Optimizing Software Revenue and Customer Satisfaction with Software License Compliance Management: Part 2 – Pros and Cons of Traditional Compliance Management Approaches

Previously we discussed, Why Software License Compliance Management Matters, in this post I’ll take a look at the pros and cons of traditional compliance management approaches.

Compliance management (many times part of a company’s software licensing policy) approaches vary greatly from producer to producer and, frequently, from product to product within the same producer. While the industry has gravitated to some common approaches there are diverse options available.

  • Strict Enforcement
    • Producer choses to enforce software license use and  entitlements by implementing a  licensing mechanisms that completely disallows access to software when usage exceeds licenses or only allows some limited amount of “overdraft” leeway
    • Provides a high degree of confidence for the producer
    • May inconvenience the customer if there is an immediate and legitimate business need for exceeding the license
  • Software Audit Only

    • Producer chooses not to use any enforcement mechanisms in their products, removing the barriers to software use by making it easy for customers to broadly use the software throughout their business
    • Producer examines of the customer’s use, usually accomplished by dispatching a third-party to the customer’s site to retrieve usage data and/or to observe usage in real time over a period of time
    • Advantages of this approach – allows both the producer and customer to discover any overuse of the software, so that fair additional compensation can be paid to the producer, if appropriate
    • Disadvantages to this approach, include: 1)high cost of maintaining and dispatching audit teams, 2) difficulty auditing the entire organization, 3) audits get settled for pennies on the dollar 4) most producers only audit 1-2% of their customers  5) customers perceive an audit as invasive and adversarial
  • Enterprise (All-You-Can-Eat) License Agreement
    • Producer provides software to the customer without stipulating specific restrictions on use (may include very limited or no enforced licensing)
    • Advantage of this approach is that it eliminates the need to monitor specific use parameters and address unanticipated fluctuations in those parameters
    • Disadvantage of this approach is that it may not reflect fair value, meaning potential revenue. For the customer, it may mean investing time in completing a true up and possibly paying for more software than is actually being 

There are pros and cons to most traditional compliance management approach. Some approaches are appropriate under specific conditions but none of them are really perfect for all situations. In some cases, an audit may be too costly and/or intrusive. In other cases – such as when spikes in business activity give customers a legitimate reason for temporarily exceeding software license parameters – rigid enforcement mechanisms may be counter-productive and disruptive. As a result, we are seeing a growing trend towards compliance management solutions that offer trust but verify approaches.

Next time: Part 3 – Impact of Technology on Compliance Management

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