How to Conduct a Self-Audit for Microsoft Licensing

How to Conduct a Self-Audit for Microsoft Licensing

• Inventory all installed Microsoft software.
• Review your current licenses.
• Reconcile installed software with owned licenses.
• Identify compliance gaps.
• Take corrective actions like purchasing or reallocating licenses.
• Document findings and create an action plan.

How to Conduct a Self-Audit for Microsoft Licensing

Microsoft software licensing can be complex, with multiple licensing options and potential pitfalls for non-compliance.

A self-audit is an effective way to ensure that your organization is compliant, optimally licensed, and not spending more than necessary.

In this article, we’ll guide you through conducting a self-audit for Microsoft Licensing, covering all essential steps to make the process smooth and effective.

1. Why Conduct a Self-Audit for Microsoft Licensing?

Self-auditing is crucial for some reasons:

• Compliance: Avoid costly penalties by complying with Microsoft’s licensing terms.
• Cost Optimization: Identify over-licensing or under-licensing to optimize costs.
• Risk Reduction: Understand and mitigate the risk of unexpected audit findings that can disrupt your operations.
• Improved Software Management: You will gain better control over your software inventory and understand how your licensing strategy aligns with your organization’s goals.
• Operational Efficiency: Enhance operational efficiency by optimizing license allocation and ensuring the right tools are available for the right people.

Conducting a self-audit can help you gain insight into your current software usage and compliance status and make informed decisions about your licensing strategy.

A proactive approach can prevent unnecessary headaches and help you maximize the value of your software investments.

2. Prerequisites for a Self-Audit

Before diving into the self-audit process, it’s crucial to be prepared:

• Assign Responsibilities: Assign a dedicated team or individual to conduct the audit. Ideally, the person in charge should be familiar with IT infrastructure and Microsoft licensing. The team should include individuals from IT, procurement, and legal departments to ensure all aspects are covered.
• Collect Documentation: Gather all relevant documents such as licensing agreements, product keys, software inventory reports, and Microsoft Enterprise Agreements. Ensure all documents are current, as outdated records can lead to incorrect assessments.
• Understand Your Licensing Models: Microsoft licensing can vary depending on the product. Familiarize yourself with the licenses available, such as Per User, Per Device, Subscription-based, and Volume Licensing. Understanding these models is key to ensuring compliance and optimizing costs.

Example: If your organization uses a mix of Office 365, Windows Server, and SQL Server, it is essential to understand the licensing models for each product, as they can differ significantly in terms of cost and usage rights.

3. Steps to Conduct a Microsoft Licensing Self-Audit

Step 1: Inventory All Installed Software

Begin by creating an inventory of all Microsoft software installed across your organization.

• Automated Tools: Use tools like Microsoft System Center Configuration Manager (SCCM) or Microsoft Assessment and Planning Toolkit (MAP Toolkit) to generate a detailed software inventory. These tools can help automate the process, saving time and reducing errors.
• Manual Inventory: In smaller environments, manually check installed software. Include all desktops, laptops, virtual machines, and servers. Ensure that all software versions and editions are properly documented.

Example: Suppose your organization uses Windows 10, Office 365, and SQL Server. Make a comprehensive list that captures all instances, including their versions and editions, across different types of devices. Include virtual machines, as these are often overlooked during inventory.

Step 2: Review Current Licenses

Next, gather all license keys and agreements to verify that they match the installed software.

• Licensing Portals: Access the Microsoft Volume Licensing Service Center (VLSC) or Microsoft 365 Admin Center to review your current licenses. These portals provide an overview of your entitlements, making matching them with installed software easier.
• Documentation Review: Ensure you have a copy of each license agreement and understand the specifics, such as whether it’s a per-user or per-device license. This step is crucial in understanding how the licenses are intended to be used.

Example: For Office 365, ensure that all active users have the appropriate number of licenses assigned, including whether they have E3 or E5 licenses, based on their needs. Cross-reference this with your HR records to confirm that only active employees are assigned licenses.

Read about Microsoft Licensing Contracts.

Step 3: Reconcile the Inventory with the Licenses

Compare the installed software against the licenses you own. Look for:

• Over-Licensing: Instances where you own more licenses than you use. This is an opportunity for cost-saving. Over-licensing often occurs when organizations fail to reassign licenses after employees leave.
• Under-Licensing: Instances where software is installed without sufficient licensing. This compliance risk can lead to penalties if discovered during a formal audit.

Example: You might find that you have 50 installations of Microsoft Project but only 30 licenses. This discrepancy could lead to compliance issues during a formal audit. Take immediate steps to either reduce the number of installations or purchase additional licenses.

Step 4: Identify Compliance Gaps

Look for compliance gaps, which can include:

• Unlicensed Software: Software installations that do not have corresponding licenses. These pose a significant compliance risk.
• Mislicensed Installations: Instances where the license type does not match the intended use. For example, using a license intended for development purposes in a production environment is a common violation.

Common Gaps:

• Using Home Editions: Installing a home version of software like Office on a work computer is a licensing violation that can result in penalties during a formal audit.
• Shared Devices: A per-user license is used on a shared device instead of a per-device license. This is common in environments like libraries or labs, where multiple users access the same machine.

Step 5: Take Corrective Actions

After identifying gaps, it’s time to take corrective actions:

• Purchase Required Licenses: If you’re under-licensed, contact your Microsoft reseller to purchase the necessary licenses. It’s important to purchase licenses when discrepancies are identified to avoid compliance issues.
• Optimize Usage: If you’re over-licensed, consider reducing license counts, particularly for subscription-based products. This will help cut down unnecessary costs.
• Reassign Licenses: Reallocate licenses if assigned to users who no longer need them. Ensure that licenses are not assigned to inactive users or unused devices.

Example: If you have employees who left the company but still have assigned licenses, reclaim those licenses for future use. This can significantly reduce unnecessary costs, especially for products like Office 365, which require ongoing subscription fees.

Step 6: Record Findings and Create an Action Plan

Document your audit findings, including:

• Inventory Results: A list of all installed Microsoft products and the corresponding licenses.
• Compliance Gaps: Any compliance gaps and their respective actions to be taken.
• Action Plan: Create a timeline for purchasing or reallocating licenses and track progress. Assign responsibilities to ensure accountability and adherence to deadlines.

Example: Create a spreadsheet that tracks each instance of non-compliance, including the actions required and deadlines for completion. Share this document with stakeholders to ensure everyone is aligned.

4. Tools for Self-Audit

Several tools can make the self-audit process easier and more accurate:

• Microsoft Assessment and Planning (MAP) Toolkit: A free tool that helps you assess your infrastructure and generate detailed reports on software installations and licensing. The MAP Toolkit is particularly useful for identifying underused licenses.
• System Center Configuration Manager (SCCM): This tool is useful for larger organizations. It helps track software inventory across multiple machines. SCCM can also automate the deployment of new licenses, streamlining compliance efforts.
• License Manager Solutions: Third-party tools like Snow Software or Flexera offer features for tracking licenses and compliance. These tools provide advanced analytics and can help you forecast future licensing needs.

Example: Using Snow Software, you can automate license tracking and gain insights into your software usage patterns, making it easier to adjust your licensing strategy as your organization grows.

5. Common Microsoft Licensing Pitfalls

Here are some common pitfalls to avoid when managing Microsoft licenses:

• Mismatched License Types: Using a personal Office 365 license for business use is a common mistake. Always ensure the license type aligns with the intended use. Business environments should use licenses specifically intended for commercial use.
• Failure to Deactivate Licenses: Not deactivating licenses when employees leave can lead to unnecessary expenses. Ensure you have a process to revoke licenses as part of your employee offboarding procedure.
• Not Tracking Cloud Subscriptions: With cloud licensing (such as Azure or Microsoft 365), losing track of assigned subscriptions is easy. Regularly audit your active user base and deactivate no longer in use licenses.
• Overprovisioning Virtual Machines: In Azure environments, creating multiple virtual machines without proper tracking can lead to unexpected costs. Always ensure that virtual machine instances are licensed correctly and that decommissioned machines are removed promptly.

Example: During a routine audit, you might discover several virtual machines running Windows Server without the appropriate licenses. Decommission unused machines and ensure active ones are licensed properly to avoid non-compliance.

6. Best Practices for Microsoft Licensing Management

• Regular Audits: Conduct self-audits annually to ensure you stay compliant and up to date. Regular audits also help you adapt to changes in your IT infrastructure.
• Centralize License Management: Use a central tool or portal to keep track of licenses, such as the VLSC or Microsoft 365 Admin Center. This ensures that your team can easily access licensing information and reduces the chances of mismanagement.
• Train Your Team: Ensure your IT and procurement teams understand Microsoft licensing basics to prevent mistakes. Regular training sessions can inform your teams about changes to Microsoft licensing policies.
• Optimize with Hybrid Use Benefits: If your organization is using Azure, take advantage of the Azure Hybrid Use Benefit to save on licensing costs for Windows Server. This benefit lets you use existing on-premises licenses for cloud deployments, reducing licensing costs.
• Assign a Licensing Champion: Designate a team member as the “licensing champion” to oversee all licensing matters, stay updated with Microsoft licensing changes, and be the point of contact for related queries.

7. Example Scenario: A Small Business Self-Audit

Background: Imagine a small business with 50 employees that uses Office 365, Windows Server, and a few instances of SQL Server.

Step 1: Inventory: The IT manager runs an inventory using the MAP Toolkit. They discover:

• Sixty instances of Office 365 installed.
• 3 SQL Server installations.

Step 2: Review Licenses: They log in to the Microsoft 365 Admin Center and find:

• Only 55 Office 365 licenses are active.
• 2 SQL Server licenses are available.

Step 3: Reconcile and Correct:

• They identify 5 Office 365 installations without licenses and purchase the additional licenses.
• They realize one SQL Server instance is unlicensed and purchase a new license.

Step 4: Document and Action Plan:

• The IT manager documents the changes and sets a reminder for a quarterly review to stay up-to-date. They also create a checklist for license assignments during the onboarding process to prevent future discrepancies.

8. Licensing Types

Microsoft offers several licensing models, which can make understanding your needs more challenging.

Here’s a quick overview:

• Volume Licensing is ideal for organizations that need multiple licenses, such as for Office or Windows. It offers discounts and is easier to manage for larger deployments.
• Subscription Licensing: Products like Microsoft 365 use subscription models that need careful tracking since costs recur monthly or annually. Subscription-based licenses provide flexibility but require ongoing management.
• Per-User vs. Per-Device: A key distinction is whether the license is per user or per device. Depending on your environment, this can significantly impact cost (e.g., remote workers using multiple devices may be more efficiently licensed per user). Ensure that you evaluate your workforce to determine the most cost-effective licensing strategy.

For remote workers using multiple devices, a per-user license for Office 365 is more cost-effective than purchasing separate licenses for each device.

9. How to Handle Microsoft Audit Requests

If Microsoft decides to conduct a formal audit, here are some steps to follow:

• Be Transparent: Provide the information Microsoft requests. Honesty is key here, as hiding information can lead to penalties.
• Leverage Documentation: Use the records from your self-audit to demonstrate compliance and show any action plans for gaps. This demonstrates your commitment to staying compliant.
• Seek Professional Help: Consider consulting a licensing expert if a formal audit is overwhelming. Experts can help negotiate with Microsoft and provide additional insights into how to manage licensing better.

Example: If your self-audit reveals potential issues, document them and communicate the corrective actions you have planned. Being proactive can lead to a more favorable outcome during a formal audit.

10. Benefits of a Proactive Approach

Conducting a self-audit not only ensures compliance but also provides several other advantages:

• Cost Savings: Identifying unnecessary licenses can significantly reduce costs. Reallocating or removing unused licenses can yield substantial savings, particularly for subscription-based services.
• Improved Forecasting: Understanding your software needs helps you plan future IT expenses. Knowing exactly what you have and need can avoid over-purchasing or being caught off guard by unexpected licensing costs.
• Reduced Audit Stress: By maintaining accurate records and performing periodic audits, you’ll be better prepared if Microsoft initiates a formal audit. This reduces the stress and disruption that can come with surprise audit requests.
• Better Resource Allocation: Optimizing your software licensing helps ensure that your employees have access to the tools they need to be productive while avoiding unnecessary expenditures on unused software.

Example: By conducting a self-audit, a mid-sized company discovered that it was over-licensed by 20 Office 365 subscriptions. They could reallocate those licenses to new hires, saving thousands of dollars annually.

Frequently Asked Questions (FAQ)

What is the purpose of a Microsoft licensing self-audit? A self-audit helps ensure compliance, reduce costs, and avoid penalties for improper licensing use, keeping your organization within Microsoft’s licensing requirements.

How often should a Microsoft licensing self-audit be conducted? One should be performed annually or bi-annually to maintain compliance and keep up with licensing changes.

What tools are best for conducting a self-audit? The Microsoft Assessment and Planning (MAP) Toolkit, System Center Configuration Manager (SCCM), and third-party solutions like Snow Software are useful.

What is the first step in conducting a self-audit? The first step is to create an inventory of all Microsoft software installed across your organization, including versions and editions.

What should be documented during a self-audit? Document the software inventory, licenses owned, compliance gaps, corrective actions, and an action plan for purchasing or reallocating licenses.

What are common compliance gaps in Microsoft licensing? Common gaps include using home editions for work purposes, Unlicensed installations, and under-licensed software.

How can I verify the licenses I currently own? You can access the Microsoft Volume Licensing Service Center (VLSC) or Microsoft 365 Admin Center to view your licenses and agreements.

What are the consequences of under-licensing? Under-licensing can lead to financial penalties, non-compliance issues, and potential legal action from Microsoft during an audit.

What are the benefits of a proactive self-audit approach? A proactive approach can help you save costs, improve compliance, reduce stress during formal audits, and optimize resource allocation.

How do I handle unused licenses discovered during a self-audit? To save on costs, I can reassign unused licenses to other users or discontinue no-longer-needed subscriptions.

What’s the difference between per-user and per-device licensing? Per-user licenses cover an individual on multiple devices, while per-device licenses apply to a single machine, regardless of who uses it.

How do I track my cloud subscriptions effectively? Regularly audit subscriptions through the Microsoft 365 Admin Center to maintain control over cloud licenses and use tools like SCCM or third-party solutions.

What should I do if Microsoft decides to conduct an official audit? I should honestly provide the requested information, use self-audit records to demonstrate compliance and seek professional guidance.

Can a self-audit prevent future compliance issues? By identifying and correcting compliance gaps, a self-audit can reduce the likelihood of compliance issues during formal audits.

What are the risks of not conducting a self-audit? Failure to conduct self-audits can lead to compliance risks, unexpected penalties, underutilized software, and unnecessary costs for unused licenses.