A recent study by Unisphere Research and License Fortress on the rising cost of software compliance shows how failure to comply with increasingly complex software rules ultimately leads to audits that can wreak havoc on companies small and large
A report published last month on the current state of software licensing and audit trends highlights the challenges for customers from a broad range of industries to maintain proper compliance with increasingly complex software contracts.
Notably, 53% of the survey’s respondents report that the introduction of the cloud has added significant complexity to managing software. Companies across the industry spectrum find software licensing terms to be too restrictive, which limits their ability to choose the most effective and cost-efficient cloud vendor of their choice and further complicates day-to-day software management.
In addition, legacy software providers often add new products and features, increasing costs without giving consumers any choice. The study found that 78% of respondents have been impacted by the new AI-powered services offered by Microsoft.
On top of the compliance challenges resulting from ever-changing terms and conditions of these contracts, software audits are occurring with greater frequency and at a higher cost. The report found that, between 2023 and 2025, the amount of respondents who have been audited by what they self-describe as a major software vendor within the last year, increased from 40% to 62%.
Customers are locked in a nasty cycle:
- Restrictive licensing practices force customers into new upgrades and products without giving them any choice;
- Terms of the contract are unclear;
- Customers are vulnerable to audits, which are happening at a higher frequency and cost.
IMPACTS
The impacts of a software audit can be staggering. 32% of the companies measured had to pay over $1 million to their vendors, compared to only 10% in 2023 that reached that level of financial liability. And it’s not just a financial cost. Audits take significant resources and staff time to complete. More than one-third of respondents report that their software audit took 3-6 months to resolve, 11% required six months to a year, and a few customers dedicated more than a year. Of course, larger companies are impacted to a larger degree.
WHAT CAN BE DONE?
Companies need to be diligent about their software contracts and ensure regular monitoring and optimization.
There also must be universal adoption of the Principles of Fair Software Licensing. The first principle, “Licensing Terms Should Be Clear and Intelligible” is critical. Licensing terms should always be clearly written, allow customers to readily determine their licensing costs, and permit customers to determine their obligations easily. Software vendors should not charge or otherwise penalize customers for failing to comply with any ambiguous, misleading, or confusing license terms. Instead, such licensing terms should be construed against the licensor and not used to extract additional licensing fees from customers.
Read the full report here.