought and compare this with your own records. Any such information supplied by the publisher or reseller/vendor constitutes proof of purchase provided it has the originators logo and is not open to change.

Legally speaking the end users of software are responsible for adhering to the terms and conditions, but it is a buyer’s market – if the vendor wants to keep you as a customer then he must shoulder some of the responsibility for helping you remain compliant. Especially if they have licensing programs that are difficult to interpret.

The new international standard should help with this process, at the anniversary of your software contracts insist that your vendor is working towards adoption of the standard identification and tagging standards for both software recognition and entitlement. (See more about this here)

As a customer, you have the greatest leverage with the vendor just before you sign the renewal. Sales people will move mountains and cut through red tape in order to get the deal closed, use this to your advantage to secure as much clarity over licensing. Be careful, quite a few account managers from software vendors don’t understand all the licensing detail themselves – so make sure you get it in writing.

Use this point of leverage to also negotiate more favourable terms and conditions. If you are finding it time consuming and costly to track and manage licensing for a certain vendor despite your best efforts negotiate terms that push back the costs to them. You should be able to secure this if you commit to keeping accurate records and following processes and procedures to maintain compliance.

As an industry, we need to get as much support from the publishers and vendors to help with the licensing burden. Legally it is the end users who must maintain compliance but we should include in the licensing negotiations as much as we can to push back to the publishers to clean up their licensing programs and make things easier to manage.
Bill Monk is founder and managing director of LOCS.

What do you think? Do you agree with Bill?