‘Tis the Season to be Audited
December 31 is fast approaching, and not only is it the end of the calendar year for most people across the globe, it also marks the fiscal year end for a number of major software vendors – including SAP, IBM, VMware and Citrix.
As we approach the end of the year, it is traditionally a time for evenings of celebration: for food, drink and merriment. For the sales and audit staff at many software vendors however, this will be replaced by late evenings in front of the computer screen, audit reviews and last-minute deals to squeeze every last bit of potential revenue from existing customers and prospects.
And, of course, if your organization is a customer of one of these vendors (there are many more than the big four mentioned above) – they’re going to be breathing down your neck making it just as stressful a time for you. Santa Claus is coming to town – but an Audit Clause might be even closer!
Strength or weakness? Knowledge brings power
What does all of this mean for you, the customer? There are two ways the situation might play out: Either one of strength, where you can (to a lesser or greater extent) dictate to the vendor your terms, or one of weakness where the vendor holds all the cards and your only strategy is damage limitations.
In some cases, you can always shift the position further to your advantage. Assuming that you have a reasonable knowledge of entitlements and what is installed across your estate, it is still likely that, with an effective Software License Management solution in place, there are gaps.
Let’s consider those scenarios and how to improve your position:
- You are under audit, or an audit letter is winging its way to you
- You are considering the purchase of new products and technologies from a vendor.
The first scenario is one of potential weakness. The vendor (or auditor acting on behalf of the vendor) may uncover more about your estate than you know, and you will likely end up owing them significant unbudgeted fees if you are out of compliance.
In the second scenario, you are in a position of strength. That’s because the vendor will want to push a deal through before the end of the year and will be willing to offer you an excellent deal. But, even then, how do you gauge quite how “excellent” that deal is without a full understanding of your estate?
You can strengthen your position, and you can do that in two key ways.
- Apply Software License Optimization processes in combination with a powerful Software Asset Management (SAM) solution
- Discover as much as you can about the vendor you are being audited by, or are negotiating with
So let’s go back to both scenarios.
Scenario #1 Software Audit – In the best case, even with an audit letter in hand, you can use a SAM solution to gain visibility of your hardware and software estate that will enable you to prepare answers to any questions the auditors may have over discrepancies/ deltas.
Depending on the software vendor, you can also make configuration changes to your estate to significantly reduce the fees that you are facing. For example, Snow has helped many SAP customers in precisely this position and saved them very large amounts of money, running into millions of dollars for some. In the worst case where your estate is effectively frozen and you are in the midst of an audit, a big pain for those involved in the process is collecting all the data required by the auditor and validating it.
With a powerful solution like Snow’s SAM Platform, the time and effort can be markedly reduced. For example, you can export all of the required inventory and usage information quickly and easily with a number of out-of-the-box reports which save both time and money.
You can export all of your license, inventory, and usage data within minutes, giving you more time to check the data for accuracy and understand where your risks may lie. Refer to Practical Software Audit Defense: Pt I and Pt2 for comprehensive advice on the audit process.
During the process of a software audit, a common strategy of vendors is to offer a compromise, a get-out clause if you will. It typically comes in the form of an offer to purchase new products. A vendor may allow you to forego audit fees and/ or true-ups if you are prepared to purchase new products. This is where your knowledge of the vendor is a major benefit.
Consider why a vendor does this. It’s not for the good of their health or because they are feeling generous. Instead it is because new product revenue looks much better than audit revenue when reporting their financial performance. And the best type of revenue is one that is strategically important to the vendor and its investors.
For example, for SAP, this technology is S/4HANA. If you are willing to take on the technologies which matter the most to a vendor, you will most likely land the best compromise deal. Although they have the impending year-end deadline, don’t be rushed all the same. Ensure you look at any contractual small print so you don’t get caught out further down the line.
Scenario #2 – Adopting New Technologies – Although you are in position of strength and you are targeting a vendors’ year end, the best way to get the strongest deal is by knowing your own IT estate inside out.
By adding layer of Software Asset Management intelligence and processes allows you to understand precisely what is being used and what is not. You can understand how effective the current licensing models are for the configurations that you have.
Remember, you may get a fantastic discount on new software license purchases, but a discount on unnecessary products is like a great deal on a present which is never opened – a waste of money!
Armed with this knowledge and understanding how crucial this time of year is for the vendor, you can negotiate a far stronger deal with long-term effectiveness.
In some cases, significant opportunities arise far less frequently. Those are the real gems to look out for. For example, SAP’s S/4HANA represents a once-in-a-decade opportunity to make huge savings on year-on-year costs. We’ve already covered this extensively in the blog – Use S/4HANA to get rid of your SAP shelfware.
No time to relax
We’ve considered the scenarios where you have reason to be actively engaging with a vendor, but what if your organization has no reason to do so right now? Well, consider yourself lucky because you have a little more time to build a position of strength. But do not take a back seat, do not put your feet up and do not relax! If you want to see results for the forthcoming year, then you should be working on it now. Vendors’ year ends are peppered throughout the year and audits can come at any time.
We’ve created a handy calendar in our eBook – Santa Claus or Audit Clause: what does the festive season have in store for you?
If your organization knows precisely which licenses and entitlements it has for each and every software vendor on its books, how that software is being used and whether the license is optimal in each and every case, it is effectively untouchable. Vendors you are less likely to audit you because they won’t get any return on their investment (audits cost a lot of money for the vendor), and you can negotiate with the greatest efficiency.
In reality, it will take some time to get to this position. You may even choose to focus on where you can save the most money rather than consider each software vendor. You should build up your SAM team and put processes in place built around your SAM solution.
Use our calendar to consider where you are at most risk from an audit. Think about the amount you have invested with a vendor. Chances are that the higher the investment, the greater the risks are to you when that audit letter does come through your door, so focus on those highly invested vendors first. It won’t take long before you start reaping the rewards.
Enjoy a positive, proactive festive period and download our e-Book which expands upon how you can manage vendor year ends.