Are you a candidate for a Vampire Audit?

The term “Vampire Audit” has unfortunately come into popular use in the ITAM community as software vendors become increasingly dependent on governance related revenues.

Ever since the GFC, real sales related software revenues have declined or evaporated forcing software companies to find new ways to report apparent growth to investors.

Vampire Audits refer to the vendors propensity to suck any remaining good will from the customer relationship, they occur when senior software management deems the damage to the relationship to be outweighed by the immediate revenues.

Prior to the GFC, governance was a restricted practice and management was mindful of damage to the relationship and looked towards the longer term. Today executive tenure is short and there is an immediate need to show growth or at the least steady state revenues while investing little in expensive innovation.

Despite the decline in new license revenue, subscription and support revenues remained strong until approximately 2012 when even the risk adverse financial sector began to wind back its annual vendor renewal amounts.

With both sources of software revenue in decline, software vendors have increasing lent on governance revenues and the value of longer term customer relationship has either diminished or disappeared.

If you are employed by a large government or a financial institution it may have been previously assumed that software vendors whom you might pay hundreds of millions of dollars every few years for so called “Enterprise” licences might relax the rules relating to licencing. You might also assume because you have purchased a discovery tool that it doesn’t matter if it isn’t really deployed on 100 per cent of the server farm. You are friendly with the vendor representative and there isn’t any danger – your relationship is worth more than any small over-deployment indiscretion.

Well this is now 2017 and times have changed. Your long serving vendor account manager has probably been changed recently and behind the new face is a new overseas assignee pulling the strings. This person is very anxious to make an instant name for themselves caring little for any long term damage.

Inside most modern software vendors there will be a think tank at the beginning of the sales year. At this meeting, which is probably attended by the vendors so called “independent” governance enforcers (from one of the major accounting firms), a hit list of the years audit targets will be assembled.

This list will be assembled by people who are no longer mindful of the existing relationship and a nominal “quota” or target for the amount of probable over-deployment will be allocated.

Since the foreign executives seldom stay in country for more than two summers, a plan is hatched to suck the blood from just about any customer with an acceptable software spend.

So be mindful of the signs and do not assume a long term vendor relationship will protect you from the Vampires. If a long term vendor representative is suddenly replaced or a foreign assignee suddenly appears on the scene there should be reason for concern.

Finally if your SAM function is in any way performed by a major software vendor or any of its partners or governance firms then its almost certain that your organisations name has been added to the audit list and an annual quota assigned.

1 Comment

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