When You Treat Your Customers Like Criminals, Don't Be Surprised When They Go To Different Suppliers

from the a-simple-warning dept

An anonymous reader sent in the following story about how some large software companies are suddenly increasing the number of "software audits" they're doing of enterprise buyers. Most enterprise software contracts include license terms that allow the software provider to "audit" the buyer, to make sure they're not abusing the license. As the article notes, however, such audits usually only come at one of two times: (1) when a company threatens to switch to another vendor or (2) when the company has received info from a reliable source that the license was being abused.

However, it looks like with the economy in freefall -- and IT spending being cut back, some enterprise software companies might be thinking that another way to squeeze some money out of customers is to audit them and force a larger bill on them. Of course, this seems like a plan that could backfire in a big, big way. As noted in the article, being audited is not a pleasant experience at all. It's basically a vendor claiming that it thinks you're breaking your agreement. It's not the best way to build up a strong relationship of trust. Because of that, a sudden increase in totally unexpected and uncalled for audits may seriously damage a company's reputation and drive them to proactively look for alternatives from companies who trust them. Treating your customers like criminals is never a good idea...

Reader Comments

Subscribe: RSS

View by: Time | Thread


  • identicon
    Virtual Web Symphony, 9 Mar 2009 @ 8:00am

    Wooing customer

    Economy is in really bad shape. We all know that. During such times customer references count a lot. So be honest with your customers and offer quality services.

    reply to this | link to this | view in chronology ]

  • identicon
    Edmond Woychowsky, 9 Mar 2009 @ 8:17am

    Two words

    Open Source.

    reply to this | link to this | view in chronology ]

  • identicon
    R. Miles, 9 Mar 2009 @ 8:36am

    More bad news on top of more bad news.

    Treating your customers like criminals is never a good idea...
    But this seems to be the new business model in this country.

    After all, what good are customers when potential profits can be made up elsewhere, such as lawsuits, audits, and licensing fees?

    Hell, the customer is become the least problematic in the new business equation.

    After all, "0" can easily be disregarded in many cases.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 9 Mar 2009 @ 8:38am

    Two words

    Actually it brings up this: the pleasure and economy of paying only for the support you actually need and use.

    reply to this | link to this | view in chronology ]

  • identicon
    Ima Fish, 9 Mar 2009 @ 8:40am

    "Don't Be Surprised When They Go To Different Suppliers"

    Or simply go open source. That's what happened to Ernie Ball. After he was shook down by an unannounced BSA raid, he switched completely to open source software. Great way to win a paying customer guys!

    reply to this | link to this | view in chronology ]

  • identicon
    Hulser, 9 Mar 2009 @ 8:44am

    Audits

    Treating your customers like criminals is never a good idea...

    Just because you're auditing someone, it doesn't mean you think they're a criminal. I've worked in situations where my work was audited on a regular basis by internal and external groups. I didn't feel like I was being treated as a criminal or, more appropriate to my situation, accused of doing poor work. I simply viewed it as a natural part of the process. More trust is put in something that is independently audited.

    In the particular case of a software vendor auditing its customers, an audit could be done to ensure that the company is not accidentally installing software on too many machines. Business is complex and some times things fall through the cracks. If given the choice between going home on time or taking extra time to make sure that every single copy of a given piece of software is installed with the right license, you know what option people are going to pick. In other words, the infringement doesn't have to be malicious or intentional.

    (Now, from a pragmatic standpoint, does it make sense for software companies to be too hardnosed about audits? No. But, just because you're being audited, it doesn't necesarilly equate to "We think you're a criminal.")

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 9 Mar 2009 @ 10:13am

      Re: Audits

      As you say, it depends on the situation.

      If I'm working in an industry where safety or security is paramount, I'd expect my work to be audited, and would be a bit nervous if it wasn't. The audits happen because, if there's a mistake, there's a risk to third parties of life and limb.

      But license audits are a different story. They're like IRS audits. Both are the auditor saying "we saw something odd, and think you're worth scrutinizing for it". These audits happen because, if there's a mistake, you're not paying enough money.

      Even if the BSA steps up audits to the point where they have the frequency of the first scenario, it will still feel like the second, because the motivation behind the audit is profit, not safety.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 9 Mar 2009 @ 9:12am

    Maybe in your company making sure it gets done right trumps going home on time, but where I work, there's time to do it right, or time to do it again, and not the next day.

    reply to this | link to this | view in chronology ]

    • identicon
      Hulser, 9 Mar 2009 @ 9:45am

      Re:

      Assuming you're replying to my comment -- you may want to check out what that "(reply to this comment)" link does some time -- I'll reply...

      Maybe in your company making sure it gets done right trumps going home on time, but where I work, there's time to do it right, or time to do it again, and not the next day.

      That's great if your company goes to those lengths, but I don't see how this contradicts my point. To put it (my point) another way, if a company has a choice between spending an hour on work that relates to its actual business or spending that hour auditing its own software compliance, in almost all cases -- especially when the economy is bad -- the choice is going to be the former i.e. to make money. Now, the net result of this may be criminal non-compliance, but in the grand scheme of things, it's a relatively small deal so it's a natural decision to make.

      That's where the audit comes in. Sure, there are probably people out there that are intentionally infringing on the software licences, but when there are so many forces out there leading people to be unintentionaly or even negligently non-compliant, an audit can be done without the implication that "You're a criminal."

      reply to this | link to this | view in chronology ]

  • identicon
    dealguru, 9 Mar 2009 @ 9:17am

    audits are not free

    sure it costs the auditor money, but it also costs the auditee (audited company) money, time, and operational distraction.

    as stated in the article, the story is about increased audits, not the status quo. the increase is a draw on resources that has no payback on the audited company -- that 'cost' takes a toll in space, power, distraction, lost productivity, etc.

    Make no mistake, the supplier's audit team isn't spending time to build a relationship, they are there to catch infringers. Make no mistake, guilty or not, increasing audits sends the message that the supplier doesn't trust you and believes their time is worth more than yours.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 9 Mar 2009 @ 9:31am

    In my experience

    There are two types of audits:
    Audits to get some certification
    Audits to catch discrepancies

    Thie first type my company just went through. ISO came onto our site and checked everything out and left a week later.

    The second is when the IRS comes and puts you through hell to squeeze a bit more money out of you. The audits described here sound like the latter. If the agreement called for annual audits to make sure everything is good and combine the audit with training, Q&A sessions for the auditied company, then no problem. but "Surprize! lets see if you have abused your agreement with us" is not something I'd be happy about.

    reply to this | link to this | view in chronology ]

    • identicon
      Hulser, 9 Mar 2009 @ 9:53am

      Re: In my experience

      lets see if you have abused your agreement with us" is not something I'd be happy about.

      No one is happy to get an IRS audit or any of these "catch discrepancies" audits. And sure they can be abused. But...this doesn't mean that aren't a beneficial part of the system.

      Take the IRS audit for example, you may get audited because of some irregularity in your return. The auditor may have been a prick and you may have had to pay more in taxes or fees, but what is the alternative? No audits and we work on the honor system? (Well, there's always the national sales tax or something like that, but that another conversation.)

      The point is that audits are a necessary evil and, in most cases, aren't something to be taken personally.

      reply to this | link to this | view in chronology ]

  • identicon
    Overcast, 9 Mar 2009 @ 9:34am

    Or simply go open source. That's what happened to Ernie Ball. After he was shook down by an unannounced BSA raid, he switched completely to open source software. Great way to win a paying customer guys!

    Yes - many companies are even looking forward at that now - not JUST because of the initial cost, but the 50 times over costs and issues with getting everything up to par license wise.

    A lot of resources have to be used to just make sure the licenses are up to par - many times; it's easier to use software that's not as 'powerful' or might require more IT support, if you don't have to hassle with licenses.

    I applaud this effort wholeheartedly - if anything else can possibly make open source software more of a viable option - it's this.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 9 Mar 2009 @ 12:27pm

      Re:

      Apple OSX is based on a FreeBSD kernel. Maybe this is why a 3 year-old system retains 70% of their resale value.

      reply to this | link to this | view in chronology ]

  • identicon
    Comboman, 9 Mar 2009 @ 9:35am

    correction

    (2) when the company has received info from a reliable source that the license was being abused.

    That should read: (2) when the company has received info from a disgruntled former employee who wants to stir up trouble.

    reply to this | link to this | view in chronology ]

  • identicon
    James, 9 Mar 2009 @ 9:46am

    Here's an idea...

    We call the EMC and tell them that the software being used at the RIAA needs to be audited for proper licensing, then, we call the RIAA and tell them the BSA is illegally downloading content and needs to be sued.

    Then we sit back and watch the fun :-P

    reply to this | link to this | view in chronology ]

  • identicon
    Mr S, 9 Mar 2009 @ 9:58am

    Nothing like an audit to make you reconsider your suppliers

    Having recently guided a large global client through the painful process of verifying itself to an Adobe audit I can also offer and confirm the following

    The guilty till proven innocent methodology means that the target (victim) company has to produce their own data which in the case of global companies can be extremely costly

    Many software vendors offer no tooling to help assist companies in detecting any potential unlicensed installations on their machines - in adobe's case they didn't even have a coherent list of software to be audited (it changed on a monthly basis) and didn't know the registry keys their own software made for auditing purposes

    The software companies expect to see the actual first hand invoice (scans and photocopies are not enough). OK for a small company but gets expensive for larger companies with vault based storage of millions of invoices

    The goalposts moved considerably over the course of several months, proofs which were acceptable one month would suddenly become unacceptable the next

    Adobe and its vendors insist on sending licenses locally but expect to audit globally, In certain countries invoices from adobe partners are not acceptable - they didn't seem to like the fact that Chinese companies insist on producing local invoices in Chinese for instance. Plus its a pain getting all your local support to store the paper licenses in a sensible location

    The list of problems was legion and this auditing a company which honestly was not that bad at obtaining the correct amount of licenses

    One thing my client instigated almost immediately was a reduction in the number of products purchased - the whole costly and frustrating exercise finally convinced them that brand name is not everything. They did some checking around and in many cases found alternatives that were cheaper and from companies happy to be more flexible with their licensing (concurrent user licenses, transferable license pools etc)

    In one notable example Fox-It PDF Reader (thoroughly recommended by the way) has proven to be quicker, less hassle and a lot less risky than Adobe Reader and is now the companies defacto standard

    Admittedly not all vendors will be the same but Adobe are amongst the worst - the best one I had from them was a few years ago when they insisted that installation copies on rollout servers on another of my clients networks would need licenses. The company had several servers spread out around the world with installation files on them to help field support and others reinstall software in the event of failure - Adobe seriously expected them to have separate licenses for these even though they weren't actually installations (this company was large enough to laugh at them however and told the auditor where he could shove his pencil!)

    Generally I would advise anybody involved in the purchase of software to ensure that they only work with vendors who manage both their licenses and purchasing centrally, keep a track of every invoice to do with a purchase in your asset management system as well as your financial one and ensure that all installation or license keys are recorded in the same system - it makes life a shed load easier later

    reply to this | link to this | view in chronology ]

  • identicon
    Corporate Drone, 9 Mar 2009 @ 10:49am

    Already Happening

    In the next year, expect to read that a Fortune 10 company is not renewing a license agreement with Microsoft for 100K+ MS Office licenses. Stay tuned to find out whether they adopt StarOffice, Google Apps, Zimbra, or a dark horse. If you don't see that announcement, know that MS blinked rather than lose tens of millions of dollars over a three year period.

    reply to this | link to this | view in chronology ]

  • identicon
    ulle, 9 Mar 2009 @ 10:58am

    Speaking from my own experience, I have found both Red Hat and Suse provide far superior customer support for their commercial products then microsoft does.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 9 Mar 2009 @ 11:34am

    Because when my software stops working I want to post a question to "the community" and wait for a response. Pure genius. I think we should hire lulz as the new CEO of AIG, GM and all the other crappy companies.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 9 Mar 2009 @ 12:00pm

      Re:

      On mission critical applications and appliances you of course wouldn't accept that as a valid alternative. But on the smaller nagging problems that would be a nice selling point. But as was mentioned, if you purchase an enterprise product from Red Hat or Suse or companies like that you pay for support which is enterprise support.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 9 Mar 2009 @ 12:15pm

    Change to Open Source?

    So if I wanted my company to change to Open Source, all I have to do is call Dog the Bountyhunter in for a software audit?

    reply to this | link to this | view in chronology ]

  • identicon
    Matt T., 9 Mar 2009 @ 1:31pm

    As Jerry Seinfeld said...

    an audit is the financial equivalent of a complete rectal examination.

    reply to this | link to this | view in chronology ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Use markdown for basic formatting. HTML is no longer supported.
  Save me a cookie
Follow Techdirt
Insider Shop - Show Your Support!

Advertisement
Report this ad  |  Hide Techdirt ads
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Chat
Advertisement
Report this ad  |  Hide Techdirt ads
Recent Stories
Advertisement
Report this ad  |  Hide Techdirt ads

Close

Email This

This feature is only available to registered users. Register or sign in to use it.