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Global bean-counting behemoth PWC tells vendors: Now would be a great time to audit your customers

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You know how it is: the economy is in meltdown; half the company is working from home and the other half is furloughed. What is there to look forward to? Software audits, that’s what.

Yes, audits are among the advice global accountancy and consultancy PWC has delivered to a software industry beleaguered by the economic impacts of COVID-19.

Before the virus outbreak, the consensus forecasts for the global software market were expecting growth between 6 and 9 per cent for 2020. Revised forecasts point towards completely flat zero growth and a fall of 7 per cent. This still represents a relatively strong performance in the circumstances, the report “Where next for the software industry?” said.

Still, PWC recommends ways in which vendors could make up the shortfall in growth.

“Where appropriate, licence verification can be an effective lever to increase short-term revenue and contracts coming up for renewal should be reviewed and optimised where possible,” the report said.

Licence verification is a euphemism for an audit. Microsoft’s licensing FAQs say: “Microsoft license compliance verification (commonly known as ‘audit’) is a formal, mandatory compliance review of a company’s use of Microsoft products and services, and it is part of the Microsoft license and contract compliance program.”

Many buyers of enterprise software will understand how software audits are not an impartial means to measure compliance with transparent and fair rules. Since some say that trivial changes to software use can be deemed in breach of licence terms, the view is often that audits are used to extract more revenue from customers, and force unwanted application or platform upgrades.

With all the challenges on their plates right now, users are unlikely to welcome the prospect of more software audits. The report also hints at tactics vendors may employ “to avoid price declines which can be challenging to reverse”.

“Actively positioning subscription pricing as an alternative to up-front licence deals to spread costs over time may help close deals and also improve recurring revenue mix,” the report said.

That, as any savvy buyer knows, could mean paying more for the same software, but spreading the cost over instalments.

Good time for customer deals

But the PWC report does point to some areas where IT departments could get a bit more from vendors. It says vendors should also consider offering more trials, commercial incentives and implementation support as a way to drive new business. So, buyers could try to get more from vendors by taking advantage of these promos.

The report paints a picture of software companies’ greater resilience compared with other industries. This is because most customers are medium-sized or big businesses able to weather the economic storm and software is vital to their operations.

But software companies will still be likely to see spending delayed, customers dropping off the list as a result of business failures, and customers may delay payments and be more price sensitive.

It may well be right to say that running a software business has its difficulties right now. But given the gargantuan challenges facing other businesses, it is fair to ask if it is appropriate for a business like PWC to be advising software companies to embark on a round of onerous customer audits.