Software audits: How high tech plays hardball

'Truing up' licenses amounts to billions of dollars in revenue for the major software makers. Here's where the money goes -- and how it's extracted

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When the software audit request came from Adobe two years ago, Margaret Smith (not her real name) thought it was business as usual. As a governance risk and compliance specialist for a Fortune 500 company, she was used to getting audited several times each year.

“Usually these things start out friendly,” she says. “We get a request for an audit, and there’s some negotiation involved. They want do an on-site audit or request specific employee IDs, and we say no. But this time they came out swinging. Within two weeks they were threatening to bring in the lawyers.”

Smith’s firm, a maker of consumer goods, had licensed at least 55 different Adobe products in offices around the globe. Now the software maker was accusing her firm of using far more software than it had a right to.

The stakes were high. Adobe could have levied penalties on top of outstanding license fees, charged her firm for the cost of the audit, and asked for retroactive payments from a certain date.

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