How Deceptive Software Pricing Can Land YOU in an Audit

Deceptive Software If it’s too good to be true, it probably is.

In the cloud, what you don’t know can hurt you. We’ve been providing cloud services for several years now and most of the hot debate is centered on security, compliance and reliability. All of these are legitimate concerns, but we’ve stumbled upon an area that is really scary for businesses. Really scary.

License compliance audits.

We have seen businesses get fined thousands of dollars for failing to be compliant with software licensing requirements. But that’s not the really scary part. The really scary part is that they didn’t even know they weren’t compliant.

Going from scary to terrifying: This is a blind spot almost every business has.

How We Uncovered the QuickBooks Scam

Fluid IT Services is one of a very few Authorized Intuit Host Providers for hosting our customers’ QuickBooks software. We had to go through a very exhaustive process to meet the Intuit requirements for security, redundancy, availability and license compliance. It’s this last item that flagged some very real dangers to business users.

We were losing some of our hosted QuickBooks sales and wanted to find out why. We knew our pricing was good, if not better than most — so why were we losing sales? What we found is some cloud hosting providers were offering hosted QuickBooks for almost half of our price.

The only way this is possible is if the software wasn’t fully licensed.

The standard pricing for hosted QuickBooks is typically in the $40-60 per user range, yet we were finding it offered at $20-30 a user. Big difference… and if you didn’t know better, who would you choose?

Were we upset? Darn right! But not because we were losing sales, but because we knew those businesses would soon get reported, audited and fined – and they probably weren’t even aware that they were doing anything illegal!

Here’s the rub. Software license compliance in the cloud is the responsibility of the end user. Even if a business is unknowingly using unlicensed software from a cloud provider, it is the business that may be responsible for the hefty fines.

Don’t think you’ll get caught? People who report unlicensed software to the Business Software Alliance get a monetary reward. All you need is one person to blow the whistle on you and you’ll be in line for an audit – with a very large bill on the other side.

Breaking Down the Numbers: How Unethical Cloud Providers Can Land YOU in the Hot Seat

In hosting QuickBooks, several layers of software licenses are required. For example, for a bookkeeping firm using QuickBooks with Microsoft Office in the cloud accessed via remote desktop services, the following licenses are required:

  1. Microsoft Windows Server user license for each user
  2. QuickBooks license for the product being used (Enterprise, Accountant, etc.)
  3. Intuit license fee per user
  4. Microsoft Office user license for each user
  5. Microsoft Remote Desktop Services user license for each user

When you add these required license fees and then the hosting fees, a cloud provider cannot do it and make money at $27 a user. Period!

So what we found was startling and scary. There are cloud hosting vendors offering services and ignoring or just ignorant to the license requirements.

But the end user, your company, is still legally responsible for being compliant.

This is the one area cloud providers spend the least amount of time educating their customers on.

The One Question to Ask NOW So You Don’t Get Fined

Businesses don’t always know the questions to ask about licensing or have the time to become a licensing expert, so they must rely on their providers to take the time to help educate them… even if the answer isn’t what they wanted to hear.

 

What makes this even more frustrating is cloud providers like Fluid that treat compliance as a core competency, and are responsible and ethical, are losing business to non-compliant vendors. Sometimes it’s just $10 that separates ethical businesses like Fluid from lower-priced, unethical (and illegal) competition.

Would you rather pay $10 more and know you are compliant or risk being audited by Microsoft and hit with a $10,000 fine?

$10 now or $10,000 later. Yes, that’s what it boils down to.

So the next time you are shopping for any cloud services be sure to ask this question and make sure they give you a comprehensive answer:

How does the provider ensure license compliance for everything you plan to use?

Licensing is a very complex world that changes almost daily, but it’s paramount that both you and your vendor understand the requirements specific to your business needs. Finding out after the fact could mean that $10 savings actually cost you a nasty audit and thousands of dollars.