Compliance trends and practices to increase revenue kpmg.com

Transcription

1 Is unlicensed software hurting your bottom line? Compliance trends and practices to increase revenue kpmg.com

2 contents 1 introduction 2 executive summary 6 KPMG s top 10 recommendations 8 detailed findings 22 conclusion 24 How KPMG can help 24 Related publication 25 About the authors

3 Software license compliance programs are evolving to meet the ongoing challenges of business and technology transformation, and to shift compliance into a value-added program that helps customers manage and optimize their enterprise software investment. Tom Lamoureux, Global Advisory Technology Industry Leader Unlicensed software continues to be a multibillion revenue challenge for software companies. As technology and business models continue to evolve at a rapid pace, publishers and customers need to address emerging complexities in the software licensing landscape. This publication examines the extent of license compliance challenges software companies face today, and leading practices in license compliance management. To address these topics, KPMG LLP (KPMG) surveyed 31 software companies representing more than 50 percent of the revenue in the software industry, where enterprise software revenue is expected to total $301 billion in 2013 (Gartner). The Web-based survey was conducted from February to April Issues examined in this report include: How do leading software publishers deal with customers that are not complying with contractual agreements? What steps are software companies taking to measure and reduce revenue and intellectual property leakage? Do compliance reviews performed by software companies jeopardize marketplace relationships? How are customers selected for compliance reviews? If license compliance breaches are found, what approaches are software companies taking to resolve them? Are recovery practices worth the effort for software publishers?

4 executive summary To date, the vast majority of activity from compliance programs has been focused on North America and Western Europe. Despite the publicity regarding software piracy in the Far East, compliance programs in these regions still account for less than 10 percent of total compliance activity. We expect this to increase in the next few years. Paul Baguley, Principal, KPMG Contract Compliance Services A Costly Challenge Given the magnitude of the potential losses, license compliance continues to be a significant issue for the industry. The majority of the survey respondents said the use of unlicensed software impacts their companies revenue by at least 10 percent. Improving software license compliance practices continues to be a significant revenue opportunity for software publishers, with a substantial percentage of respondents indicating compliance-related recoveries provide 4 percent or more of their annual software revenue streams. Business and Technology Complexity Increases Compliance Issues The survey indicates the top challenge customers face in achieving license compliance is complex and difficultto-understand metrics, followed closely by virtualized environments that are difficult to track and report on. Put together, these represent a real challenge for Software Asset Management (SAM) managers to deal with. Cloud and Compliance The accelerating shift toward cloud-based enterprise software can, depending on the deployment scenario, simplify or complicate licensing procedures. Generally speaking, the pay-for-usage model of public cloud applications makes license compliance straightforward, as providers and customers both have accurate ways to determine when software has been accessed or data has been exchanged. Many (73 percent) of survey respondents said that their companies offered Software as a Service (SaaS) products, and less than half of these included SaaS in their company s compliance program. Despite all the publicity around the cloud, its relevance to software compliance and inclusion in compliance programs has not been fully considered yet by most software companies. Furthermore, the growing use of employee-owned mobile devices and various cloud licensing models will add complexity for SAM managers as they continue to manage a variety of on-premise and off-premise software models from different software publishers. 2 Unlicensed Software: Usage and Compliance

5 The growing use of employee-owned mobile devices including smartphones and tablets to access enterprise software resources is another challenge that is not always anticipated by a company s software licensing program. Unlicensed Software: Usage and Compliance 3

6 One of the common concerns associated with software compliance is the potential negative reaction by customers or channel partners as a result of addressing potential license and usage issues resulting from a compliance audit. These concerns are often misunderstood, with over 85 percent of respondents reporting either neutral or a positive customer response. 4 Unlicensed Software: Usage and Compliance

7 Our survey finds that software license compliance programs rarely result in negative resolutions such as litigation or loss of a customer, making these revenue-producing programs a low-risk proposition for publishers. Also, the vast majority of software executives in the 2013 survey say programs have a positive or neutral impact on their relationships with channel partners and customers. Rob Pink, National Service Network Leader, Contract Compliance Services Adding Value Beyond Compliance Aligning compliance programs more closely with customer needs can make the fight against unlicensed software mutually beneficial. Although the focus of compliance programs remains on comparing deployed software with licensed software, an emerging practice is for software publishers to use the programs to bring additional value to their customers by: Providing training during the compliance review. Helping customers improve their capabilities to manage software. Placing greater focus on future deployments. Emphasizing a positive customer experience and viewing the review as part of the customer life cycle. Delivering value-added benefits to customers during license reviews can make compliance programs more attractive to customers and also make the software companies efforts to combat the deployment of unlicensed software mutually beneficial. Customer Relations One of the common concerns associated with software compliance is the potential negative reaction by customers or channel partners as a result of addressing potential license and usage issues resulting from a compliance audit. This concern is often misunderstood and can usually be usually be managed by implementing an effective compliance program. C-level Support Survey respondents reported that senior-level support is critical to successful license compliance programs, both in helping to emphasize the importance of compliance as well as in maintaining relationships with customers. In this year s survey, 65 percent of respondents said C-level executives supported or strongly supported their compliance program. C-level involvement sends an important signal about the value of compliance programs in protecting revenue and intellectual property. Opportunity for Software Asset Management (SAM) The survey results also identify an opportunity to improve compliance efforts, indicating greater use of Software Asset Management (SAM) assistance could help. Two-thirds of those surveyed say they don t provide SAM assistance as part of a compliance settlement for customers found to be noncompliant after an audit. Increasing the use of SAM assistance is a huge opportunity to improve software compliance. Linkage to Sales Over half of our respondents said their compliance programs reported into sales or sales operations within their company, and only 13 percent into their finance function. This contrasts with 2007, when one-third reported into sales and almost half into finance. As was the case in the 2007 study, software leaders responding to the 2013 survey say license compliance programs have a positive or neutral effect on their relationship with existing or prospective customers. Executives agreed overwhelmingly that outcomes such as customer loss or ligation rarely occur. Unlicensed Software: Usage and Compliance 5

8 KPMG s top 10 recommendations 1. Integration and support from the sales team is vital to a successful compliance program. The sales team should be involved throughout the customer engagement process. Software companies recognize the importance of this integration, and the number of compliance programs reporting to the sales group increased from a third in 2007 to a majority (52 percent) in In addition, sales representatives receive commissions for compliance revenue at 70 percent of our survey companies (37 percent provide commissions to the sales reps, and 33 percent pay commissions to both the sales rep and the compliance program rep). 2. Compliance programs should use multiple techniques and adapt to customer geographies, size and complexity, contract type and other factors. The vast majority of our surveyed companies have multiple approaches to review compliance. On-site reviews are effective for large global enterprises, but a questionnaire-based review may be more effective for a regionally based customer. 3. Aim for a balanced portfolio of review techniques. To help maximize returns, compliance programs should aim to keep a consistent review pipeline throughout the year with a mix of large, medium and small reviews. Putting all of your eggs in one basket with a handful of large reviews started late in the year may result in disappointment if they are unable to close on time. Mixing small and medium reviews with a fast turnaround time, along with the slow-burn large reviews, is a tactic more likely to succeed. 4. Add value to the customer during the review process. Since our survey in 2007, compliance programs that provide license management education and/or SAM assistance as part of the review have increased. Helping customers understand entitlements can improve the review process and enhance the customer relationship. Make license compliance a C-level priority. Having top-down support for compliance priority signals everyone, including customers, that compliance merits serious attention. 6 Unlicensed Software: Usage and Compliance Survey

9 5. Be transparent with the customer. Set expectations up front and make sure there are no surprises. Like any successful project, the beginning of the review sets the tone. Customers need to know what is expected of them, how long the review will take, and how any potential settlement will be handled once the review concludes. 6. Keep the review objective. The comparison of deployed software to purchased software should be completely fact-based and agreed to before resolution discussions should begin. Using objective, third-party professionals to conduct the reviews can often help with this goal, especially for aspects such as obtaining on-site access and verifying actual software deployments. 7. Make the program measures simple and believable. Clearly demonstrate the value of a compliance program by using a consistent return on investment (ROI) metric. Overclaiming on compliance deals is one of the quickest ways to discredit a program. 8. Continuously monitor and report customer satisfaction. Our survey found software companies almost never lose a customer due to a compliance review. However, negative customer experiences can escalate quickly. Unless the provider has set up rigorous monitoring and continuous reporting of customer satisfaction metrics, senior executives may see only the negative results from a compliance program. 9. Executive support is crucial. Executives need to understand and support the program. Establish escalation protocols and pull executives in to major compliance settlements with key customers. 10. Use automated tools to validate deployments. IT environments have become more complex and difficult to audit using semiautomated or manual techniques. More than 40 percent of compliance programs use discovery scripts written for software audit purposes, and just under 40 percent provide proprietary tools to help customers monitor compliance. Unlicensed Software: Usage and Compliance Survey 7

10 detailed findings Revenue loss vs. rewards Revenue loss Q: What would you say is the approximate percentage of your company s revenue loss due to unlicensed software? Compliance program revenue Q: What percentage of your company s total annual software revenue (both licenses and maintenance) does your software license compliance program generate? 0% 20% or more 0% 10% or more 1% to 2% 10% 10% 14% 10% 15% to less than 20% 11% 11% 7% 8% to less than 10% 3% to 5% 17% 10% 28% 10% to less than 15% up to 2% 30% 11% 11% 19% 6% to less than 8% 6% to less than 10% 2% to less than 4% 4% to less than 6% UPDATE: Percentage of revenue generated by license compliance programs increased from 2007 The majority of the respondents say revenue losses from the use of unlicensed software amounts to at least 10 percent of their revenue in this year s survey. The Business Software Alliance estimates industry revenue losses from unlicensed and pirated software at $64 billion. In 2007, an IDC estimate of revenue losses from these causes was $34 billion. Even though there is an increase in the number of compliance programs since 2007 and an expansion in product and geographic coverage, the software industry continues to have significant issues with pirated and unlicensed software. Almost 90 percent say their software license compliance program is a source of revenue and nearly half of the survey participants indicated compliance efforts account for at least 4 percent of their companies software revenue. Recognizing the revenue potential, an increasing number of software companies have implemented customer license compliance programs by a 7-to-1 margin in this year s survey, compared with a 2-to-1 margin in KPMG s 2007 survey. Compliance programs provide a source of revenue that would otherwise be left on the table. It offsets at least some of the loss from software over-deployment or other forms of license noncompliance. 8 Unlicensed Software: Usage and Compliance

11 C-level support Support from C-level and sales teams Q: How would you rate the level of support your compliance program receives from your company s C-level executives; your sales teams? C-level Sales teams 13% 14% 33% 23% 52% 67% 65% 34% Rating scale: 1=no 2013 support Rating all scale: 5=very 1=no strong support support at all 5=very strong 2013 support Rating scale: 1=no 2013 support Rating all scale: 1=no support at all 2007 Rating scale: 1=very 2007 weak Rating 5=very scale: strong 1=very weak 5=very strong 5=very strong support 5=very strong support Respondents said senior-level support is critical to establishing and maintaining successful software license compliance programs. C-level involvement sends an important signal about the importance of compliance efforts in protecting revenue and intellectual property. In addition, senior-level support can be valuable in helping providers maintain healthy relationships with customers by reinforcing the provider s desire to develop a compliance process that is fair to the interests of both sides. Unlicensed Software: Usage and Compliance 9

12 C-level success metrics and compliance program leadership C-level success metrics Q: When measuring the success of your compliance program, please rate the following on their importance to your C-level executives. Protection of intellectual property 8% 23% 69% Revenue/return on investment 4% 31% 65% Customer satisfaction/ education 14% 21% 64% 0% 20% 40% 60% 80% 100% Rating scale: 1 = not important at all 5 = very important Senior executives balance protecting intellectual property, enhancing revenue and ensuring customer satisfaction as equal priorities of their license compliance efforts. When measuring the success of their license compliance programs, C-level executives want to get it right -- ensuring licenses and payments reflect the customer s agreement terms and use, and that a fair process is outlined to determine and verify the correct payments to the software provider. Education is becoming a key area to improve licensing programs. Compliance program leadership Q: Which functional area leads your compliance program? Other 26% 52% Sales or Sales Operation The desire to align the sales process with compliance can be seen in a shift in responsibility for administering software compliance programs. Over half of the respondents said sales or sales operations leads their compliance programs, compared with a third in the 2007 survey. The number saying their finance function leads license compliance shifted from nearly half in 2007 to 13 percent in the current results. Legal 10% Finance 13% UPDATE: Over 1/2 now say sales, up from 1/3 in % UPDATE: 10% 20% 30% 40% 50% 60% Only 13% now say finance, down from 47% in The alignment between license compliance and the sales process can also be seen in instances where a customer is found to have violated license terms or conditions. The vast majority of executives say their company is more interested in addressing customer noncompliance in a forward-looking sales process than in trying to assess penalties or interest for overdeployment further illustrating publishers desire to get it right. 10 Unlicensed Software: Usage and Compliance

13 Global compliance by region Global compliance by region Q: What is the approximate percentage of your company s total global compliance activity by region? Percentage of companies reporting no compliance activity in Percentage of companies reporting only 1% 10% compliance activity in Africa 55% India 71% Middle East 43% Rest of Asia Pacific 65% China 27% Middle East 57% India 19% Eastern Europe 57% So. & Central America 14% So. & Central America 55% Eastern Europe 13% China 50% West. Europe + Israel 7% Africa 45% Rest of Asia Pacific 4% West. Europe + Israel 15% North America 4% North America 12% 0% Compliance Only 1-10% Compliance As the enterprise software industry pursues global expansion initiatives, publishers have an opportunity to extend license compliance programs to regions where sales and compliance efforts have not been common or are under-represented. Unlicensed Software: Usage and Compliance 11

14 Compliance compensation trends and audit clauses Compliance program compensation trends Q: Who receives commissions for compliance revenue? Q: Are the compensation commission structures generated by sales with compliance reviews, the same as the commission structures for sales without compliance reviews? Neither 20% Other 7% 37% Sales representatives No 41% 59% Yes Up from 17% in % Both sales and compliance 3% Compliance professionals Audit clauses Q: How many of your license agreements typically include an audit clause that gives your company the right to audit your customers or channel partners? None 6% 1%-33% 16% 34%-66% 10% 42% All UPDATE: 26% 42% have an audit clause inclusion, down from 55% in %-99% 12 Unlicensed Software: Usage and Compliance

15 Compliance selection criteria 0% 20% 40% 60% 80% 100% Compliance selection criteria Rating scale: 1 = not important at all 5 = very important Q: What criteria do you use to select the individual customers or channel partners that will be reviewed as part of your software license compliance program? Sales account team nomination Historical issues with licensee, sales force experience, referrals Data analytics suggesting higher risk of non-compliance 50% 47% 53% Systematic-all customers will get reviewed at some point 23% External information 13% Random selection 7% Other 13% 0% 10% 20% 30% 40% 50% 60% 0% 20% 40% 60% 80% 100% Rating scale: 1 = not important at all 5 = very important Unlicensed Software: Usage and Compliance 13

16 Compliance techniques and settlement philosophy Almost 90% say they have a program designed to ensure customer compliance with license agreements, up from 64% in Q: What percentage of your software license compliance revenue reviews are questionnaire or self-assessment based? What percentage utilize a customer on-site validation approach? Q: Do you give customers Web-based tools to provide detailed information on the entitlements they own? On-Site Validation Questionnaires/Self-Assessment Web-based Tools 82 % 78 % 56 % Use on-site validation as a review technique. 44% use them for 20% or more of their reviews. Use questionnaires or self assessments as a review technique. 22% use them for 20% or more of their reviews. A majority give their customers Web-based tools providing detailed information on the entitlements owned. Settlement philosophy Q: Which of the following best describes your company s settlement philosophy with respect to customer noncompliance discovered in the course of an audit? The majority of executives say their company is more interested in addressing customer noncompliance in a forwardlooking sales process than trying to assess penalties for overdeployment, and will typically address compliance issues in license renewal negotiations. Rectify overdeployment, no look-back Rectify overdeployment, full look-back 14% 7% 25% Rectify overdeployment, including partial look-back 54% Use the findings as leverage for structuring new deals in a forward-looking sales approach 14 Unlicensed Software: Usage and Compliance

17 Software license compliance program trends Compliance resolution trends Q: How often does your license compliance program result in each of the following? Less than optimal revenue collected 40 % 39 % 17 % 25 % 3 % 7 % Loss of a customer 3 % 4 % 0 % 4 % 3 % 0 % Litigation 10 % 11 % 0 % 0 % 0 % 0 % A few times per year More than 10 times per year Too frequent to measure There has been a slight downturn in the ability of compliance programs to collect optimal revenue from reviews since 2007, despite an overall maturing of the compliance function. This may be partly due to increased customer awareness and pushback at time of settlement. Customer loss and litigation remain rare, and at similar rates to Unlicensed Software: Usage and Compliance 15

18 Complexity increases compliance issues Challenges in achieving and maintaining compliance 0% 10% 20% 30% 40% 50% 60% Q: What are the biggest challenges your customers face in achieving and maintaining license compliance? Complex and difficult to understand license metrics 14% 14% 71% Complex virtualized IT environments that are difficult to track and report on 7% 33% 59% Lack of focus on SAM 19% 23% 58% Inadequate/limited SAM tools 32% 32% 36% 0% 20% 40% 60% 80% 100% Rating scale: 1 = not important at all 5 = very important Understanding the various, and at times complex, licensing metrics from different publishers is considered to be the top challenge customers face. This is followed by complex virtualized IT environments that can be difficult to report on. In addition, over one-third considered inadequate/limited SAM tools to be a significant or very significant challenge. These points are all related, and help explain why customers focusing resources and expenses on SAM still have issues in achieving compliance. SAM assistance in compliance settlement Q: Do you provide any SAM assistance/services, as part of the compliance settlement, for those customers who are found to be noncompliant after an audit? 34% Yes SAM assistance remains uncommon during license compliance settlements, but provides a potentially attractive opportunity for software publishers to add value during the compliance process and help customers optimize their software deployments. No 66% 0% 20% % 60% 80% 100% Over a third of software companies are now providing SAM assistance at settlement, and we see this as a growing trend among publishers of all sizes. These services are provided at the end of the license review to the customer, from settlement findings, with the aim of helping the customer proactively manage compliance on an ongoing basis. Rating scale: 1 = not effective at all 5 = very effective 16 Unlicensed Software: Usage and Compliance

19 Customer education and training Customer education and training 0% 20% 40% 60% 80% 100% Rating scale: 1 = not important at all 5 = very important Q: How effective are the types of training you provide customers on your licensing metrics and how to count your products? Program driven at the end of the compliance review 19% 27% 54% Ongoing program driven by sales interaction with the customer 43% 32% 25% Program managed by third party 39% 39% 22% Ongoing online training program 60% 32% 8% training materials 62% 31% 8% Other 50% 33% 17% 0% 20% 40% 60% 80% 100% Rating scale: 1 = not effective at all 5 = very effective An effective software license compliance effort designed to be fair to both sides can help customers better understand the software entitlements they have purchased, the software they are using, and how to manage their software assets more effectively. In most instances in the United States and Western Europe, overdeployment of software assets is inadvertent, and results more from ineffective inventory controls than a deliberate attempt to avoid spending for software in use. A compliance audit that goes beyond identifying license shortages to educate customers about effective software management and deployment can help customers understand their needs more effectively going forward, and could help improve the relationship between the software provider and its end customers. 0% 10% 20% 30% 40% 50% Unlicensed Software: Usage and Compliance 17

20 Software license compliance program trends Impact of licensing compliance on relationships 0% 20% 40% 60% 80% 100% Rating scale: 1 = not important at all 5 = very important Q: In your opinion, what impact does your company s license compliance activities have on your relationship with channel partners and direct customers? 14% 17% 43% 36% Rating scale: 1 = very negative 5 = very positive % 50% Rating 0% scale: 1 = very 20% negative 5 = very positive Use of tools in software compliance is growing 40% 60% 80% 100% Q: What tools (discovery methods) do you use in your software license compliance program? Rating scale: 1 = not effective at all 5 = very effective Discovery scripts written for audit purposes Proprietary customer tools to monitor compliance 42% 39% Nonproprietary/ commercial tools 23% Other No tools, we work with the SAM capabilities customers have in place 10% 26% Down from 28% in % 10% 20% 30% 40% 50% Compliance programs rely on a mix of tools including discovery scripts, proprietary and commercial nonproprietary tools, in addition to leveraging any relevant information supplied by the customer from their own tool sets. Interestingly, over one in four respondents do not use their own or proprietary tools a slight decline from Unlicensed Software: Usage and Compliance

21 Software license compliance program trends Most say a majority of their software does not include embedded controls to restrict overdeployment Q: Does the majority of your software include embedded controls to restrict overdeployment? 81 % Yes 19 % 21 % UPDATE: No For server software, most companies have made a strategic decision that ease of deployment is more important than embedding strict installation controls. The use of embedded controls or license keys to restrict deployment of unlicensed or underlicensed products still tends to be focused on high-value desktop software (such as computer aided design). Plan to add Only 21% plan to add restriction controls, down from 29% in 2007 Technology innovation, such as cloud, drives significant change and in some deployments adds complexity to software licensing models. For example, while private clouds and hybrid clouds can make counting software more difficult, public clouds simplify software compliance since the provider operates a pay-per-use software service. Vanessa Lo, Partner, KPMG Contract Compliance Services Unlicensed Software: Usage and Compliance 19

22 Software license compliance program trends Software asset tagging Q: Does your company intend to implement software asset tagging for its products in the next three years? 17% Yes, on all new software products under development 37% Don t know 27% Yes, on some software products 20% No 20 Unlicensed Software: Usage and Compliance

23 Software license compliance program trends SaaS in compliance programs Q: Are SaaS products included in your compliance program? Among those who say their company offers SaaS products The shift to cloud-based software services is prompting evolution in license terms and compliance programs, with compliance efforts maturing as cloud services gain marketplace acceptance. At this early stage, only a minority of respondents report customer compliance issues or findings during compliance reviews. No 52% 5% 33% 10% Yes, but no customer compliance issues/findings Yes, some minor customer compliance issues/findings Yes, some significant customer compliance issues/findings SaaS in licensing program requirements Q: Will you need additional programs to manage compliance for SaaS products? Among those who say their company offers SaaS products 27% Yes No 41% 32% Maybe Unlicensed Software: Usage and Compliance 21

24 conclusion It is important for software companies and customers to collaborate in the development of contract compliance programs and proactively assess the outcomes. Complexity increases compliance risks. In many instances, customers struggle to understand exactly what types of software they own, and the specific entitlements they have. Business challenges include: Inefficient purchasing procedures, inaccurate records, or a lack of coordination between procurement and IT leadership. Customers often don t know how much software they ve purchased, or what they re entitled to use. Customers trying to track licenses or purchase records manually in a spreadsheet or simple database are unlikely to have a current or accurate snapshot of their software or needs. License terms, conditions, and definitions often vary among software providers, leading to potential misunderstanding or confusion among customers about entitlements. Some software companies may be more aggressive about enforcing contract provisions than others. 22 Unlicensed Software: Usage and Compliance Survey

25 Consolidation within the software industry is another factor that can complicate license compliance, especially if software companies acquire competitors or smaller firms with incomplete or inaccurate license data. A lack of accurate sales records can make it difficult for publishers to identify or understand the entitlements of new customers, or those they may have shared with the acquired firm. For software providers, there are a number of key factors to keep in mind: Compliance programs can reduce revenue loss from unlicensed product use. A greater portion of the total annual software revenue (both licenses and maintenance) now comes from compliance programs, according to the 2013 survey findings. A substantial percentage of respondents indicated compliancerelated recoveries provide 4 percent or more of their annual software revenue streams. Cloud business models may simplify or complicate licensing procedures. The pay-for-usage model of public cloud applications makes license compliance straightforward, but private or hybrid cloud environments may complicate software licensing. The increased use of software asset management (SAM) tools offers publishers and customers a huge opportunity to improve efficiency and license compliance. A systematic approach to managing software license compliance efforts is a low-risk, high-reward endeavor. More respondents are interested in a go-forward approach to noncompliance settlements than looking back or trying to punish noncompliant customers. Despite concerns about customer reactions, most respondents said license compliance activities have a positive or neutral impact on relationships with customers and channel partners. Fairness in the resolution of noncompliance issues with customers is of paramount importance in maintaining a positive customer experience and enhancing the overall relationship. Assistance from objective third-party service providers in performing compliance reviews benefits both the software publishers and their respective customers. Software Asset Management Opportunities The use of software asset management (SAM) technologies represents a potential opportunity for customers to increase compliance with their software licenses. Twothirds of the respondents say their company does not provide SAM assistance as part of compliance settlements, but the increased use of SAM technologies may help customers address their license compliance challenges. Successful SAM programs align a customer s software expenditures with corporate budgets and strategies. Some customers, for example, may choose to prioritize software titles and software companies for license compliance activity based on investment and importance to the overall business, or may choose to invest in discovery or inventory tools to track software considered a higher risk for a compliance audit. For more information, please reference KPMG s publication entitled Cost-Effective Alternatives to Software Asset Management. Unlicensed Software: Usage and Compliance 23

26 How KPMG can help As technology continues to evolve at a rapid pace and software continues to drive innovation in consumer and enterprise markets, software providers need to balance the ease of use with software compliance considerations. Across KPMG s global technology industry network, we have extensive experience helping software companies of all sizes implement effective license compliance programs. Our professionals have extensive experience working with global technology companies ranging from FORTUNE 500 to pre-ipo startups. We go beyond today s challenges to anticipate the potential long- and short-term consequences of evolving business and technology strategies. Related KPMG publication Cost-Effective Alternatives to Software Asset Management This publication examines how software customers can approach SAM with a focus on the biggest risks in a budgetconscious environment by taking a more costeffective approach to keep costs in line with corporate budgets. 24 Unlicensed Software: Usage and Compliance

27 About the authors Paul Baguley is a Principal in KPMG s Contract Compliance practice in the Silicon Valley Office. Paul s focus is on helping technology clients to improve their license compliance and software asset management programs. Paul is the U.S. lead for KPMG s Software Asset Management (SAM) services and is a frequent speaker at software asset management industry forums. Tom Lamoureux is the global advisory industry leader for the technology industry, and has worked with the world s top technology companies. A member of KPMG s Technology practice steering committee, he leads the development of innovative services to help technology companies capitalize on business transformation opportunities and improve risk management and business performance. Tom is a frequent speaker on technology industry trends and has coauthored numerous publications addressing topics such as cloud transformation, software asset management, software licensing compliance, channel management, identity access management, and internal controls. Vanessa Lo, an advisory partner in KPMG s Silicon Valley office, leads KPMG s software license compliance practice in the United States and played a key role in growing the U.S. Contract Compliance Services practice. Vanessa has extensive experience in helping companies establish compliance programs and executing compliance reviews of various thirdparties. Her experience includes software licensing, software asset management, royalties and license agreements, channel partners and supplier/vendor pricing. Rob Pink is the national service network leader for Contract Compliance Services. Rob has approximately 28 years of experience across aspects of audit engagements, contract compliance reviews, software asset management, risk assessments, control design and enhancement, and control and risk self assessment. Rob has been instrumental in developing the service offerings and supporting methodologies that are currently used in CCS. He has an extensive background in assisting clients with assessing third party risk, implementing compliance programs, and performing compliance reviews of customers, suppliers, service providers, channel partners, and licensees across a wide range of industries. Rob led contract compliance audits around the world. Such audits include software license audits, royalty audits, outsourced service provider, vendor/most favored pricing audits, and distribution audits. Contributors We acknowledge the contribution of the following individuals who assisted in the development of this publication: Mike Alva, Associate Director, Technology Industry External Communications Hasan Dajani, Associate Director, Primary Research Kevin Davidson, Director, Technology Industry Program Marketing Charlie Garbowski, Director, Primary Research Patricia Rios, Director, Technology, Media & Telecommunications Marketing ABOUT KPMG KPMG LLP, the audit, tax and advisory firm ( is the U.S. member firm of KPMG International Cooperative ( KPMG International ). KPMG International s member firms have 152,000 professionals, including more than 8,600 partners, in 156 countries. Unlicensed Software: Usage and Compliance Survey 25

28 Contact Us Gary Matuszak Global and U.S. Chair Technology, Media & Telecommunications Tom Lamoureux Global Advisory Technology Industry Leader Rob Pink National Service Network Leader, Contract Compliance Services Vanessa Lo Partner, KPMG Contract Compliance Services Paul Baguley Principal, KPMG Contract Compliance Services KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG