VideoQuan Ha was driving through Los Angeles when he heard a disturbing announcement on the radio. The Business Software Alliance, an industry group that combats software piracy and similar abuses, was urging companies to audit the software they use internally to ensure they had adequate licensing in place — or risk being audited by the BSA and penalized if they did not.
As manager of desktop support at Sony Pictures Digital, a unit of Sony Corp. of America's Sony Pictures Entertainment, Ha worried that the company might not have enough licenses. Sony Pictures Digital had taken what Ha calls a "shotgun approach" to managing software assets, with no formal way to track the number of licenses it owned or who was using which software programs.
What's more, he had heard horror stories about companies being audited and fined heavily if they were underlicensed. In January alone, seven U.S. companies were fined between $29,000 and $120,000 each, and the BSA collected more than $12 million in fines for 2002. "When I heard that announcement," says Ha, "I knew we weren't compliant." Suitably motivated, he began researching asset-management software that would give Sony Pictures Digital an accurate, up-to-date accounting of all the commercial software it had installed and the licenses it had acquired.
Companies are increasingly turning to such products in order to avoid penalties from software vendors and to get a better handle on how much software they have and whether the applications they've paid for are actually being used.
The incentive for companies to know whether they are over- or underlicensed has never been stronger. With IT spending down, software vendors are increasingly auditing customers to ensure license compliance, and that same budget squeeze has prompted finance and technology executives to make sure they fully leverage current hardware and software assets.
IT research firm Gartner expects software vendors to double the number of audits they perform in the next two to three years. Jane Disbrow, a Gartner research director, says the firm is getting more queries from vendors about how to conduct audits. Clients, meanwhile, are calling to learn how they can avoid them. (Audits generally come in two flavors: voluntary, which may be done by a vendor, a consultant, or even the customers themselves; and involuntary, in which a vendor, the BSA, or some other party swoops in unannounced, usually because someone has attested that illegal copying or other infractions have taken place.)
Given the increased scrutiny, and the fact that software has become one of the largest assets companies own, "I can't imagine a CFO not being interested in what software assets the company has," says Disbrow. Getting hit with penalties not only hurts financially, she adds, but also generates negative publicity for the company.
David Friedlander, an analyst with Giga Information Group Inc., predicts a growing market for asset-management tools. It's difficult to measure the total size of the market because many vendors — Friedlander estimates at least 50 — offer the capability, but not always in a dedicated product: sometimes it's part of software that provides other IT-management help along with the auditing capability. He says the growing demand will be helped by the fact that "it's very easy for companies to see a return on this particular investment" (see "Rapid Return," at the end of this article).
Sony Pictures Digital chose a product called GASP from Attest Systems Inc. The application, which runs on Windows NT servers, automatically conducts weekly audits of files on every PC in the company to determine which software applications are being used. GASP collects the data and creates reports listing applications and licenses owned by the company, helping managers determine whether supply and demand are in sync.
Their Presence Lingered
After running the program the first time, Sony Pictures Digital discovered it was actually overlicensed for some products; for example, it had too many copies of Microsoft's Visio drawing and diagramming software. When employees who had been using that application left the company, the licenses remained in effect, a common occurrence that needlessly pushes many companies' software expenses up.
On the other hand, the company learned it was significantly underlicensed for such applications as Adobe Illustrator and Macromedia development software. That was more frightening, since it could have potentially resulted in fines, says Ha.
Following these discoveries, Sony Pictures Digital decided that tracking software and other IT assets was important enough to justify the hiring of an administrator who is responsible for asset management and for keeping all licenses up-to-date.
CNA Insurance Co. in Chicago also uses asset-management software (Logidex from LogicLibrary Inc.), not only to avoid audits and cut down on overlicensing but also to avoid costly downtime by identifying the most vital software it owns. By showing which applications are linked to particular business processes, "we will know going forward what effect taking out a particular software program, such as a policy-management system, would have on the overall business," says Dmitry Tyomkin, enterprise architect. CNA has done preliminary studies that show it could cost the company several million dollars if certain systems were unavailable for even a short period of time. The asset-management software cost CNA far less than the projected overlicensing savings.
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