Microsoft Licensing Audits Ramping Up: Are you up to date?

This fall, Microsoft’s new Windows 8 operating system captured the attention of many customers. Windows 8, however, isn’t the only Microsoft change 2013 will bring. Microsoft is planning to provide stricter oversight of its auditing process by conducting up to 30,000 licensing audits on small to midsize companies by 2014. Here is an overview of why you should ensure that your software is up to date and what to expect when it comes to the Microsoft licensing audits.

What are the Microsoft Licensing Audits?
In 2013, Microsoft will conduct audits on customers’ software usage. The audits will be mainly focused on mid-size companies with 500 - 2,000 computers.  Many large companies have already put strict companywide licensing policies in place, but smaller firms typically have less formalized processes for ensuring all devices are licensed appropriately. As a result, Microsoft’s auditing focus is shifting to smaller companies. These audits will ensure that clients’ software is correctly licensed and paid for.

Microsoft’s dense licensing scheme can be difficult to manage. Typically, the licensing scheme is based on the amount of customer devices or users. However, more complex licensing arrangements, such as per processor licenses, and virtualization, in which companies run multiple instances of an operating system on a single computer, can pose challenges.

Companies can encounter different types of Microsoft audits. The Software Asset Management engagement, also known as SAM engagement, is a voluntary audit. During a SAM engagement, a Microsoft consulting partner examines the client’s Microsoft software resources for any misuse. There is often confusion regarding how many licenses are currently installed on devices.  Sometimes the results of a SAM engagement will result in having the company pay for installed programming that is not currently used. To avoid overpaying, companies should dispose of dated and unused software and workstations.

A significantly more serious and involuntary Microsoft audit is the Legal Contract and Compliance Audit, also known as the LCC Audit. An LCC Audit is only administered when Microsoft believes that a serious licensing infraction has taken place, as this type of audit is costly and time consuming. LCC Audits may be issued when a company has consistently refused to undergo a SAM engagement.

What to Expect
In an audit, Microsoft will confirm that every piece of equipment with the capability of running a Microsoft product is appropriately licensed and paid for. Unintentional non-compliance is almost guaranteed due to the intricacy of Microsoft’s licensing structure and because Microsoft does not alert firms when software overuse has occurred. If companies have a highly advanced system allows IT to recognize when overuse is occurring, they may be able to avoid non-compliance.  However, even if a company actually possesses the appropriate licenses, if they cannot show an audit trail, Microsoft can still impose fines.
Companies must understand that they are completely responsible for ensuring that all of their devices are appropriately licensed regardless of the confusion that Microsoft’s licensing structure may present.

What are the Ramifications for being Non-Compliant?
Companies will incur penalties if Microsoft finds them to be out of compliance. In most cases, companies will be expected to pay for additional licenses, sometimes at retail cost. Non-compliant companies may also encounter fines, penalties, and even criminal prosecution for the most serious cases. Microsoft’s strict penalties reflect their harsh stance on compliance, making it vital that companies take measures to ensure they are in line.

How Firms Can Prepare for the Audits
Firms can take steps to guarantee that their licensing is in line with Microsoft’s expectations. In fact, Microsoft has made several suggestions to help firms more easily comply with the audit requirements.  Firms must be able to pair all software to their appropriate licenses, and keep to date versions of all software in the case of an audit.

Companies should consistently strive to achieve a culture of licensing compliance far before Microsoft requests an audit. As audits will only be increasing as time goes on, firms should establish an asset management process to stay on top of licensing requirements. This includes keeping all updated licensing information in one central location so that the information is easily accessible in the case of an audit. Companies can create a software and hardware map in the form of a database, spreadsheet, or diagram that details where software is installed on computers. This will ensure that companies stay knowledgeable about their software.

Companies should also adopt a regular inventory schedule to keep track of any new software and license acquisitions. Each time the company acquires new software, they should enter it into their software tracking system. Firms should also take care to regulate their software to ensure that all employees are using the same version.

Finally, firms might contemplate investing in Microsoft’s volume licensing programs. These programs are more reasonably priced, as well as allow for tailored purchasing options and enhanced software management. Microsoft’s Open Value Program enables companies to easily track and manage their licenses, which results in a lower compliance risk. The cost effective program also offers benefits such as companywide licenses, low upfront costs with a yearly subscription and ease of management.
 
What Eze Castle is doing
We suggest that clients are proactive in licensing the proper devices. We can assist clients with obtaining a product list from Microsoft so that the client can confirm that their licenses are updated.