Picture this: You are behind your computer at the office and open an email attachment from one of the world's largest software companies. The letter is a formal announcement that they are auditing your ERP software usage. Put metaphorically, they are coming for your business’s wallet. In this scenario, you would be wrong to think, "Surely this won't be a big deal" and sit on the sidelines while the audit takes its course. The cost of audit findings showing non-compliance can be devastating. Indeed, software audits are increasing in frequency, and the penalties are getting harsher. If you aren't prepared, your business could be in serious trouble.
The truth is, companies large and small are underestimating the risk of software audits, and the numbers prove it. A 2025 survey by our friends and colleagues at LicenseFortress shows that more than 62% of companies were audited last year. Compare that to just 40% only two years ago. This is an unnerving trend for businesses — and there is no sign that it is slowing down. It is increasingly clear that software audits aren't just an occasional minor inconvenience. They are a practical reality that represent a potentially massive threat to your business.
Respondents from the LicenseFortress survey reported that 32% of companies had to pay over $1 million because of an audit. In other words, nearly 1/3 of the respondents faced serious financial consequences stemming from a software audit.
And audits cost far more than just money. They demand massive amounts of time and effort from your employees. Over 52% of companies reported dedicating between three to ten people to the audit process. And for some, it was even worse. About 25% of audits involved the direct participation of C-suite executives — the people who should be focused on growing your business, not dealing with costly, disruptive software audits.
Software companies are becoming more aggressive in pursuing compliance. Microsoft, Oracle, and VMware, for example, are ramping up their audit programs. In fact, the number of audits from VMware has increased by over 50% in just the past two years. These audits aren't about just finding small mistakes — they’re about finding anything that can make you pay.
Indeed, the software audit risk to your company may be a moving target. In the LicenseFortress survey, over 53% of respondents reported that moving their applications to the Cloud has added significant complexity to managing their software licenses. This means that if you’re using cloud services, your software usage may be more difficult to track, and you might not even realize that you are not in compliance with your software licensing terms.
It’s easy to assume that your company’s software use is compliant, but when was the last time you checked the fine print of your software contracts to confirm whether that was indeed the case? Many businesses unknowingly misuse software by installing it in the wrong locations or using it for purposes not permitted under the license. Database administrators, for example, sometimes install relational database management software without realizing it is being used in unauthorized ways. Mistakes like this can be discovered during an audit and lead to huge fines and a world of potential legal trouble. If you’re not proactive in identifying and addressing these issues, they will haunt you when the auditor comes knocking. And, as these survey results indicate, they will be at your door eventually.
The best way to protect your company is by acting before the audit starts. Legal and software licensing experts can help you identify potential issues, fix them before the auditors find them, and keep your business safe from costly consequences. In fact, companies that worked with legal experts and software management companies fared much better than those that didn’t during audits — 95% of companies that used software management services or legal advisors reported that these services were helpful in reducing the impact of audits.
You can start by seeking out software license management services or tools that help you stay compliant. Make sure your software licensing agreements are known and understood and that you’re using your software in a compliant fashion. If you’re unsure where to start, consult with legal counsel who understands the complexities of software licensing. A “go-it-alone” strategy is ill-advised and can be fatal to your business.
* * *
The question is simple and salient: Will you wait for disaster from a software audit to strike, or will you take the necessary steps to protect your business in a timely way? The clock is ticking. Don’t be caught unprepared.
Published on May 21, 2025
Software licensors are known for vague contracts—they’ve made a business of it.
Read the latest industry news.
