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Another reason why legacy tech is flailing: AUDITS

In speaking to a friend (who is also a CIO for a Fortune 25 company) the conversation slanted into what is wrong within how corporations use and pay for enterprise technology. The conversation went something like this:

ME: "What is the biggest pain in your butt these days that I don't already read about in the press?"
CTO: "The systemic and repeated arrogance of some of technology vendors to feel the right to audit us over-and-over again! IBM, Microsoft, Oracle and OpenText are the biggest offenders. I will never buy from them again"

He went on to rant on the amount of overhead that goes into the total effort - from the moment the letter is received from the vendor about the audit to the final end where the vendor is owed nothing. In the middle is legal, procurement, technology and even senior leadership.

I have always known of audits in my career. They tend to be motivated by:

  • Organizations who have weak organic revenue growth so they spike up their top-line with audits to position the company to be sold.

  • Organizations who have grown through acquisition. They want to get the acquired tech clients' onto their agreements and over time they lose track of just what is enforced and what is not. IBM and OpenText are the most guilt. The most obvious example of that right now is OpenText buying Microfocus - the only reason is to acquire clients with run-rate maintenance to audit and inflate.

  • Organizations who culturally drive their next transaction with a client because of the outcome of an audit. Microsoft and Oracle has been doing this for decades.

All the while, the only winners are the shareholders of the tech firms.

As I furthered my investigation into these practices, I used the following informative research papers to help:

What was further concerning is how the market for 'corporate software audits' has ballooned to create a market of firms that only help clients defend themselves.

As the word 'AUDIT' brings such a negative connotation, was interesting when I saw one of the research papers getting into just how friendly vs hostile vendors were - with IBM being the most hostile and the rest being better at telling you there is an unbudgeted dollar amount owed. Especially with the highest average true-up coming from Oracle - which also had the largest percentage of 'no charges owed'. Also when asked about engaging a 3rd party, it happen 33% of the time with people saying that reduced the liability 92% of the time.

Aside the financial burden is the time and people burden to defend oneself. One research result set showed how dozens of employees in larger firms would have to participate in audits that take months to execute.

This all results in corporate IT to want to reduce the overall spend with vendors. It was especially interesting in the question asked by Platform 3's research "Please complete this sentence, “We are looking to reduce our spend with…” (Check all that apply) " with the below results mapping to what other research results show as the most pervasive in auditing. Appreciated how this piece of work also showed any changes over time.

There is a consistent and obvious message that these organizations are not listening to in the market - BE NICE.

Make sure you read all the research bookmarked in this article as they all share what should be done. But worth also adding:

  • This is why open-source tools are growing. In looking at the Platform 3 research, they mention how the top 3 reasons for 'open-source' are price, innovation and contractual flexibility.

  • Use technology based on a more subscription and utility model. Snowflake charges by the second for compute, EnterpriseDB has a very open subscription models allowing firms to increase and decrease with each renewal.

Since the beginning of 'computer software' 40+ years ago, this has been the biggest failings.

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