Scott & Scott, LLP represents clients in Microsoft software audit matters conducted by the BSA and Microsoft SAM consultants. Microsoft audits its customers using a variety of strategies. Small to medium-sized firms are frequently the target of a Microsoft audit initiated by a trade group such as the BSA. For large enterprise and mid-market firms, Microsoft audits its customers through its software asset management partner channel in what is frequently referred to as a Microsoft Software Asset Management (“SAM”) engagement.

Software Asset Management engagements are usually conducted by third-party auditors or consultants, but there is no obligation that the auditor in a SAM engagement be independent. Microsoft will request that the target allow a third party to audit its software installations and report the results directly to them. In these engagements, the target is required to purchase licenses to cover any deficiencies in its software licenses. Microsoft’s SAM engagement has been extensively used in lieu of traditional software audits with mixed reviews from the end user’s perspective.

If you license Microsoft products via the Services Provider License Agreement, the agreement typically includes audit rights language giving Microsoft the ability to review a SPLA partner’s records regarding software deployments and entitlements and to demand compensation – usually at a mark-up over standard reseller pricing levels – for any deployments found to be in excess of the business’ past monthly SPLA reporting. Businesses that deploy Microsoft software under one or more SPLAs should strongly consider working with an attorney experienced in Microsoft software audits before disclosing any information to Microsoft in response to a SPLA audit engagement.

Our lawyers and technology consultants also assist companies conducting an internal Microsoft audit for license true-ups, compliance initiatives, outsourcing contracts, and in connection with acquisitions and divestitures.

Microsoft Audit Blogs

Navigating Microsoft License Verification Audits

Keli Johnson Swan  Comments (0)
Microsoft, like other software publishers, routinely audits customers to help ensure that it is protecting the value of its intellectual property.  Microsoft verifies its customers’ compliance using several methods. Microsoft License Verification (also, Software Asset...
 

Microsoft Audit FAQ's

Q: How negotiable are other Microsoft agreements, like re-seller agreements for cloud etc?

A: We have found Microsoft to be fairly inflexible in negotiating re-seller agreements with the exception of very large clients involving significant revenue streams. Many of my clients resell Microsoft and we frequently request changes. Microsoft’s flexibility seems to be tied to relationship size in dollars. Much of our work in this area is focused on helping clients comply with the contractual obligations of the agreement and making sure the required terms are included in customer contracts.

Q: What authority does Microsoft have to conduct the audit it requested in the letter I received?

A: The Microsoft Business and Services (MBSA) agreement contains a section called "Verifying Compliance" that gives Microsoft the right to engage with a third party auditor to conduct an audit of your use of all the Microsoft software licensed under that agreement. Many Microsoft licensing programs, including the Enterprise Agreement, Enterprise Subscription, and SPLA, are subject to the terms and conditions contained in the MBSA.

Q: What will happen if I ignore the request to cooperate in the audit process?

A: If you do not permit Microsoft to conduct its audit, your organization is arguably in breach of your agreements with Microsoft. In the event of a breach, Microsoft can terminate your rights to use any Microsoft software that was purchased under the master agreement (MBSA). At that point, all Microsoft software would have to be uninstalled, or you could be sued for infringing Microsoft copyrights, with damages of up to $150,000 per violation.

Q: What kinds of information am I required to share with Microsoft and the third party auditors during the audit?

A: If you received a letter regarding a "compliance audit of your Service Provider License Agreement," you will be asked to share detailed network infrastructure, client billing, and server access management information. The auditors will ask for as much information as they can get away with.

Microsoft Audit Articles

Microsoft and city of Louisville in talks over software piracy dispute

Phillip M. Bailey, Courier Journal

Microsoft is examining Louisville Metro Government use of its software in a piracy dispute that could lead to a hefty bill for the city.

Microsoft is still playing hardball when it comes to software payments, some partners complain

Julie Bort, Business Insider

Microsoft is cultivating a kinder, gentler image under CEO Satya Nadella, but Business Insider has heard complaints from a couple of Microsoft partners that the company is still playing hardball when it comes to how it charges for software.

Beware hidden costs of Microsoft's new Windows Server licensing

Serdar Yegulalp, InfoWorld

The move to per-core licensing could increase the costs of Windows Server substantially and impact Software Assurance customers as well

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