Fine Time on the Desktop

Increasingly, software vendors are auditing their corporate customers.

Quan Ha was driving through Los Angeles when he heard a disturbing announcement on the radio. The Business Software Alliance, an industry group that combats software piracy and similar abuses, was urging companies to audit the software they use internally to ensure they had adequate licensing in place — or risk being audited by the BSA and penalized if they did not.

As manager of desktop support at Sony Pictures Digital, a unit of Sony Corp. of America’s Sony Pictures Entertainment, Ha worried that the company might not have enough licenses. Sony Pictures Digital had taken what Ha calls a “shotgun approach” to managing software assets, with no formal way to track the number of licenses it owned or who was using which software programs.

What’s more, he had heard horror stories about companies being audited and fined heavily if they were underlicensed. In January alone, seven U.S. companies were fined between $29,000 and $120,000 each, and the BSA collected more than $12 million in fines for 2002. “When I heard that announcement,” says Ha, “I knew we weren’t compliant.” Suitably motivated, he began researching asset-management software that would give Sony Pictures Digital an accurate, up-to-date accounting of all the commercial software it had installed and the licenses it had acquired.

Companies are increasingly turning to such products in order to avoid penalties from software vendors and to get a better handle on how much software they have and whether the applications they’ve paid for are actually being used.

The incentive for companies to know whether they are over- or underlicensed has never been stronger. With IT spending down, software vendors are increasingly auditing customers to ensure license compliance, and that same budget squeeze has prompted finance and technology executives to make sure they fully leverage current hardware and software assets.

IT research firm Gartner expects software vendors to double the number of audits they perform in the next two to three years. Jane Disbrow, a Gartner research director, says the firm is getting more queries from vendors about how to conduct audits. Clients, meanwhile, are calling to learn how they can avoid them. (Audits generally come in two flavors: voluntary, which may be done by a vendor, a consultant, or even the customers themselves; and involuntary, in which a vendor, the BSA, or some other party swoops in unannounced, usually because someone has attested that illegal copying or other infractions have taken place.)

Given the increased scrutiny, and the fact that software has become one of the largest assets companies own, “I can’t imagine a CFO not being interested in what software assets the company has,” says Disbrow. Getting hit with penalties not only hurts financially, she adds, but also generates negative publicity for the company.

David Friedlander, an analyst with Giga Information Group Inc., predicts a growing market for asset-management tools. It’s difficult to measure the total size of the market because many vendors — Friedlander estimates at least 50 — offer the capability, but not always in a dedicated product: sometimes it’s part of software that provides other IT-management help along with the auditing capability. He says the growing demand will be helped by the fact that “it’s very easy for companies to see a return on this particular investment” (see “Rapid Return,” at the end of this article).

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