All license agreements are at all times restricted to a specific legal entity (or a group of legal entities as defined in the Customer Definition). In case of a merger or acquisition, your legal entity structure changes. As a result of this change, you would need to assess if your software providers allow such change as well.
Many publishers only allow the software to be used by a specific number of legal entities; therefore, in case of a merger or acquisition, such change will require a new (commercial) agreement. This apart from the fact that a merger or acquisition would typically result in an increased number of employees and/or increased number of servers on which the software programs are deployed. Software publishers therefore wait 6 months to 1 year to start an audit after a merger or acquisition has taken place, especially if no new (commercial) agreement has been put in place. This to make sure that the acquired or merged company has been integrated from an IT perspective, resulting in the biggest risk of non-compliance.
A number of your software agreements will be perpetual. But many agreements have a limited life-spam (e.g. Microsoft Enterprise Agreement, Oracle Unlimited License Agreement). Once the expiration date of the agreement is near its end, the end user organization is expected to start discussions with the software publisher to renew the agreement. But in order to sign a new agreement, it’s in the interest of the software publisher to have a clear view of the actual deployment position. If they find a compliance issue as a result of this “baseline”, it’s the best position for the software vendor to start the negotiations.
Failing Your Obligations
Let’s say you license Microsoft software through an Enterprise Agreement, then you should know you are subject to an annual True Up. This means that you need to report to Microsoft any extra licenses you may need. Not complying with this obligation, hence not reporting anything, will more likely trigger an audit. A zero True Up form can raise questions as well about your inventory and headcount. If your responses do not match with your licensing claim, you might expect a software audit to follow.
Support Tickets for Unlicensed Programs
Many software publishers offer the possibility to log a support ticket for any technical issues. It often happens that end user organizations forget that this information is being used internally by the software publisher to determine if everything is in line with what they know about your licensing situation. It’s not uncommon that your technical staff (or outsourcer) raised a support ticket for a product, which is then validated against your available licenses. If and when a technical support ticket is raised for an unlicensed product, you will definitely get questions from the publisher, which in the end may result in an audit.
Trainings for Unlicensed Programs
Many software publishers offer specific technical trainings for the installation and/or use of the software programs for which they sell licenses and/or subscriptions. This can be done either by the software publishers themselves or by their partners. If an end user signs up for trainings of specific programs, this is usually an indication that there is an interest within the organization to start using the software. If the commercial representatives are not able to sell these programs but the publisher has the feeling that the end user is still using the software, an official software audit will be the next step.
Private Equity Firm Takes over the Software Publisher
Many software publishers have been acquired by private equity firms. Think for example about publishers like Quest Software and Tibco. A private equity firm usually wants to make sure that they have a return of their investment within the shortest possible timeframe. Combine this with the fact that an acquisition of a software publisher typically results in a situation in which the new company does not have a clear view of what the actual contractual agreements and deployment positions are within its end user organization, and the ingredients of why you are selected for an audit are known.