For Kermit the Frog, it's not easy being green. And for many business software users, it isn't easy being--and staying--clean. Even when company policy favors, and more likely mandates, compliance with software licensing agreements, the most vigilant IT department may be stretching thin its resources trying to track and report on software usage.

But the effort to do so can pay dividends. Many IT managers are discovering that software compliance actually cuts costs and improves efficiency, while reducing the exposure to problems stemming from unlicensed or improperly used software. Benefits of compliance include problems avoided: sidestepping legal and financial difficulties, as well as averting the harsh glare of publicity, which can negatively affect customer relationships and the bottom line.

Compliance monitoring software can help companies operate more efficiently and, in some cases, save money. It also facilitates better, less confrontational conversations with software vendors over usage.

In much of the world, software piracy is a huge problem. In fact, 35 percent of the software installed on PCs worldwide in 2006 was obtained illegally, amounting to nearly $40 billion in global losses due to software piracy, according to the fourth annual global PC software piracy study released by the Business Software Alliance, an international association representing the commercial software industry. The study was conducted by IDC, a global IT market research firm.

Despite anti-piracy campaigns and crackdowns, the report says that piracy actually increased by 15 percent in 2006 over the previous year. That represents an increase of more than $5 billion. Worldwide, for every two dollars spent on licensed software, another dollar's worth of software was obtained illegally. And this is at a time when the revenue growth rate for independent software vendors (ISVs) has fallen to the single digits.

Clearly, it's essential for enterprises to step up their software compliance efforts in ways that allow collegial conversations about usage--not confrontations that may have the client looking at a different software vendor when the current license expires, because of a strained relationship.

Software Audits: A Fact of Life
License audits are one approach, but businesses want to avoid them because of the unproductive time and resources that must be devoted to these audits. ISVs, for their part, don't like the adversarial nature of audits, which often damage the client relationship. For both sides, there may be disagreements over usage scenarios, as well as unanticipated usage involving demo, backup/standby or retired equipment.
Yet, like them or not, 30 percent of all enterprises--and 40 percent of midsize and large corporations--will undergo at least one software audit over the course of a single year, according to research firm Gartner.

Nearly half of all software tracking (an estimated 48 percent) in enterprises is manual. This approach is costly in terms of personnel time, and it's prone to mistakes. Because the standard audit is just a snapshot, it can't capture high watermarks of software usage or reveal ongoing trends. And 8 percent of businesses report that they don't track software usage at all.

Conventional automated tracking software may get the job half done. It reports on the software that’s deployed in the enterprise, but it typically can't tell if the software is actually being used—or overused. Overuse carries possible liabilities and penalties; underuse means companies are spending money they don't need to spend.

Compliance Monitoring Software
Compliance monitoring software allows for better conversations by stripping away the adversarial relationship between vendor and customer and replacing it with ongoing monitoring that allows for fact-based discussions without finger-pointing, hurt feelings or terminated relationships. Monitoring software usage alerts the enterprises and ISVs alike to over usage before it gets out of hand.

In some circumstances, without ongoing software compliance monitoring, charges for over usage--even without penalties--could run into the millions. Monitoring also allows for periodic "true-ups" in the client's software usage when that usage goes beyond the licensed amounts. Monitoring software enables ISVs to help their clients stay in compliance.

That's because compliance monitoring software captures not just a snapshot, but an ongoing record of software usage. The ISV and client determine the metrics of the licensing model beforehand, and the tools identify not just over usage of the software, but also usage trends.

In addition, as part of the software monitoring process, agreement is reached on what equipment is covered. So the only issue becomes software usage, as tracked subjectively.

Some organizations may not understand the number of seats needed when applications cost tens of thousands of dollars per seat; monitoring software makes clear how many seats are needed. And compliance monitoring software can also be deployed to track mainstream software where the value is relatively low--a couple of hundred dollars per seat, tops--but deployment runs into the thousands of units.

The enterprise may discover that its noncompliance is occasional and can easily be balanced or worked around within the scope of the license. With a manual audit, ongoing noncompliance might be missed, or it might capture a rare worst-case period of noncompliance and assume it's an ongoing problem.

In some cases, the enterprise may find out that it under-budgeted for software--sometimes with software costing thousands or tens of thousands of dollars per seat. Compliance monitoring software provides the information needed to right-size a licensing arrangement.

Conversely, clients may determine that they need fewer licenses. The short-term decrease in the ISV's revenue may be offset by a better, longer-term relationship with the businesses, leading to more customer satisfaction and a longer total revenue stream. With compliance monitoring, the software purchases are based on actual business needs--a win-win for everyone.

ISV as a Working Partner
Even in an era of single-digit revenue growth, ISVs believe they can develop a successful business based on customers who want to be honest, as well as those who fear the repercussions of getting caught abusing their software licenses. ISVs want to work with these enterprises to get and keep them in compliance. That leaves only those engaged in outright piracy.

Most ISVs want to focus on developing their own software products. They don't want to have to create compliance tools that quickly become outdated. They also want multiple licensing models to choose from, such as concurrent, locked by node or a specific named user license.

Clearly, ISVs don't like the confrontations that can occur with customers going through traditional audits, in which the snapshot may not reflect the typical situation at a client site. Some may like the incremental revenue obtained, without additional staffing, from audits. But they definitely don't like the damaged relationships that often go hand in hand with such audits. Nor do they want unhappy clients who find out during an audit that they've been licensing software that they're not using.

Companies that offer compliance monitoring solutions can help broker the conversation between enterprises and ISVs. They can also provide ISVs with a solution that will enable them to deliver a compliance solution through their software to work with what the enterprises have in-house.

Primarily, ISVs want to be fairly and fully compensated for their products and services. All these needs can be met through best-in-class compliance monitoring software.

John Frame is the senior director of product management for Acresso.