This year many mergers, acquisitions and consolidations to improve profitability and efficiency are expected. We think that software asset management (SAM) should be a critical part of doing due diligence during mergers and acquisitions.
Businesses need to know what software licence liabilities they may be taking on.
Software is usually more costly than hardware, and shared ownership of software licences is rarely included in the original licence deal.
When software is bought for an entire enterprise, licences are more likely to be accurately tracked. Decentralised procurement means the enterprise may be over- or under-licensed and not maximising volume discount opportunities.
An inventory of installed software may be performed manually by random sampling, enterprise-wide by automated inventory gathering, or some other way. It may be done centrally or left to individual business units or departments and may only happen once a year.
Sufficient data must be collected to confirm compliance with different licence types, such as per-device licences, named-user licences or concurrent-use licences.
The ideal situation is a centrally administered, automated, continuous enterprise-wide software inventory collection process.
Benefits include increased operational efficiency and a reduction in human resources. An ability to collect application usage data is helpful, allowing licence re-harvesting and re-use to defer new purchases and reduce ongoing maintenance renewal costs.
A company also needs an accurate record of all licences purchased, including the rights and restrictions of each.
Licence terms and conditions must be consistently communicated from procurement to the IT operations department.
At a basic level, reconciling installations to licences is a matter of comparing seats installed to seats purchased. But software licensing takes many forms.
A process must be in place for accurately assessing whether the software installations and use comply fully with the licence entitlements on record.
If over-licensed, it is important to assess whether any excess licences can be transferred to the acquiring company.
For critical and expensive software applications, licence and maintenance transfer rules that apply to the buyout must be determined.
In the case of volume-licensed products, Microsoft Software Assurance may not be transferred to another entity in many cases. Also, only the latest version of a product may be transferred with Microsoft approval, for perpetual volume-licensed products.
A licence audit by a major software vendor can tie up IT resources for months and result in financial penalties, and the merger or acquisition may itself put a company on vendor radar screens as a potential audit candidate.
Other factors that can increase the probability of an audit are recent employment growth or layoffs and termination or reductions to maintenance or support services.
Good SAM can save money, ease integration and ensure licence compliance during what is usually a challenging time.
Patrick Gunn is EMEA sales vice president at ManageSoft
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