Executive Summary
A merger, acquisition or divestiture initiative can pose a serious software license management risk. When considering such initiatives, organizations should review all licensing agreements to ascertain if they are freely transferable between organizations. Non-compliance can lead to an audit failure, significant penalties, and expensive software purchasing fees that can be completely unexpected and at times unnecessary.
Risks/Considerations
Software licensing agreements typically include language that states licenses as non-transferrable and may be unusable until the organization obtains the software vendor’s consent. Therefore, organizations should include clauses relating to acquisitions and subsidiaries before entering into a service agreement. These are necessary to both protect the organization and to provide the flexibility to expand and contract depending on organizational needs and changing market conditions.
Merger, acquisition, or divestiture activity is a key trigger for software audits. Software vendors know that many organizations considering a merger, acquisition or divestiture initiative go through a period of integration, migration, and decommissioning to eliminate redundancies, reduce costs, and increase operational efficiency and quality. However, service agreements may include license metrics that would automatically put the organization out of compliance at the time of a merger or acquisition should such metrics exceed the license base thresholds. As a result, the software vendor may demand a license review or full license audit to determine if the newly formed organizational structure is in compliance. Non-compliance may result in the organization paying significant penalties and purchasing additional software licenses that may be unnecessary considering consolidation plans in the near future.
Many organizations do not consistently maintain software license inventories and a lack of management may result in non-compliance and significant penalties. Organizations should also review all licensing agreements to identify any gaps in regards to software installations, licensing, and usage. This may be challenging if software inventories were not maintained and multiple licensing agreements and different licensing types were purchased over time and spread across different divisions and geographic locations. Maintaining software inventories saves time in the event of an organizational change or if the software vendor demands a license review or full license audit. In the case of an acquisition, the acquiring organization has an opportunity to negotiate terms if there are any gaps in compliance before the transaction takes place; otherwise, it is the new owner’s responsibility to assume all costs relating to non-compliancy.
Conclusion
Software vendors often demand a license review or full software audit following a merger, acquisition or divestiture to determine if the newly formed organizational structure is in compliance. Non-compliance may result in the organization paying significant penalties and repurchasing software licenses and applicable support at a higher cost. Please contact your trusted Miro Analyst or Miro Account Manager if you are considering or have recently gone through a merger, acquisition, or divestiture initiative. Miro can assist your organization with assessing all of the risks and opportunities to maximize your software investment while ensuring a fully compliant environment.