It’s Tax Season: Are You Ready For an Audit? (An Oracle Audit, That Is!)

Spend Matters welcomes a guest post from Craig Guarente, President, Palisade Consulting Group.

Tax day is nigh! For many of us, the prospect of getting that letter from the IRS telling us we are about to be audited is, to say the least, not something we look forward to. For those of us responsible for software compliance, similar feelings arise with the prospect of getting a letter from large software vendors like Oracle announcing that you are the lucky company "randomly" chosen for a license audit. Oracle users want to be in compliance -- they just don't know how to do it. I once heard someone say that Oracle clients are all over-licensed and at the same time they are out of compliance. Simply buying more and more licenses is not a long-term solution to compliance management.

The way Oracle licenses, distributes, and controls its software combined with the inherent nature of database software puts Oracle customers in a particularly difficult place when it comes to compliance. For example, the lack of technology in Oracle products to alert or prevent users from going over their license count has its business advantages, but it can be disastrous if a company does exceed their licenses and thus gets hit with an audit. One of the biggest issues we see with Oracle compliance is that the client simply has no idea how much Oracle was installed in their systems or how their backup systems (just by having Oracle on them) and virtualized environments potentially present a risk for millions of dollars in compliance findings.

The problem seems daunting, but there is good news. What if you could use the same solutions you use to mitigate your tax exposure to mitigate your Oracle exposure? Imagine you had a potential tax problem. Would your first call be to the IRS asking for their help? "Why hello Mr. IRS Agent! I think I underpaid you last year. Please come here and look at my books so I can be all square with Uncle Sam." Of course not! You would consult with your experts (internal or external), mitigate the risk as much as possible, and then approach the IRS with your solution. The same applies to software license audits. An expert will give you options -- Oracle will just give you a bill.

An even better strategy is to coordinate with an Oracle licensing expert to map out a long-term contracting and compliance strategy before you get that audit letter arrives. Do you think GE ended up paying no taxes last year because they sat down at the end of the year and figured out all their deductions? No. They had a long-term plan and strategy executed over several years that mitigated their exposure. Your Oracle licensing expert can offer you advice and guidance on industry trends, vendor behavior, contractual options, technology, licensing implications, etc. This plan will often lead to lower costs and lower risks. Even more important, it will ensure that your contracts and licenses align with your business objectives.

If you implement a long term Oracle strategy and execute properly then you'll have no worries about getting that letter from Oracle. In fact, with such a strong plan in place, Oracle won't want to audit you. Why would they? They can get the next company and make some real money.

- Craig Guarente, President, Palisade Consulting Group

Palisade provides industry-leading expertise on software deal structure, pricing, contract negotiations, and audit support. Our goal is to lower costs, reduce compliance risks, and align software contracts with corporate goals. Before starting Palisade Craig spent 16 years with Oracle, most recently as the Global Vice President of Contracts, Business Practices, and Migrations. Craig also headed Oracle's customer audit team (LMS).

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