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Blame 'Accidental Piracy' for Some Big Software Bills

By Kimberly Koerth
May 01, 2014 - News

Thanks in part to accidental software pirating, many enterprises face frequent, unbudgeted software license bills from their vendors, often to the tune of millions of dollars annually.

According to a report from Flexera Software and IDC, 85 percent of organizations are out of compliance with their software license agreements, 63 percent were audited by their software vendors in the last 18-24 months and 56 percent were handed true-up bills.

"Software license audits are a legitimate way for vendors to ensure they're getting paid for their software that's actually being used. However, CFOs can be unaware of software contract provisions permitting these audits, which can result in an unexpected budget shock when IT staff present them with a true-up bill," said Amy Konary, research vice president — software licensing and provisioning at IDC. "The cost of these true-ups can be significant, so CFOs should take the necessary steps to reduce their risk by implementing software license management processes and technologies to help ensure continual compliance."

Two-thirds of respondents said they had been audited in the last two years, and a third of enterprises with $3 billion or more in revenue said they had been audited three times or more in that time period. Microsoft is the most frequent auditor, with 58 percent of respondents saying they had been audited by the Redmond, Wash.-based sofware giant in the last year. This compares to 29 percent for Adobe, 23 percent for IBM and 21 percent for Oracle.

One-fifth of enterprises were invoiced $1 million or more for true-ups and more than 50 percent of respondents reported audit fees of $100,000 or more.

The report found that most organizations are "accidental" software pirates – they are using software they unintentionally have not paid for. This occurs when enterprises fail to implement the necessary processes and technology to track software installation and use across all environments – on-premises, virtualized, cloud and mobile – and reconcile that activity with the rules contained in their license agreements. Eighty-five percent of respondents reported that at least some of their license spend is associated with applications that are out of compliance, 42 percent of whom say more than 10 percent of their software spend is associated with applications that are out of compliance.

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