WHITE PAPER

GETTING STARTED
ON BUILDING
YOUR VENDOR
AUDIT DEFENSE
PROGRAM

AUDIT
DEFE
1E.COM

KEY ISSUES TO CONSIDER WHEN CONFRONTED WITH A VENDOR AUDIT

Contents
3

Audits Are Inevitable

Dont Start By Trying to Work Out Your Software License Entitlements.

Begin By Working Out What You Are Actually Using.

Do You Think the IT Department Are Concerned About Your License Position?
They Arent.

Dont Try to Boil The Ocean From An Entitlement Perspective.

Entitlement Quick Wins
Optimization Quick Wins

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Compile A Usage-based Evidence Dossier and Lean on Experts to Negotiate Effectively

Compile Usage-based Evidence
Hire Audit Experts

Case Study Sasol Cuts Software License Costs.

Business as Usual: Robust, Proactive And Continuous Processess.

Make the Switch From Reactive to Proactive
Align your ITAM plans to the business

10

Case Study Being the Adobe Audit Model Citizen.

11

1E AppClarity Optimizes and Right Sizes Your Software Estate.

12

1E ITAM Services

Abstract
This whitepaper sets out how
organizations can intelligently manage
software audits and in the process save
millions by managing their software
licenses more efficiently, and arm
themselves with the data they need for
an impending vendor audit.

GETTING STARTED ON BUILDING YOUR VENDOR AUDIT DEFENSE PROGRAM

Audits Are Inevitable

You Cant Avoid An Audit, So Get Your House In Order: Software
vendors have a right to audit to protect their IP and to ensure that
customers stay compliant, adhere to the licensing rules, and pay for
what they use. So dont be surprised when you get the call informing
you that an audit team is coming your way soon.
Software Audits: The Pain, The Shame, And The Gain.
Forrester Research Inc., 20131
Recent research2 conducted on behalf of

Many organizations have come to believe

1E, shows that most organizations have

been audited at least once in the past 12
months, with 52% audited at least twice.

that buying their way out of trouble is

often the safest solution. And, on the
face of it, over-licensing on software that
is critical to a business may seem like a
justifiable option, especially when the
alternative could be financially
embarrassing with unbudgeted license
cost and in some cases, legal action that
could result in major fines - not to
mention potentially damaging press
coverage.

With the number of audits from software

vendors on the rise, and typically with
just 30 days in which to respond,
companies have little leeway to take any
action to mitigate the consequential
license costs.

Just over half (52%) of

companies surveyed were
audited at least twice in the
past year.
1E Software License
Optimization Report 2013

Whats more, many people do not realize

that when you buy during an audit you
will be in a weakened negotiation
positlon with less opportunity for
discounts.
However it doesnt have to be this way.
Even companies that are unprepared for
an audit can take a number of
straightforward, practical steps to lessen
its potential impact and be able to
negotiate from a stronger position.

 orrester Research Inc., Software Audits: The Pain, The Shame, And The Gain; If You Havent Been Audited
F
Yet, Chances Are You Will Be Soon So Be Prepared, Mark Bartrick, with Chris Andrews and Ben Jennings,
29 August 2013.
2
Software License Optimization Report 2013, 1E (using data commissioned from VansonBourne).
1

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GETTING STARTED ON BUILDING YOUR VENDOR AUDIT DEFENSE PROGRAM

Dont Start By Trying to Work Out Your Software

License Entitlements. Begin By Working Out
What You Are Actually Using.
IT asset managers must continue to work with users of the software
to ensure they understand each licensors usage rights. IT
procurement and IT asset management must work with their legal
department on a review of any legal language regarding how to count
the license usage. How to count licenses is often the area of highest
risk with audits.
Software Vendor Auditing Trends: What to Watch for and How to
Respond1
Gartner Research Inc.
Conventional wisdom around software
license optimization says that
organizations should begin by
understanding their rights to use the
software products (entitlement) that
they have purchased and then to
inventory their estates to ascertain their
compliance position.

There is on average $65 per

PC/ year, of unused software.
For a company of 20,000
seats, thats a cost of $1.3
million a year.
1E Benchmark Analysis, 2013
However in order to to this, you need to
know where all of your proofs of
entilement are. This can take years and
certainly cannot be done within the time
constraints of a vendor audit.

1Es own analysis1 of 75 companies has

found that for the top 35 most commonly
deployed products (excluding Microsoft
Office) there is on average $65 per PC/
year, of unused software. For a company
of 20,000 seats, thats a cost of $1.3
million a year.
Furthermore paying for unused software
has a long-term knock-on effect of
recurring maintenance fees. This simply
compounds the problem.
If, in the first instance, you target
removing your unused software and
proactively reduce license liabliity, when
an auditors letter falls on your desk, then
theres one thing you can be sure of
youll be paying less than you would if
youd started with trying to optimize your
entitlements.

The simple fact is that much of the

software deployed to users desktops is
rarely, if ever, used.
If you do a general cleanup you will by
default reduce any hidden license liability
you may have.

 artner Research Inc. Software Vendor Auditing Trends: What to Watch for and How to Respond 23 May 2012 by
G
Jane B. Disbrow,Alexa Bona, Frances OBrien, Frank DeSalvo, Ted Friedman, Jo Ann Rosenberger, Joseph
Neapolitan, Victoria Barber, Stewart Buchanan
2
1E Benchmark Analysis of 75 companies across 13 industries, covering 1.8 million seats, November 2013.
1

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GETTING STARTED ON BUILDING YOUR VENDOR AUDIT DEFENSE PROGRAM

Do You Think the IT Department Are Concerned

About Your License Position? They Arent.
Software costs rise for enterprises trying to use existing licenses in
new unlicensed ways. However, these costs are becoming significant
enough to turn growing indignation into action.
Predicts 2013: New Trends Bring New Challenges for IT Asset
Management and Procurement1
Gartner Research Inc.
You may ask why your license
requirement is so high. One reason may
well be because the IT teams that deploy
software will have not given a moments
thought to licensing considerations.

Installing Oracle in a
virtualized environment can
cost many tens of times more
from a license standpoint
than other configuration
alternatives.
Its their job to design systems against
technical standards and considerations
around performance or scale, or simply a
desire to use the latest technology. They
almost never consider the license impact
of their technical implementation.
For example, although virtualizing
everything is often standard practice,
installing Oracle in a virtualized
environment can cost many tens of times
more from a license standpoint than
other configuration alternatives.

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A recent Gartner2 report found, for

example, If an organization is using the
Oracle DBMS on a 32-processor server,
but running this DBMS on only eight of
those processors, if the server is
hardware-partitioned the customer must
pay for only eight processors. Without
hardware partitioning, the entire server
or servers where live-migration or other
virtual server mobility technologies have
been deployed must be licensed. Oracle
does not recognize any software
partitioning (including Oracle VM) as a
method of isolating the software, so
Oracle will require all processors to be
licensed.
Its important therefore to continually
seek out areas that may result in a
previously unaccounted for high license
requirement and review alternative
configurations to see if this can be
reduced.

 artner Research Inc. Predicts 2013: New Trends Bring New Challenges for IT Asset Management and
G
Procurement 27 November 2012 By Rob Schafer, Alexa Bona and Stewart Buchanan.
Gartner Research Inc. Oracles Virtualization Policy: Options to Remain in Compliance 22 June 2011 By Jane B.
Disbrow, Donald Feinberg, Philip Dawson.Jane B. Disbrow,Alexa Bona

GETTING STARTED ON BUILDING YOUR VENDOR AUDIT DEFENSE PROGRAM

Dont Try to Boil The Ocean From An Entitlement

Perspective
Software asset managers are struggling to manage license
entitlement effectively to prove compliance.
Software Asset Management Fails to Deliver Benefits Without
License Assignment1
Gartner Research Inc.
Entitlement Quick Wins

Optimization Quick Wins

Doing entitlement discovery and

Like entitlement, full optimization can be

reconciliation on all vendors and

products can take years. Instead, by
focusing on the areas where you consider
you are at risk you can quickly take action
and see immediate benefit.

a long path, but a highly targeted

exercise can pay immediate dividends.
For example, if theres significant audit
exposure around Adobe Acrobat, (even
after eliminating the unused licenses), it
can be worthwhile to investigate second
use rights. You may find you are not liable
for more licenses as a user may have the
right to use the software on more than
one device.

Dont forget, you could get audited

tomorrow. If you start with a selective
targeted entitlement exercise today, you
can identify audit risk hotspots and
investigate what optimization strategies
exist for those products.
You need to first look at the likelihood of
your liability. You are less likely to be in a
weak position for example, if you
performed a true-up in the past 12
months. It is also worth weighing up the
risks if the vendor is particularly agressive
and litigious in pursuing audits.
Next you should focus on products
where you are most likely to be exposed
to license liability. Look at the likelihood
of a product to profilerate through the
organization, for example, Oracle
Database will be more likely to spread
that the big applications.

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Alternatively investigate alternative

licensing schemes that might be more
cost effective. For example, maybe you
built a database when the business was
small, since then it has grown
significantly and licensing per user has
become less cost effective at this point
and an Enterprise Agreement would be a
preferable option.
Also, a vendor may regard you as a soft
touch if you dont have the information
and evidence of your software licensing
position for the audit.

 artner Research Inc. Software Asset Management Fails to Deliver Benefits Without License Assignment
G
22 April 2013 By Victoria Barber and Stewart Buchanan

GETTING STARTED ON BUILDING YOUR VENDOR AUDIT DEFENSE PROGRAM

Compile A Usage-based Evidence Dossier and

Lean on Experts to Negotiate Effectively
Without experienced negotiation to lead the effort, hidden and
ambiguous cost detail is not obvious and will not be captured to
provide management with the necessary criteria to optimize
acquisition decisions.
Collaborative Teams, Customized Checklists and Robust Models Can
Expose Hidden Costs During Software Negotiations
Gartner Research Inc.1
Compile Usage-based Evidence

Hire Audit Experts

Once youve removed the unused

licenses, streamlined whats remaining
and optimized the most pressing its
time to negotiate.

Vendor rules and terms are changing all

the time. No two vendors use the same
contracts and it is hard to keep track of
the latest terms and conditions around
software licenses if you only negotiate
periodically (say, every three years) with
the likes of Oracle, IBM or Microsoft.
Therefore it can be beneficial to get help
from an expert who does it every month.

Ensure you enter the negotiation with

the best possible ammunition. By
compiling a dossier of evidence based on
usage you should be able to negotiate
more effectively.
If, for example, you can prove that 60% of
your users dont need all the features of
Office Pro Plus and could make do with
the Standard edition, although you
wouldnt be able to downgrade, it is a
very valuable card that can be played
when trying to squeeze out a few more
discount points during an Enterprise
Agreement negotiation.

They will be able to give you greater

insight into understanding the vendors
motivation, sales process and audit
methodology.
1E Expert Services directly supports your
negotiations such as true-up,
maintenance and enterprise agreement
contracts (please see page 12 for more
information).

Additionally, for software no longer being

used, you may not be able to cut the
number of licenses themselves, but you
can certainly stop paying support and
maintenance and even negotiate for
credit against future purchases.

Gartner Research Inc., Collaborative Teams, Customized Checklists and Robust Models Can Expose Hidden
Costs During Software Negotiations, by Jo Ann Rosenberger, September 20, 2013
1

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GETTING STARTED ON BUILDING YOUR VENDOR AUDIT DEFENSE PROGRAM

Case Study
Sasol Cuts License Software Costs
Cobie Nel, IM Services: Manager Applications at Sasol was looking for
a software licensing optimization solution to give visibility into which
applications are used across all users in the company, and have the
ability to reclaim unused installations of software and ensure that the
company was compliant when it came to vendor audits.
We have thousands of different applications deployed across the
company and we wanted to ensure that our license liability was at
zero.
When an auditor comes along its important that you have reliable
evidence of the number of licenses deployed and in use. With
software license optimization from a tool like 1E AppClarity we have
been able to radically reduce the risk and ensure compliance with our
software contracts.
Just a few months into its program of optimizing how software
licenses are used and managed across the business, Sasol was able to
reclaim more than 185,000 installations covering 15,000 PCs and
laptops - an average of 16 applications per user.

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GETTING STARTED ON BUILDING YOUR VENDOR AUDIT DEFENSE PROGRAM

Business as Usual: Robust, Proactive And

Continuous Processess
IT asset managers are struggling to demonstrate and quantify value
in order to justify continued executive sponsorship and ongoing
investment in ITAM resources. (...) IT asset managers are struggling to
demonstrate and quantify value in order to justify continued
executive sponsorship and ongoing investment in ITAM resources.
Demonstrate the Relevance of Your ITAM Program by Using
Outcome-Oriented Metrics .1
Gartner Research Inc.
Make the Switch From Reactive to
Proactive
Once youve put out all the imminent
fires and can progress to a more Business
as Usual (BAU) model. You need to
conduct a full entitlement exercise and
switch to a model of continually
monitoring and understanding risk.
Discover what percentage of your
licenses have proof that can stand up to
an audit? And, what percentage of your
software estate do you have visibility? If
either of these are not 100%, then youve
got a blind spot.
Ironically audits are a significant cost to
software vendors in terms of fees (to the
auditor) and opportunity cost (could they
be focusing on another victim?). If youre
able to prove quickly and easily that
youve got a good audit defense there is
evidence to suggest that you may get an
exemption on the audit. They will go and
seek an easier more vulnerable target.

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Align Your ITAM Plans to The Business

When in negotiation with a vendor you
should be aware that you may not win on
every point. You need to know what
ground you should fight for and what
ground you should give up.
Therefore, it is important to get
management buy-in and conduct QBRs
with senior sponsors to gain alignment
with their business plans and be
forearmed with this information before
entering any negotiation.
If you understand that the business is
likely to grow by 300% over the next three
years then renewing that Oracle ULA
might be a good move.
If you know the business is looking to
branch out into three new geographies,
then the ability to transfer licenses
between regions will be critical.

 artner Research Inc. Demonstrate the Relevance of Your ITAM Program by Using Outcome-Oriented Metrics.
G
16 May 2013 by Gayla Sullivan

GETTING STARTED ON BUILDING YOUR VENDOR AUDIT DEFENSE PROGRAM

Case Study
Being the Adobe Audit Model Citizen
Adobe highly complimented a large auction company during a recent vendor audit
telling their software asset management team You are a model citizen.
The company, who by that time had been using AppClarity for nearly a year, were
easily able to run a report on all the Adobe products used in the company, and uninstall
software that was no longer being used to ensure they were compliant.
They were able to ensure that they had all the licenses they needed prior to the audit.
In the past what would have taken more than two weeks to research now only takes a
few minutes, says the Manager of Engineering, We are able to run a report that
identifies the publisher, product, number of licenses, usage and estimated value.
Before AppClarity we had a blind spot about usage, he asserts. Now not only is the
company compliant, it has been able to save $70,000 through reclaiming unused
Adobe software.

1E.COM

10

GETTING STARTED ON BUILDING YOUR VENDOR AUDIT DEFENSE PROGRAM

1E AppClarity
Optimizes and Right Sizes Your Software Estate
Know what software you are actually using. A new generation of
software asset management (SAM) tools have been developed that
automate and alleviate many of the challenges of identifying what
you are actually using, comparing it with your contractual
entitlement, and so ensuring that you stay compliant () these
products help with Software License Optimization (SLO) and are
delighting exasperated sourcing and asset managers around the
world.
Software Audits: The Pain, The Shame, And The Gain1.
Forrester Research Inc.
Uniquely focused on software waste,
AppClarity delivers compliance without
complexity by filtering out irrelevant data
to show just licensable software and
organizing it by financial impact or
vendor so you can quickly focus on
reducing your software spend.
By making sense of what software you
have, why you have it, and where and
how it is being used, AppClarity allows
you to make informed strategic and
operational decisions. For example, you
can set policies to silently reclaim and
reallocate licenses from one user to
another if an application has not been
used for a set period.
AppClarity gives you clear and simple
visibility of your entire software estate
which enables you to make immediate
reductions in software costs by analyzing
all your applications and providing you
with actionable results, reducing your
spend straightaway.
By identifying the software you actually
use, then automatically removing what
you dont need, AppClarity financially
quantifies all unused software, across all
applications and across all machines.
AppClarity is user centric. It can be set to
offer every user a per application opt-out
option, either assuming that a reclaim
will be okay as long as the user does not

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11

object or waiting for a prompt from the

user as to what to do next.
It also highlights the cost of every
software license to the user, because
users are often more willing to return a
license to software they no longer use
when they realize it might be costing the
organization anywhere from hundreds of
thousands to millions per year.
Deploying AppClarity alongside other 1E
products like Shopping (the enterprise
app store) delivers a solution that further
enhances license control by offering the
opportunity to rent applications on a
short-term basis to users.
Using rental ensures that short-term
needs do not become long-term
liabilities. It also enables users to find,
select and download applications they
need on demand. If, for example, a user
has not used an application in several
months and it has been reclaimed by
AppClarity, when they need it again they
can find it, download it and begin using it
again within minutes through Shopping.
At first glance, reclaiming and reusing
software licenses seems complex and
daunting. However, with the right tools
and processes in place, it can yield
massive savings without any of the
perceived risks.

Forrester Research Inc. Bartrick, Andrews, Jennings, op. cit.

GETTING STARTED ON BUILDING YOUR VENDOR AUDIT DEFENSE PROGRAM

1E ITAM Services
At 1E we like to be different; were not so
much about thinking outside the box,
more likely were standing off-center to
recognize the cube in front of us.
We want to take our expertise founded in
designing world-class systems
management software and put our
knowledge and experience to work for
your company in the IT Asset
Management arena.

1E has a dedicated team of

ITAM experts with many
years of experience of
offering strategic and
operational advice around
hardware and software
management.

The services we offer include:

Software metering/removal
Baseline Entitlement Assessment
Accounts Payable Forensic Analysis
Baseline Inventory Discovery Report
Entitlement Escrow
IT Asset Optimization (ITAO
Configuration Management
Training
Reselling Software Licenses
SAM Process Assessment
SAM Process Engineering
Vendor Negotiation
We help you maximize the value in your IT
assets, to remain flexible and responsive
to the needs of IT and the wider business
- both operationally and strategically.

We understand that many companies are

at varying levels of IT asset maturity, and
so seek to offer light touch/ advisory
services for those higher up the ladder
through to feet on the ground gruntwork that might be required to kick-start
your IT Asset Management Programme.
ITAM is not an overnight exercise, but
with 1Es guidance, we can help you
recognize where you are and where you
want to be.

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About 1E
1E is the pioneer and global leader in
efficient IT solutions. 1Es mission is to
identify unused IT, help remove it and
optimize everything else. 1E efficient IT
solutions help reduce servers, network
bandwidth constraints, software licenses
and energy consumption.

Contact us
UK (HQ): +44 20 8326 3880
US: +1 866 592 4214
India: +91 120 402 4000
info@1e.com

Copyright 2013 1E. All rights reserved. The information contained herein is subject to change without notice.
1E shall not be liable for technical or editorial errors or omissions contained herein.