By: Cris Wendt
If you buy software licenses, you will probably be presumed guilty until proven innocent for ensuring that you are using software in compliance with your software license agreement. The burden of proof of evidence is place upon the user of software. If an audit occurs, you somehow must match the deployment and usage of software to some combination of documents to show entitlement rights.
However, if the burden of proof were placed on the shoulders of the software vendors, then the story may be different. This is especially true in the world of B2B enterprise software.
As a colleague of mine once said, "compliance is like the sound of hands clapping – one hand is usage reporting and software asset management from the customer, while the other hand involved in the clapping represents the software vendor's entitlement management systems." In most cases, the hand representing the software vendor's entitlement management system would be missing, or at least missing a few fingers.
Many software vendors will readily admit that their records of what software licenses customers are entitled to use are so bad, that they often call their customers to find out what the customer should own. In fact, I think that every software vendor over $1M in annual revenue has dirty data in their entitlement management systems.
How can this be? There are several problem areas that seem to contribute to an ever-worsening situation. Below are some of those problem areas:
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Non-standard agreements with little auditability: Many software vendors derive the lion's share of their revenue from large ELAs (Enterprise License Agreements )– deals designed to meet the specific needs of their customer, but they are often non-standard in nature and include many terms that cannot be tracked without spreadsheets, and knowledge inside of people's heads. One example is the "remix" – an approach to allowing customers to remix their licenses annually, based upon a formula that involves the list price of the software, and, the percentage of the total software purchased.
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Fuzzy license models: Some software vendors sell concurrent licenses, but aren't clear on the distribution of those concurrent users – are the users all local to one building, or, can they be dispersed geographically? The issue arises when licenses are being used on a worldwide-basis (24 hour usage), but the pricing intent was for the licenses to be used locally.
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Product packaging changes: Over time, software entitlements change because the underlying software product packaging changes. As the result of M&A, market re-branding, or end-of-life processes, customers may be "migrated" from one set of products to another, using a method that is customer friendly, but difficult to track or audit in an entitlement management system.
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Using ERP systems as entitlement management to track license rights: ERP systems were designed to track the manufacture and delivery of physical goods. Upon delivery, the product is shipped, and the role of the ERP typically ends. With software, the trouble usually starts after the software is delivered, as exact mix and version of software, including who exactly is entitled to use the software evolves over time due to upgrades, updates, moves, M&A, and product repackaging. Over time, software vendors often lose track of which customer is entitled to own a product. A true entitlement management system is needed, and must be properly integrated with an ERP system to effectively manage software entitlements.
Next week – How to approach improved entitlement management…

