Microsoft Licensing: A Cautionary Tale

Organizations have long dreaded tax audits and safety audits since the inspections can cost an organization precious time and money. IT managers have an added source of audit anxiety – the software license audit.

Microsoft recently surprised the municipal government of Virginia Beach, Va. with a random audit, which resulted in the municipality sending Redmond a $129,000 check.

Last August, Virginia Beach received a letter from Microsoft, requesting a routine inventory of licenses and installed software at the city’s offices. The City of Virginia Beach employs 5,900 people and uses 3,900 Windows computers. The 60 days Redmond gave the city presented both an organizational and technical challenge for the city’s IT department.

“The hardest part for us was coming up with proof-of-ownership documentation,” says David Sullivan, chief information officer for Virginia Beach. Sullivan says that, until recently, software and other equipment was acquired on a departmental level, with little centralized management. In some cases, point solutions were purchased with petty cash at retail outlets, although Dell is the city’s approved supplier.

Before the audit, Sullivan began the task of centralizing the purchase and management of the city’s computers, ensuring that software licenses were accessible and accounted for. Sullivan says that the audit reinforced the need for standard policies regarding licenses. “We needed better management and knowledge of what software was installed,” he says.

The bulk of Virginia Beach’s 3,900 PCs run Windows 95, with a few Windows 98 and Windows NT workstations. Workstations use the WordPerfect suite for productivity applications. Although the city uses NetWare for most of its file-and-print services, it also uses Windows 2000 servers, particularly for SQL Server applications.

SQL Server Client Access Licenses (CAL) presented a significant problem. Sullivan estimates that about a third of the payment made to Microsoft is for SQL Server CALs. “The CALs are very difficult to administer,” he says, noting it was difficult to determine exactly how many user accessed the city’s three SQL Server databases.

Sullivan and his team were also required to audit the operating systems on desktop machines. For this task, the city repurposed Check2000, a Year 2000 assessment program from Greenwich Mean Time Ltd. and User Technology Associates, to crawl the network and determine the installed software. Sullivan said he has selected Asset Insight by Tangram Enterprise Solutions for future centralized software assessments.

Sullivan says that machines like laptops that are not consistently attached to the network had to be inventoried by hand, making the task a little more tedious. After the inventory was completed, Sullivan and his team found that several machines had Windows installed, but did not have licenses to account for the installation. Sullivan says he is sure that a fair number of machines were already paid for, but the city paid Redmond to avoid further problems.

Sullivan says, however, that a license audit is something difficult for administrators to plan for. “Microsoft frequently changes their licensing agreements and is not required to notify us,” he says. After consulting with colleagues at other organizations, Sullivan believes his experience is not unusual – “Clearly Microsoft is stepping it up,” he says, “You need to read your Microsoft licensing agreements.”

The news of the audit reached the Linux-friendly message board, and Sullivan became intrigued by the suggestions some of the posters made, including using free-license, open-source software.

 Sullivan says that Virginia Beach uses commercial software written for purposes beyond the reach of amateur programmers, like a SQL front-end for police administration. If the city decided to go open-source, it would have to hire a programmer to accomplish what packaged software does cheaply – a practice the city ended when it closed the doors on its mainframe era. ”When you have a buy strategy, the market pretty much dictates what you want to do,” he says. – Christopher McConnell

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.