Big IT firms ‘gouge council clients for extra cash’

Microsoft and Oracle accused of raising software licenses to make up for flagging revenue

Money

Big IT firms are hitting up councils and universities to squeeze more money out of their technology deployments, a report has claimed.

Companies including Microsoft and Oracle are performing software audits on public sector bodies, often deciding to charge them more for the tech they're using, according to research published by a software licensing costs expert.

Cerno's report, The Untrusted Partner: Software license reviews in the public sector discovered that a third of 412 councils it surveyed were subject to a software audit in the previous 20 months (the research took place between August and November 2014).

Of those, 59 per cent were found to be underlicensed, resulting in penalties of up to 50,000 23 per cent paid even more.

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Redmond carried out 50 per cent of the 160 council audits, with Oracle performing 21 per cent of them.

Universities had a slightly easier time of it, but 35 of 123 had undergone audits in the previous 20 months, a quarter being found to be underlicensed.

Cerno warned that with public sector budgets already under pressure, these audits will come as a "depressing distraction" to customers.

"The challenge of a license review' from a major software vendor is therefore unwelcome and, as may be seen in this survey, often results in significant true up' demands," the report added.

"There is accordingly a heavy expectation to settle up and pay within a short period of time."

This could be as tight a deadline as four weeks, often less if a salesperson is offering a discount to wrap up their quarter, the report suggested.

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The research claimed the software giants are gouging customers to make up for underwhelming quarters.

It referenced figures from Oracle suggesting the proportion of revenue generated by new license sales has dropped by seven per cent to a 21 per cent total over five years.

Meanwhile, revenue derived from software license updates and producyt support jumped by four per cent to reach 60 per cent over the same period.

The big shock for customers, however, is realising they're not best of friends with their suppliers, according to Cerno.

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"The surprise to the customer is that the software vendor is not their trusted friend," the report said.

"In the eyes of the results-driven global software vendors, they are no longer (and maybe have never been) valued customers, but untrusted partners to be trusted only to supply additional revenue in a challenging market."

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Campaign for Clear Licensing (CCL) founder and chair, Martin Thompson, accused tech giants of abusing their relationships with customers.

He told IT Pro: "This report highlights the trend in modern day software audits: A cash cow to prop up flagging software publishers.

"It is immoral to prey on underfunded local authorities and universities for quick cash to prop up sales targets. It should also be outlawed to sell a license program when the measurement of consumption has not been defined.

"Many audits manage to generate cash because the victim has no idea how their licensing is actually measured or managed."

The CCL is urging European legislators to give this kind of behaviour more scrutiny, citing Microsoft, IBM, SAP and Oracle as companies particularly at fault in its eyes.

However, Thompson added that customers must take their share of responsibility.

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"Local councils and universities need to wake up to the significant management overhead of managing complex licensing," he said. "A framework agreement or campus agreement is not a shield of steel against audits, organsations need to invest in managing software as an asset or face the surprise of unbudgeted settlements."

Oracle declined to comment on the story, but a Microsoft spokesperson told IT Pro: "Microsoft does periodically conduct audits, as is fairly standard across the industry, however we have also made significant investments in training and consulting services to provide customers with customized, proactive SAM assistance.

"We continue long-term efforts to improve and simplify our licensing terms, based on valuable feedback from our customers and partners worldwide. We have also partnered with national standards bodies and industry leading groups to develop and adopt international standards which enable customers to not only manage their software licenses but also optimize their spend and improve overall IT security."

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