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Slide 1: INFORMATION, COMMUNICATIONS & ENTERTAINMENT Is Unlicensed Software Usage Hurting Your Bottom Line? Leading Practices to Reduce Revenue Loss September 2007 KPMG LLP
Slide 3: Leaving Big Money on the Table: Software License Misuse Costs Publishers Billions Research conducted by International Data Corporation (IDC) in 2005 concluded that the world’s software companies were losing USD34 billion1 in revenue to unlicensed installations. This is more than the gross domestic product (GDP) of 42 countries.2 Said another way, a USD34 billion software company would be almost on par with Microsoft’s annual revenue as the second largest software company in the world. It would be nearly twice as large as IBM’s software business, which racks up USD18 billion in software revenue annually.3 Any way you look at it, this is a very significant problem for the industry, one that is due in part to software license agreement violations. With the spotlight on contractual compliance, KPMG sought to understand the issues faced by most software companies today. How do major software vendors deal with customers that are not complying with contractual agreements? What steps are software companies taking to understand and control the nature and extent of revenue and intellectual property leakage caused by this issue? Do compliance reviews performed by software companies jeopardize their relationships in the marketplace? How are cusThis study of the software industry was conducted in cooperation with the International Business Software Managers Association. [SIDEBAR] tomers selected for compliance reviews? Who actually performs the compliance reviews? If license compliance breaches are found, what approaches are software vendors taking to resolve them? What percentage of revenue is represented by recovered licensecompliance revenue? And, are these recovery practices worth the effort for software publishers? KPMG’s Software License Compliance Survey 2007 To find the answers to these and other questions, KPMG surveyed software companies in cooperation with the International Business Software Managers Association (IBSMA), a trade group that represents enterprise-level software customers. In addition, KPMG interviewed compliance executives at six prominent software companies to validate the survey findings and identify software license compliance practices worthy of note. Our objective was to understand the substantive issues underlying this significant industry problem by surveying a valid cross-section of software publishers. Our approach also focused on identifying better practices in license compliance in an effort to present successful strategies and techniques being applied by software companies today. 1 2 [END SIDEBAR] Cumulative of revenue leakage due to software piracy (including unlicensed personal use) as well as contractual noncompliance. Source: International Monetary Fund Report, 2006 3 Software industry revenue ranking source: Standard & Poor’s Industry Surveys, Computers: Software, April 27 2007 , SOFTWARE LICENSE COMPLIANCE 1 © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 ,
Slide 4: Our respondents included those responsible for, or with a strong working knowledge of, license compliance in software publishing companies. The companies surveyed collectively represented almost 50 percent of total industry revenue. Demographics Twenty-eight percent of those who responded are with companies earning USD5 billion or more in software revenue. In addition, 62 percent are with companies earning more than USD250 million. Responses from individuals who, based on their stated titles, had no direct responsibility for license compliance activities have been excluded from the results. Of all respondents, nearly 40 percent sell PC software, a like percentage sell middleware /database software, and 74 percent sell enterprise business applications. Also, 96 percent of respondents work for companies that sell to enterprises having more than 2,500 employees. Eighty-nine percent of the companies surveyed publish software for the Microsoft Windows® platform, 78 percent for workstations, 78 percent for UNIX servers, and 35 percent for mainframes. Only 13 percent said their software is used on other platforms. According to the survey results, respondents’ companies sell largely to the financial services, telecom, healthcare, and federal or local government industry segments. At least half of all respondents sell to the manufacturing, information, retail, and entertainment industry segments. This survey population proved relevant to uncovering important nuances related to software license compliance, and their collective experience provides valuable insights into both the rewards and the risks associated with licensing matters. Key Findings Some important findings and conclusions drawn from this survey include: • Unlicensed software use has significant and widespread impact on the industry. • Almost all survey respondents said their companies lose significant amounts of revenue due to unlicensed use of their products. For example, 34 percent of those polled said losses amount to more than 10 percent of revenue, and 21 percent of respondents said their companies lose over 20 percent of overall revenue. • A systematic approach to managing software license compliance efforts is a low-risk, high-reward endeavor. • A substantial percentage of respondents indicated that compliance-related recoveries provide more than 5 percent of their annual software revenue streams. • Most said license compliance activities have a positive or neutral impact on their relationships with end-user customers and channel partners. • Use of fairness in the resolution of noncompliance issues with customers is of paramount importance in maintaining a positive customer experience and enhancing the overall relationship. • Assistance from objective third-party service providers in performing compliance reviews benefits both the software publishers and their respective customers. Additional analysis and conclusions can be found in the Executive Summary and the Survey Highlights sections of this report. © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , 2 SOFTWARE LICENSE COMPLIANCE
Slide 5: Executive Summary A Low-Risk, High-Reward Endeavor Overall, KPMG found that a systematic approach to software license compliance efforts produces good financial results and causes few, if any, negative ramifications. A large majority of those polled said that the impact of software license compliance activity was neutral, positive, or very positive at the end of the compliance review process. Executives responding to follow-up interviews felt that customers ultimately view the process in a positive light, although initially a software compliance review may be perceived negatively. Christina Crowley, Vice President of License Management Services at Oracle, explained, “When first contacting a customer regarding a license compliance review, the perception may be viewed as negative or intrusive. People are nervous about what it means or how the review will be conducted. However, by providing information on the process and expectations, we can reduce overall concerns regarding what is tomers consistently viewed compliance reviews negatively there was no visible impact on subsequent “repeat” sales to those customers. More than 94 percent of survey participants said that their companies rarely lost a customer due to software license compliance activities. Ninety percent said that escalation to litigation was rare as well. Craig Stoeber, Worldwide Software Compliance Executive at IBM, said, “We really haven’t seen any negative impacts. In some cases relationships have improved because we’ve accessed customers at higher levels in these organizations. There have been some issues with mid-level IT managers who are responsible for managing the software and who become identified as doing a less-than-perfect job, but even those haven’t had a long-term negative impact. ” Microsoft’s Rod Ross, Software Asset Management Director, agreed, “Overall, it’s very, very positive. We’ve approached these situations in different ways over time. It’s always potentially explosive, but approaching situations within the context of business process is very positive. We end up with neutral or positive perceptions 96 percent of the time. ” Michelle Brooks, Worldwide Director of Software Compliance at Attachmate, added, “I think overall the impact is positive, although not always immediately. ” Jeff Gustafson, a Worldwide Software Licensing & Compliance executive at EMC, views compliance primarily as providing value-added information to the overall relationship: “Software asset management is difficult even under the best of circumstances, with customers taking a risk-based approach to resource allocation in managing vendor contracts. Uncertainty, complexity, and risk in software licensing (e.g., the ‘perpetual license/on-site deployment’ model) can create perverse asymmetries in the business relationship, resulting in decisions based on imperfect information on both sides. In broad terms, compliance programs are responding by moving toward a relationship management engagement model in an effort to drive value-added information back into that relationship. ” © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , expected during a license review. Another executive asserted that even if some cus” SOFTWARE LICENSE COMPLIANCE 3
Slide 6: Mostly Nonpunitive Measures Based on various actions most companies take with noncompliant customers, we found customers are not being overtly penalized for noncompliance. Rather, many publishers use the results of compliance reviews as a basis for true-up only, or structuring of go-forward deals.4 Yet despite that, 30 percent of those surveyed said recovered revenue amounted to between 5 percent and 10 percent of gross annual software revenue, and 7 percent of those polled said recovered fees had added 10 percent or more to the top line. Handle Customers with Care Follow-up interviews shed light on how these potentially sensitive activities are handled. “At Attachmate we understand that this can be intimidating, so we try to be very transparent about what customers can expect from us and any third-party partner we may be working with, said Brooks. IBM’s Stoeber concurred with that practice and added, ” “We typically have face-to-face meetings with large customers, and we have welldefined processes and approaches that we follow on each one. We strive for consistency © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , and we take customers through the processes and explain why we do what we do. ” EMC’s Gustafson emphasized the customer benefits: “More than simply mitigating legal and financial risk between the parties, compliance programs provide customers and vendors with other benefits. On one hand, customers can gain information to help optimize and leverage existing as well as future investments. On the other, vendors can gain a better understanding of their customers’ usage, thus facilitating a better alignment to value. ” Oracle’s Crowley added, “Our goal is to manage compliance risk and in doing so educate customers on their license inventory, deployment, and usage. In many cases, we are providing customers with information they may not have and/or are not managing. We report back to them in a customer-value-added way. ” Rod Ross from Microsoft acknowledged that things can turn contentious, and indicated that keeping the conversation focused on business issues is a key for success in dealing with customers. “We reset the conversation by saying ‘let’s make sure you understand our goal and what we are proposing to do here.’ We explain that we want to identify their baseline and see what’s needed. ” Top-Down Support Works Best A key characteristic common to successful compliance programs is senior executive support. The prospect of compliance reviews can be intimidating not only to customers but also to stakeholders in the publisher’s own sales function. When a C-level executive endorses compliance practices, internal dissension is reduced. Including stakeholders from the sales function also helps to make the compliance function more successful. Interestingly enough, when a publisher review receives the proper executive support at the customer level (i.e., when an executive such as the CIO is involved in a compliance review), the whole process is often smoother. “At the highest levels within IBM, said Stoeber, “support is very, very good. At the mid” level, we find people who are not supportive for certain reasons. They require counsel on why they need to be supportive. ” 4 Note: The approach taken by trade organizations, such as the Business Software Alliance, that act on behalf of publishers differs from the practices of the publishers themselves. BSA seeks a “penalty, or a payment above the true-up cost from users ” that overdeploy. 4 SOFTWARE LICENSE COMPLIANCE
Slide 7: “At Attachmate, our primary support comes from the CEO, CFO, and general manager, ” Brooks said. “By extension, our six-person executive committee has made compliance a corporate priority and an important part of the charter for the committee. ” “While strategic support with executives is a key factor, I would not overlook the importance of tactical alignment with the grass roots, says EMC’s Gustafson. “I have not met ” an account executive or key internal business stakeholder who wasn’t interested in enabling his or her business relationship, rather than burning it. ” BEA’s Christian Pruitt, Senior Director of Worldwide Compliance, also enjoys top-down support. “To a degree, the higher up, the more supportive [our executives] are, he explained. ” “The EVP of sales genuinely wants to do more, but is concerned that his team may already be overextended. At the country manager level, they’re supportive—when compliance activities are not unduly painful to them, they’ll make a good business decision. ” Fair Settlement Policies said, software companies rightly expect to be fairly compensated for the products that customers install and/or use. Some believe that the “letter of their contracts” is paramount and require full look-back measures (such as interest on payments) for overdeployed software. Other companies are content reducing discounts commensurately, rather than charging for interest. The net result may be the same, but the perception of punitive actions may be different. Still, many publishers extend regular discounts and no look-back charges. Microsoft’s Ross indicated that conditional aspects of the company’s settlement approach are important to his customers. “There is naturally a very careful approach to such situations. When customers are willing to be reasonable and cooperative, settlement resolution is a very collaborative and cooperative process. ” According to Stoeber, IBM sees itself as being in the middle of the spectrum on settlement policies. “We do not have penalties or interest. We believe customers do not want to be out of compliance; some customers are simply not good at managing their software assets. We ask only that customers pay a fair price for an IBM software solution. We assume that our enterprise customers truly expect to pay fairly for what they use, and for related support. On that basis we ask customers, for example, to show us how long they have been using our products, to ensure they are in compliance with our maintenance policies. ” BEA’s Pruitt also used the word “fair” to describe the relationship his company expects to have with its customers. “I want a fair resolution when a contract violation occurs. That means what is fair to our customer. They only have to pay for what they use and what they need. What is fair to BEA is being compensated, at the right price, for what a customer used. They should not expect to ask me to let them uninstall something and not pay for it. If they used the software, then they should pay for it. If, on the other hand, they can demonstrate that they installed something but never used it, we are tolerant. ” It is important to point out here that fairness is closely related to each publisher’s revenue model. Some publishers, such as cable television providers, believe the value is inherent in the installation. Compensation is based on installation rather than use. Electric utilities, on the other hand, charge by usage. Settlement policies would therefore be different with respect to one publisher who charges for installation and another whose revenue model is based on users and usage. 5 © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , Again, the common denominator in settlement policies is the word “fair. However, that ” SOFTWARE LICENSE COMPLIANCE
Slide 8: Software Executives Speak Out on Third-Party Reviews “One large benefit of using a partner is to obtain an accurate view, and complete and accurate remedy, that both Attachmate and the customer accept, said Attachmate’s Brooks. ” “Partners give us depth and breadth. Sophisticated customers will also understand that they will learn quite a bit from the compliance review process that our partners take them through. We know our compliance review firm is going to find everything that’s there. Both our customers and Attachmate see the value of a partner as a mediator/moderator in the process. ” EMC’s Gustafson agreed, “The presence of a third party tasked with performing a professional, accurate, and complete software licensing assessment between the parties lends objectivity, credibility, and confidentiality to the engagement and, ideally, to the business relationship. ” KPMG’s Top 10 Recommendations for Successful Compliance Reviews Based on our experience working with numerous software companies and the results of our survey, KPMG has identified these leading practices: • Make license compliance a C-level priority. Having compliance as a top-down priority signals everyone, customers included, that compliance merits serious attention. • License contracts should have clearly stated auditing provisions. Without contractual consent, a publisher’s right to audit is subject to legal interpretation and ambiguities. • Every license contract should clearly define how the publisher verifies compliance. Definitions of overdeployment, compliance findings, and other important concepts should be included as well as some commentary on what methods may be applied to understand the entitlement-versus-deployment position. Although approaches may vary on a case-by-case basis, a broad discussion of how compliance findings would be resolved also may be included. • Customers to be reviewed should be selected deterministically. Random auditing may reveal the extent of noncompliance and provide significant value to the publisher. However, a more targeted approach, based on probabilistic analysis, is far more efficient in focusing on the key issues facing the publisher in the marketplace from a compliance standpoint. Continued on next page. “We’re not the compliance review experts, added BEA’s Pruitt. “Third parties bring a much ” broader skill set to the table. If I tried to hire, train, and manage the level of resources I need, I would also need my own team of HR people. I would need to quadruple my team that would be very difficult for me to replicate. ” “Software compliance reviews are not a core competency here, and never will be, ” chimed in IBM’s Stoeber. “An independent third party brings credibility to the process, and allows our customers to be more open in a non-threatening environment. ” “We don’t have to sell their merits and attributes. Our customers already know that, ” said Ross of Microsoft. “The Big Four really have the market cornered on having everyone’s respect. ” Resolution Philosophy No matter what the actual losses due to unlicensed software installations are, everyone agrees they are significant. Some portion is due to counterfeiting, and software license compliance programs will typically not identify that type of risk. But a big portion of revenue loss is due to noncompliance with licensing contracts. Whether a publisher takes a look-back or look-forward approach to settlements, significant amounts of revenue could be added to the top line. Best practices are emerging. Compliance programs are taking in far more than they cost to operate, and companies that already have successful programs in place are planning to expand them. Others that have not adopted a formal approach are seriously considering doing so. Not a single respondent to KPMG’s survey said the company planned to discontinue or downsize an existing compliance program. A new industry standard for Software Asset Management (SAM), ISO 19770-1, was released in May of 2006, representing growing awareness of the critical role of SAM within organizations and of the challenges and complexities associated with governing SAM programs. A second part to the standard, 19770-2, is currently being developed and will include requirements for software publishers on tagging their software products to facilitate easy and accurate discovery by customers. By its very nature, the software business is different from dealing in physical wares. It is often difficult to determine if an enterprise is using more than it’s paying for. Nevertheless, based on our survey findings, publishers that do what’s necessary to ensure they are justly compensated for their intellectual property are recovering more revenue than they are investing in the recovery process. © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , and manage that broad spectrum of skills. Third parties have an infrastructure around them 6 SOFTWARE LICENSE COMPLIANCE
Slide 9: • Compliance review decisions should be made with stakeholder participation. Far greater success can be achieved when conducting a compliance review if it is sanctioned by internal stakeholders, such as sales, legal, and finance, as appropriate. • Customer discomfort should be dealt with respectfully. Compliance audits, and meetings leading up to them, can be difficult. They should be conducted with concern for the sensitivities of all involved. • Ideally, use objective third-party professionals to conduct the reviews. There is nearly universal agreement that third parties bring resources, experience, and dispassionate execution to an otherwise awkward and demanding engagement. • Reviews should be designed to leverage information the customer already has in place. Instead of trying to recreate the inventory from scratch (for example, by introducing external discovery tools) a more efficient approach in many situations is to perform procedures (such as sample testing) that will allow the publisher to rely on the completeness and accuracy of the customer’s own data. This is not only the most efficient approach but also promotes a healthy long-term relationship and trust between the publisher and the customer. In addition, if it turns out the customer did not get the inventory right, this process will show the customer where its process went wrong so it can be corrected going forward. • Reviews should be a learning experience for the customer. Reviews provide opportunities for software publishers to teach customers how to better manage their software assets. • Customers should expect to pay for overdeployments. It is important to establish from the outset of a compliance-related discussion that overdeployment is no different from receiving additional packaged products. The software company should make it clear that it expects to be paid for that overdeployment. Inadvertent Noncompliance Is an Easy Pitfall Every software company deserves a return on the value (installation- or usage-based) its software provides to its customers. Software licensing is a way to establish such compensation mechanisms. However, virtually everyone agrees that millions of dollars of value go unpaid every year. For software users, it’s not very difficult get to out of compliance with publishers’ contracts. Here are some of the common reasons for getting into an overdeployed position: • Complex, vague, and ever-changing licensing and pricing rules. Publishers are frequently changing how their software products are licensed. This is typically done in response to marketplace demands and in an attempt to provide more flexibility to customers. However, a side effect may include creating additional confusion around an alreadycomplex matter. As a result, we have found that a key element of many compliance programs is customer education as to current usage rights. • Disconnects between the procurement function that purchases the licenses and the IT department that actually uses the licenses. This disconnect can cause a misunderstanding of the licensing terms and conditions per the contract and may lead to inappropriate use of the software. It is common to find that software is deployed on machines with a higher number of CPUs than purchased, or using virtualization techniques that the licensing metrics either do not allow for or require additional licenses to support. Another example is using development licenses in a production environment. Other examples may include granting widespread access to limited-user software or hosting applications to the Internet without actually being entitled to do so. • Changes to IT environments that modify the use of hardware resources such as servers and workstations that have licensed software installed on them. Although software vendors allow moving software from one server to another if changes in the environment occur, the expectation is that once software in reinstalled on a new server, it is also uninstalled from the older machines. Software users often overlook this expectation, and before they know it, their environment has more software deployed than they are entitled to. • Mergers and acquisitions can complicate both entitlements and deployments. When one company acquires another, the acquiring company does not automatically inherit any software licenses that were owned by the company acquired, unless the contract expressly allows it. Often the acquiring company has no way of knowing what software is being used by the new entity, or where. Unless due diligence is performed in understanding the nature and extent of software assets and related contracts, the acquiring company may be opening itself to significant liabilities in license and support fees. It is strongly recommended that this due diligence be performed and all software assets are appropriately assigned before signing on the dotted line. Survey Highlights To establish the authority of this survey and the resulting report, KPMG identified these critical criteria: • Executives polled were from across the software publishing industry, representing enterprises of all sizes. • These executives have direct responsibility for, or at least a working knowledge of, software license compliance. In addition to our objective field survey, executive interviews were conducted to validate the key survey findings. The survey was conducted online from March 27 through May 25, 2007 . SOFTWARE LICENSE COMPLIANCE 7 © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 ,
Slide 10: A Significant Impact on the Software Industry IDC’s 2005 Software Industry Survey concluded that as much as 35 percent of software applications currently in use are illegally installed, amounting to some USD34 billion in lost revenue for the industry (these numbers include revenue leakage due to software piracy as well as unlicensed personal use of software). Seventy-seven percent of those polled by KPMG in 2007 agreed with the estimate when asked about the accuracy of that statistic. Nine percent of respondents thought that the amount of revenue loss was even higher, and 6 percent thought the loss was lower than projected. Interestingly, though, nearly two thirds of respondents (62 percent) believe their companies have fared better than the average when considering the magnitude of their losses. Regardless, almost everyone included in our survey (87 percent) indicated their companies suffer losses due to unlicensed software use, with 34 percent saying losses to their companies’ top line amount to more than 10 percent, and 21 percent reporting revenue losses higher than 20 percent. © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , Question 1: A 2005 study conducted by IDC on behalf of the Business Software Alliance (BSA) reported 35 percent of software installed on PCs worldwide is unlicensed, amounting to USD34 billion in lost revenue for software companies. Taking into account the entire universe of software companies across the world, do you agree with this estimate? Most Agree 35% of Software Is Unlicensed g g 6% 77% 9% 9% 0 20 40 60 80 100 I think the actual amount is lower I think the amount is about right I think the actual amount is higher Other Does not total 100 percent due to rounding. Source: KPMG LLP 2007 , [RT CHART 1] Question 2: Compared with the IDC/BSA survey, what would you say is the percentage of your company’s revenue loss to unlicensed users? Most Believe Their Company’s Revenue Loss Is Below Average 62% 13% 9% 17% 0 20 40 60 80 Below average Above average Average Don’t know Does not total 100 percent due to rounding. Source: KPMG LLP 2007 , 8 SOFTWARE LICENSE COMPLIANCE
Slide 11: Question 3: What is the approximate percentage of your company’s revenue loss due to unlicensed users? y A Third Say Revenue Loss Is More Than 10% 13% 34% 19% 9% 4% 21% 0 20 40 34% 0 1–5% 6–10% 11–15% 16–20% More than 20% Source: KPMG LLP 2007 , © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , KPMG’s Analysis Most of the respondents thought the IDC/BSA survey had it right—35 percent of installed software is unlicensed and unpaid for. However, nearly all of the respondents believed their own losses were considerably less than that. The survey figure of USD34 billion included both overdeployment and pirated software as well as all varieties of software. KPMG believes the 35 percent figure is affected by significant PC software piracy. So, while it may be representative of the industry as a whole, the losses for enterprise software companies due to noncompliance are more in line with the lower losses the respondents believed they sustained. Thus, the enterprise software segment of the industry may not have lost USD34 billion, but a quick correlation of respondents’ estimates and their companies’ software revenue strongly corroborates annual losses of billions of dollars. License Compliance and Revenue Recovery Programs A majority of those polled, 64 percent, said their companies have a software license compliance program, and of those, 67 percent said executive management is a strong proponent. According to respondents, none of the companies that now have such a program has ever discontinued or downsized a license compliance program. Two thirds of those polled said they apply the program in every country where they do business. In post-survey interviews with executives at various software publishers, virtually everyone agreed that there are significant differences when applying these programs across different regions. Differences in contract law along with different business and social customs must be considered with regard to how compliance programs are applied. Of the 36 percent of respondents whose companies do not have a compliance program, almost 60 percent believe they have no license compliance issues. Almost as many executives cited resource limitations as the reason for not implementing a program. Others SOFTWARE LICENSE COMPLIANCE 9
Slide 12: are concerned about negative impact on customer relationships, and still others think that such a program would not have sufficient return on investment to warrant it. A small group said competitors are not doing compliance reviews, and they don’t want to be at a competitive disadvantage. © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, , a Swiss cooperative. All rights reserved. 070322 Question 4: Does your company have a program designed to ensure customer compliance with license agreements? Majority Has a Program to Ensure Compliance with License Agreements 64% 36% 0 20 40 60 80 Yes No Source: KPMG LLP 2007 , Question 5: On a scale of 1–5 how would you rate the extent to which your company’s C-level executives support your compliance program? Two Thirds Say C-Level Executives Strongly Support Compliance Program Efforts 0% 33% 67% 0 20 40 60 80 Weak (1–2) Neutral (3) Strong (4–5) Source: KPMG LLP 2007 , 10 SOFTWARE LICENSE COMPLIANCE
Slide 13: Question 6: In which regions do you operate your compliance program (select all that apply)? Two Thirds Operate a Compliance Program in Every Country Where They Do Business In every country in which your company operates U.S.A. Europe Canada Other Asia Pacific countries South America Mexico 66% 34% 24% 24% 17% 17% 17% 14% 7% 3% 0 20 40 60 80 Japan Africa Other Small base size, findings are directional only. Source: KPMG LLP 2007 , Question 7: What is the approximate percentage of your company’s total global compliance activity by region? Distribution of Compliance Activity by Region 55% 32% 13% 0 20 40 60 Americas Europe, Middle East, and Africa Asia Pacific Small base size, findings are directional only. Source: KPMG LLP 2007 , KPMG’s Analysis KPMG recommends that: • Companies that do not have a compliance program consider running pilots with just a few customers • Companies use caution when they elect to conduct piecemeal reviews in individual regions Of the 36 percent of respondents whose companies had no compliance program, more than half believe they have no compliance issues. This survey finding is consistent with a minority of the population of publishing companies KPMG encounters in the marketplace. We recommend that those without a program consider running a pilot with a few customers. The outcome would either confirm their no-problem assumptions or give them a tangible reason to reconsider having a compliance program. With regard to customers using software on a global scale, KPMG advises caution when electing to conduct piecemeal reviews in individual regions. More often than not, understanding entitlement for global customers requires considering purchases and SOFTWARE LICENSE COMPLIANCE 11 © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 ,
Slide 14: deployments on a global basis. Reviews that are limited to one country only make sense if entitlements could be determined for that one country. Generally, if license agreements are global, reviews should be global. The rate of success in collecting unpaid license fees varies between geographies. In North America and Western Europe, it is generally easier to collect on findings, even on those that are relatively insignificant. In Asia, although the magnitude of findings may be much greater, publishers have found it difficult to collect on them. Embedded Controls: A “Catch-22” More than half of those polled (53 percent) said that some of their products have software that includes embedded controls that help prevent overdeployment. Of these, 68 percent use license validation “keys. Another 40 percent use node-locking controls. ” Twenty percent use third-party commercial license management tools, and 20 percent use other methods. However, we found in our post-survey interviews that many companies—particularly those offering large enterprise business applications—thought it was counterproductive to put controls into their software that may inhibit a customer’s ability to operate under any circumstances. Their comments can be summed up as, “We think it’s bad business because automated controls often limit a customer’s ability to run the production environment effectively and efficiently. ” © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , Question 8: Does your software include embedded controls to restrict overdeployment? [INSERT CHART 23] Half Say Software Includes Embedded Controls to Restrict Overdeployment 53% 47% 0 20 40 60 Yes No Source: KPMG LLP 2007 , Question 9: If your software includes embedded controls to restrict overdeployment, which of the following do you use most frequently (select all that apply)? Controls Most Frequently Used to Restrict Overdeployment 68% 40% 20% 20% 0 20 40 60 80 Online validation license key required for activation Node locking* FlexLM Other built-in control mechanisms *License key issues to an IP/MAC address or range, or similar Small base size, findings are directional only. Source: KPMG LLP 2007 , 12 SOFTWARE LICENSE COMPLIANCE
Slide 15: Of those without embedded controls, only a few indicated that they had plans to implement such measures in the future. Question 10: If your software does not include embedded controls to restrict overdeployment, does your company have plans to add them? Just over One Quarter Plan to Add Embedded Controls to Restrict Overdeployment 29% 71% 0 20 40 60 80 Yes No Small base size, findings are directional only. Source: KPMG LLP 2007 , © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , [INSERT CHART 25] KPMG’s Analysis Compliance controls embedded in software can be a double-edged sword. No technological solution that exists today would provide 100 percent coverage against overdeployment or eliminate the need to engage in compliance activities with customers. Some companies have embraced embedded control technology that can potentially reduce overdeployment. KPMG advises companies to consider embedded controls carefully while fully weighing the advantages and disadvantages. For example, KPMG has encountered publishers that used embedded controls, only to find that the technology makes the software application more difficult for the customer to use. Some have subsequently abandoned these embedded controls. Purchase History and Entitlement Information: To Tell or Not to Tell? According to our survey respondents, software companies could be doing a better job of helping their customers understand what they have purchased and what types of usage their license agreements allow. Only 36 percent make such information easily accessible to their customers, while 43 percent said they share such information on a case-by-case basis. In addition, the information that is made available may not be as comprehensive as necessary. While 45 percent said their entitlement information is comprehensive, 55 percent said the data may provide only an average or limited level of understanding. Interestingly however, almost all respondents think that their companies accurately determine whether or not a customer calling in for support is entitled to it. KPMG’s Analysis We believe this problem involves more than just information clarity and access. As previously mentioned, the disconnect between procurement and IT can lead to misunderstandings about agreed-upon terms and conditions of software use. An effective practice would provide processes for communicating license terms and conditions to the people who actually use the software. Sharing entitlement information with customers SOFTWARE LICENSE COMPLIANCE 13
Slide 16: can better enable them to understand what they have, what they need, and whether or not they are in compliance with the contracts. Having the right baseline information before a sales discussion with the customer is always a good idea. Compliance Programs: Elements and Methods To understand the software license landscape, we asked survey participants about the foundations on which their license agreements were based. In other words, how do companies license their software and what metrics form the basis of measuring compliance with license agreements? We found that publishers are using a mix of approaches to license software to customers. Fifty-seven percent of respondents based their licenses on the number of unique or registered users, while 54 percent use the number of servers and other machines on which their software is deployed. Another 54 percent of respondents license their software based on the number of concurrent or simultaneous users, and 48 percent use the per-CPU/Processor model. © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , Question 11: Which of these metrics do you use as a basis for your product licenses (select all that apply)? Use of Metrics as a Basis for Product Licenses Per unique/ Per unique/registered user registered user 57% 54% 54% 48% 43% 30% 17% 0 20 40 60 Per server/machine Per server/machine Per concurrent/simultaneous ncurrent/ simultaneous user (high watermark) user (high-water mark) Per CPU/Processor Per CPU/Processor umber of employees/workPer number of employees/ workns in the entire organization stations in the entire organization Per PC Per PC Other Other [INSERT CHART 10] Source: KPMG LLP 2007 , Almost all respondents (89 percent) said all or some of their contracts include audit clauses, but only 55 percent said all of their contracts specify such clauses. When it comes to enforcing their license agreements, publishers do not rely on any one type of metric for determining where to conduct compliance reviews of their customers and channel partners. Over half (52 percent) said their compliance review decisions are triggered by data analytics. In second place, customer history is used by 45 percent of those polled. Random selection and external information are each used by 28 percent of respondents’ companies. 14 SOFTWARE LICENSE COMPLIANCE
Slide 17: Question 12: How many of your license agreements typically include an audit clause that gives your company the right to audit your customers or channel partners? Most Include an Audit Clause in Some Portion of Their License Agreements 55% 89% 34% 11% 0 20 40 60 80 All Some None Source: KPMG LLP 2007 , [INSERT CHART 12] Data Analytics Most Common Criterion for Selecting Audit Subjects 52% 45% 28% 28% 21% 0 20 40 60 Data analytics suggesting higher risk of noncompliance Known historical issues your company has had with the licensee/sales force experience and referrals Random selection External information* Other *E.g., licensee reputation in the marketplace, recommendation by external party Small base size, findings are directional only. Source: KPMG LLP 2007 , [INSERT CHART 13] More than half of those polled said they or third-party firms conducting reviews on their behalf use proprietary software or internal product capabilities (commands or logs) for compliance discovery. Thirty-one percent of respondents use nonproprietary (commercial) software and 28 percent rely on the customers’ own software-asset management tools or capabilities. SOFTWARE LICENSE COMPLIANCE 15 © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , Question 13: What criteria do you use to select the individual customers or channel partners that will be reviewed as part of your software license compliance program (select all that apply)?
Slide 18: Question 14: What tools (discovery methods) do you use in your software license compliance program (select all that apply)? p y p Half Use Proprietary Tools in Software License Compliance g Program 52% 31% 28% 17% 0 20 40 60 Proprietary tools Nonproprietary/commercial tools No tools, we work with whatever SAM capabilities the customer may have in place Other Small base size, findings are directional only. Source: KPMG LLP 2007 , [T CHART 14] Fifty-four percent of respondents use an independent third-party to perform software license compliance reviews. This group uses the services of Big Four firms most often. KPMG’s Analysis Clearly there are differences in how software companies license their software. It would probably be easier if there were more consistency, but that is unlikely to happen. Therefore, it is critical that contracts clearly define how the software company computes installation and/or usage and how it verifies the chosen approach. There is disparity in the inclusion of an audit clause in contracts. We strongly urge every software company to include an audit clause in every enterprise software contract. Even if the company is unlikely to audit, the clause may encourage compliance. Without that clause, compliance verification options are somewhat limited. There is no consensus with regard to the question of compliance-related tools. Today, a majority of software companies use proprietary tools and capabilities. There is clearly an opportunity for commercial tools to serve this market, either data analytic tools or some of the customers’ own software asset–management tools. At first glance, the latter would appear to be more appealing to customers. Tools may help make the compliance review process more efficient and save costs for both sides, and they may provide ongoing capabilities to customers. As we’ve seen, more than half of respondents use third-party help in conducting compliance reviews. © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , 16 SOFTWARE LICENSE COMPLIANCE
Slide 19: Industry Associations and Standards to the Rescue? We wanted to know if publishers were turning to industry associations or using industry standards in their attempts to thwart license compliance problems. Interestingly, a majority of companies represented in our survey indicated that they do not leverage industry associations for compliance enforcement activities. We tested for affiliation with the Business Software Alliance and the Software and Information Industry Association as well as other trade groups with respect to compliance and enforcement activities. The SAM standard ISO 19770-1 has been formulated to provide an internationally recognized standard against which organizations can measure the maturity of their software license compliance programs. It also assists in providing effective support to help IT departments maintain compliance with legal and contractual requirements and to © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , demonstrate good corporate governance. Our survey found that this standard is not well known by software publishers (55 percent of respondents are unfamiliar with it). Of those who are familiar with the standard, 81 percent feel it would benefit the industry. However, 71 percent said a customer’s 19770-1 certification would not influence how compliance program activities are applied to that customer. Question 15: Are you familiar with the ISO SAM Standard 19770-1? Slight Majority Not Familiar with ISO SAM Standard 19770-1 45% 55% 0 20 40 60 Yes No Source: KPMG LLP 2007 , Question 16: Do you believe the ISO SAM Standard 19770-1 benefits the industry overall? 8 in 10 of Those Familiar with the Standard Believe It Is Beneficial to the Industry 81% 19% 0 20 40 60 80 100 Yes No Small base size, findings are directional only. Source: KPMG LLP 2007 , SOFTWARE LICENSE COMPLIANCE 17
Slide 20: Question 17: [INSERT CHART 18] 7 in 10 of Those Familiar with the Standard Say Compliance Activities Will Not Be Influenced by Customer Certification Status 29% 71% 0 20 40 60 80 Yes No Small base size, findings are directional only. Source: KPMG LLP 2007 , KPMG’s Analysis Though ISO SAM Standard 19770-1 can help the companies that implement it with improving their software license compliance profiles, publishers are reluctant to rely on the standard in lieu of compliance activities for a number of reasons. First, independent certification against the standard is not currently available, so publishers would need to rely on customers’ self-assessments. Second, even if independent certification was available, it could not address compliance with specific software license agreements, which is what publishers are really after. Furthermore, other ISO certifications have tended to focus more on whether you “say what you do” rather than on whether you actually “do what you say. Third, as it is written, the standard does not provide adequate guidance ” as to how its recommendations should be implemented. Alternatively, KPMG’s Software Asset Management (SAM) methodology provides enterprises with guidance to help them move efficiently up the SAM maturity curve, thereby improving their software compliance profiles as a by-product. Organizational Footprint Of those polled, 80 percent said that their compliance programs report to either the sales or finance function. Of these, 47 percent said finance and 33 percent said sales. The remaining 20 percent said compliance reported to other functional areas, including legal and internal audit. 18 SOFTWARE LICENSE COMPLIANCE © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , In your opinion, will your company’s future software license compliance activities be influenced by whether or not a customer is certified under the standard?
Slide 21: Question 18: To which functional area does your compliance program report? INSERT CHART 19] Compliance Programs Generally Report to Finance or Sales/Sales Operations 47% 33% 7% 3% 10% 0 20 40 60 Finance Sales or Sales Operations Legal Internal Audit Other Source: KPMG LLP 2007 , When it comes to where credit is given for revenue generated for license compliance, nearly half of those polled (47 percent) said “sales representatives” receive commissions for compliance revenue. About 17 percent of respondents said both the compliance and sales organizations share in commissions on compliance revenue, while 13 percent said that compliance recovery commissions went exclusively to the compliance organization. Question 19: Who receives commissions for compliance revenue? I Sales Generally Receives Largest Portion of Compliance Revenue Commissions 47% 64% 17% 17% 13% 7% 0 20 40 60 Sales representatives Both sales and compliance Neither Compliance professionals Other Does not total 100 percent due to rounding. Source: KPMG LLP 2007 , NSERT CHART 21] KPMG’s Analysis There is no clear trend emerging for where to put a compliance group. Today, about half report to sales and half to finance. It would be interesting, in a follow-up survey, to compare the results for those reporting to sales and those reporting to finance. Advantages in having the compliance program report to finance may include management’s existing mindset of compliance and audits as well as objectivity and separation from the sales force. SOFTWARE LICENSE COMPLIANCE 19 © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 ,
Slide 22: Effects of Compliance Programs on Customer Relations Most respondents say license compliance activities have a positive or neutral impact on partner and customer relationships, as demonstrated in the chart below. Question 20: In your opinion, on a scale of 1–5, what is the impact of your company’s license compliance activities on your relationships with channel partners and direct customers? INSERT CHART 8] Impact of License Compliance Activities on Relationships with Channel Partners and Customers 17% © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , 40% 43% 0 20 40 60 Negative (1–2) Neutral (3) Positive (4–5) Source: KPMG LLP 2007 , When asked if compliance activities resulted in negative outcomes, 94 percent indicated that customer loss is very rare or never occurs. Ten percent indicated that litigation occurs a few times per year as a result of compliance activities. Sixty percent indicated that the most troubling outcome of compliance activity was that not all revenue due was collected from the customer. 20 SOFTWARE LICENSE COMPLIANCE
Slide 23: Question 21: How often does your license compliance program result in each of the following: loss of a customer, less than optimal revenue collected, litigation, or another negative resolution? INSERT CHART 9] License Compliance Program Negatively Impacts Revenue for 60% of Respondents Loss of a customer Loss of a customer Less than optimal Less than optimal revenue collected revenue collected Litigation Never Never 37% 40% 17% 27% 57% Litigation resolution Other negative Other resolutionnegative Veryrarely rarely Very 50% 23% 33% 3% 10% 40% 13% 0% Loss of a customer: 6% Less than optimal revenue collected: 10% © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , AA few timesper year few times per year More than 10 times per year More than 10 times per year 0% 17% 13% 3% 0% 3% 13% 0 20 40 Litigation: 60% Other: 39% Too frequently to measure Too frequently to measure 60 Does not total 100 percent due to rounding. Source: KPMG LLP 2007 , KPMG’s Analysis Even in the absence of adopted leading practices, compliance-related activities do not appear to cause problems between software companies and their customers. Most said the outcome is neutral or positive; very few said it leads to loss of future sales. With the threat of relationship degradation clearly low-risk, and the prospect of recovering some of the billions of dollars being left on the table, KPMG suggests all publishers consider employing, or at least piloting, compliance programs. We believe that leadingpractice techniques are emerging and as these become standard operating procedure, the negative risks will be lower still. Compliance programs have enabled software companies to engage C-level executives within customer organizations, which in some instances has led to forging far better relationships than previously existed—ones based on better transparency for both sides. SOFTWARE LICENSE COMPLIANCE 21
Slide 24: Measuring Compliance Program Success While revenue from compliance activities is a strong indicator of the success of software license compliance programs, many software publishers also consider other metrics. Thirty-seven percent of respondents said that their compliance programs deliver 5 percent or more of their ongoing software revenue streams. Included in that group, 7 percent said that compliance recoveries account for more than 10 percent of top-line revenue. However, a majority of those polled (57 percent) believe that their compliance programs contribute 2 percent or less to overall software revenue. Question 22: What percentage of your company’s total annual software revenue (both licenses and maintenance) does your software license compliance program contribute? INSERT CHART 20] © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , Majority Says Software License Compliance Programs Contribute 2% or Less to Software Revenue 57% 7% 13% 7% 10% 7% 0 20 40 60 0%–2% 3%–4% 5%–6% 7%–8% 9%–10% More than 10% Does not total 100 percent due to rounding. Source: KPMG LLP 2007 , Exactly half of those surveyed said customer satisfaction is one measure used to gauge compliance program success. Almost as many (46 percent) use internal control/governance value to measure effectiveness. Another 39 percent use a return-on-investment metric, and 29 percent use other key performance indicators. Question 23: What financial or other metrics do you use to measure the success of your compliance program (select all that apply)? Customer Satisfaction and Internal Control/Governance Value Are Most Frequently Used Metrics 50% 46% 39% 29% 0 20 40 60 Customer satisfaction/education Internal control/governance value Return on investment Other Small base size, findings are directional only. Source: KPMG LLP 2007 , 22 SOFTWARE LICENSE COMPLIANCE
Slide 25: Forty-seven percent of respondents’ companies measure compliance revenue as reported by the compliance function, while 33 percent do not measure compliance revenue separately from sales revenue. KPMG’s Analysis There is a wide variance in how software companies measure the success of their compliance programs. There is also a wide variance in how much additional revenue respondents believe their compliance programs contribute. At a fundamental level, one measure of success would be return on investment. But KPMG believes it is not a linear relationship. Compliance programs should be given credit for any incremental sales resulting from the customer after the customer has been notified of the compliance review, as often the customer will choose to “true-up” once notified of the compliance review. A Forgiving Industry? The settlement philosophies of the companies involved in the polling tend to gravitate around a middle-ground position. There may be some look-back involved but the settlements tend not to involve complete capture of all overdeployment revenue and rarely involve recovering the time-value of money (interest). Punitive measures such as fines are not used by the companies we surveyed. In fact, nearly half (43 percent) of those surveyed take this middle-ground position, and only 10 percent apply full look-back actions. One fifth of the respondents said their companies apply no look-back recovery at all but do rectify current overdeployment. And 13 percent use their findings as a way to structure new forward-looking deals. Question 24: Which of the following best describes your company’s settlement philosophy with respect to customer noncompliance discovered in the course of an audit? p p Customer Noncompliance Settlement Philosophies 43% 20% 13% 10% 10% 13% 0 20 40 43% 20% 60 Rectify overdeployment, including partial look-back (back support only, no interest or audit fee recovery) Rectify overdeployment, however no look-back Use the findings only as leverage for structuring new deals in a forward-looking sales approach Rectify overdeployment, including full look-back (back support, interest, and audit fee recovery) Other Does not total 100 percent due to rounding. Source: KPMG LLP 2007 , SOFTWARE LICENSE COMPLIANCE 23 © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 ,
Slide 26: Contact Us For more information about this study, or about KPMG’s Software License Compliance practice and capabilities, please contact the following Technology Industry practice leaders: Gary Matuszak Partner, Global Chair—Information, Communications & Entertainment 650-404-4858 gmatuszak@kpmg.com Tom Lamoureux Principal, Global Advisory Sector Leader—Information, Communications & Entertainment 650-404-5052 tlamoureux@kpmg.com KPMG’s Analysis Forgiveness has its virtues, but today’s compliance-related settlement philosophies err on the side of forgiveness and create an atmosphere where customers see little downside to playing fast and loose with compliance—just waiting for the publisher to catch them. Even when they are caught, they will not be required to pay an amount equal to the cost of their usage all along. Even in cases where the publisher insists on recovering the full amount, the customer still benefits from the time-value of money. KPMG believes there is a lot of room for stricter compliance measures—measures that would not place compliant customers at a financial disadvantage compared with noncompliant customers—before significantly running up the relationship risk. In addition to the obvious higher return, such measures have a more-than-subtle impact on behavior. There are no ethical issues at play because software companies have a right to receive compensation for value derived—whether based on installation or usage. “Fairness” is the right term. It is fair that customers not be penalized for capabilities they have not used, particularly as noncompliance is mostly unintentional. It is also fair for software companies to be paid for capabilities their customers have used. By the same token, companies with compensation based on installation, rather than a usage formula, rightly make no distinction between deployment and usage. In those cases, if a product is installed, it should be paid for. © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 070322 , KPMG LLP Can Help KPMG’s Advisory practice provides our software clients with a comprehensive portfolio of Licensing Compliance Services. We use a win-win, nonadversarial methodology to help our clients identify opportunities for revenue recovery through third-party reviews of their channel partners’ and direct customers’ adherence to license agreements—all with a professional approach that maintains the underlying business relationship. We are organized globally with dedicated professionals in KPMG member firms in 148 countries, located in or near the cities where our clients’ customers are likely based. This proximity means that KPMG’s professionals know local laws, customs, and business practices, so they can (1) effectively provide a thorough license compliance review, (2) help our clients’ customers better understand their specific entitlements, and (3) recommend practices that can help ensure future compliance. KPMG’s global methodology coupled with our regional knowledge and proximity are key reasons why more software companies rely on us for licensing reviews than on any other Big Four firm. 24 SOFTWARE LICENSE COMPLIANCE
Slide 27: About the Authors Tom Lamoureux is KPMG’s Global Advisory Sector Leader—Information, Communications & Entertainment. He assists technology clients in creating leading processes to improve risk management and optimize business processes. Tom’s clients include many of the world’s leading technology companies. Ron Brill is a partner in KPMG’s Advisory practice where he focuses on helping software clients with improving software licensing compliance and software asset management. In addition to Contract Compliance services, Ron is also KPMG’s Global Leader for Software Asset Management and a frequent speaker at software industry forums. Abhi Joshi is a director with KPMG’s Advisory practice and has worked with multiple software companies to build compliance programs. Abhi is also a leading Software Asset Management practitioner and a speaker at various leading industry conferences on SAM and software compliance. Abhi leads a team of professionals that helps software companies build and run compliance programs and better manage software and hardware assets. Contributors We acknowledge the significant contributions of Vanessa Lo, Christine Wagner, and Dave Boscacci, who assisted in the development of this report. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2007 KPMG LLP a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms , affiliated with KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Microsoft Windows is a registered trademark of Microsoft Corporation. 070322
Slide 28: us.kpmg.com