Channel warned on licensing
- 25 October, 2006 15:30
A financial services firm has warned the IT channel to improve the reporting of software licenses. In a recent study on the selfreporting economy, KPMG claimed most software and storage licensing agreements were based on trust. It estimated these were worth upwards of $US300 billion globally.
According to the findings of its study, up to 70 per cent of self-reported statements were incorrect. KPMG attributed the failings to misunderstandings, mistakes and occasional fraud. The firm suggested many suppliers were afraid to push stricter auditing reports for fear of damaging customer relationships.
The growth of virtualisation and a trend towards more complicated software licensing agreements meant matters would only get worse, KPMG information, communications and entertainment partner, Julie Fahey, said. Emerging issues that could affect customer relationships include increased digital delivery of software and stricter contract compliance. "In the world of people going to enterprise licensing and using outsourcers, suppliers are losing transparency in terms of their direct relationship with the customer and the way in which the customer's IT is being used," she said. "This has a direct impact on how they are complying with their licensing agreements."
Fahey said suppliers were ultimately responsible for managing usage, as well as keeping customers abreast of licensing terms and conditions. She advised resellers to hit customers with an early and professional breakdown of processes.
"If you have an ongoing relationship with a customer, showing a clear understanding of what that contract means and what review processes will be needed is a very important message," she said.
"Doing a compliance audit down the track can be disruptive to a customer relationship if it's not included as part of the services management agreement. It is important suppliers have that discussion upfront and agree on what processes will come in when."
KPMG contract compliance senior manager, Rupert Rowson, said there was an opportunity for resellers and distributors to help vendors and customers through customer education and software auditing facilities. "Suppliers need to articulate to customers where the value in the exercise lies for them," he said. "Auditing may benefit the vendor, but it's also an important factor in showing an end user what they have in place and what they are using. Often, they do not know."
Fahey said better auditing practices would ensure revenue wasn't being leaked and that suppliers were getting appropriate reimbursement for licensing. "Customers need to do this to get the best value from their licensing. And having this will mean they come back to the supplier again and again," she added.
Express Data licensing and annuity manager, Niall Connell, said it still relied on customers to correctly report PC and user numbers. He admitted the method would become harder to maintain as more complex technologies, such as virtualisation and multi-core processors, were taken up.
To combat inevitable customer confusion, the distributor was looking to introduce asset management tools that would allow its resellers to perform auditing for customers. Connell cited Novell's asset management software as one of many products available for licensing management.
Ordyss general manager, Michael Cooke, said the Queensland-based integrator offered asset and license management as part of its customer services. The company has a couple of license specialists who monitor client systems to determine when licenses needed to be renewed or updated. It is a gold partner with several software vendors including Microsoft and Symantec. "Microsoft is pretty well understood by most people today, but others have their quirks. Virtualisation is also a grey area," he said. "We do an audit of a customer's equipment and use a number of tools to determine what's being used as well as what is installed." Cooke said resellers ultimately had a duty of care to ensure customers were equipped with the right software licensing.
"We have an obligation as a partner to eliminate any gaps in licensing which may put a customer in a bad position," he said.
ED's Connell said the changing licensing landscape presented resellers with a good opportunity to deepen their relationship.
"By getting deeper into the inquiry you're adding more value," he said. "Resellers will have to be more involved with queries about licensing as it becomes more complicated. It won't just be about how many users but also the number of cores per processor, which models are running and so forth.