2016 is shaping up to be a banner year for mergers and acquisitions for Australian businesses, according to Sydney Morning Herald. From a big picture perspective, that’s good news for the national economy, as M&A activity is typically accompanied by investments, growth plans and expansion into new markets. Executives managing the operational integration of new entities, meanwhile, focus on ensuring that anticipated economies of scale are achieved and synergies leveraged.
Amidst all this activity, an often overlooked side effect of M&As is an increased risk of being subjected to an audit of enterprise software licenses and assets. The disruption and upheaval that accompany the acquisition, integration or divestiture of operational entities wreak havoc with a business’ asset management discipline and license portfolio. Confronted with so many conflicting priorities, asset management discipline is likely to be pushed to the back burner, making an enterprise susceptible to violations of license terms. Indeed, participation in an M&A is a major red flag for software vendors who are increasingly aggressive about using audits as a revenue stream, and who actively seek to target customers likely to be out of compliance.
Any firm involved in the acquisition or divestiture of new entities should therefore proactively prepare for the possibility of an audit by carefully reviewing existing contracts and licenses. The goal should be to enhance internal governance and processes around software acquisition, licensing and usage. A dedicated function focused on instilling the requisite people, process and technology discipline is imperative. It’s not enough to educate all users on general guidelines; rather, admin rights should be limited to select users, who then receive special training to build awareness of different categories of licenses as well as potential compliance traps. Procurement processes need to align with contract requirements to avoid back-channel acquisition of non-compliant software products.
The benefits of such an initiative go beyond effective audit response and risk mitigation. Gaining granular transparency into products under license and in-use, as well as insight into costs, contract terms and options, can help navigate the challenges of integration and divestiture. In other words, it’s worth doing even if you don’t get audited.
Software compliance has never been a top strategic priority, and that’s especially true during an M&A. It’s therefore incumbent on the CIO to articulate the importance of compliance and implications of contractual violations, specifically in the context of a merger and acquisition or divestiture. Put simply, the CIO must educate the boardroom that software compliance matters.
About the author
Dom is an experienced advisor and programme manager with 15 years of experience delivering IT and telecoms procurement, outsourcing and transformation projects across all areas of the public and private sectors. He has managed global projects spanning 35 countries in six continents.
