News & Insights

COALITION INSIGHT: Customers have no choice when retaliation is an option

By Ryan Triplette, Executive Director, Coalition for Fair Software Licensing

Choice is not a privilege; it is essential. Choice provides individuals with the freedom to choose what is best for them and their organizations. What protects this freedom, and those who exercise it, is the assurance that retaliation is not an option. 

When it comes to the selection of cloud providers, customers must have the freedom to choose the cloud services and products that meet their digital transformation needs. These choices are a cornerstone of their long term plans to innovate and expand in the digital economy. And their dismissal is a sign of a larger underlying threat to the industry – the abuse of customers by market dominant players. That is why the fifth principle of the Principles of Fair Software Licensing is “Freedom from Retaliation for Cloud Choices.”

Software vendors should not penalize or retaliate against customers who choose to use those vendors’ software on other providers’ cloud offerings. 

Software customers should have the freedom to choose which cloud providers best serve their organization. According to a survey conducted by Morning Consult earlier this year, 89 percent of tech decision makers agree: companies should be able to run their on-premises software on the cloud of their choice. Yet many customers have faced retaliation from software vendors simply for utilizing other cloud providers. While retaliation can take on a number of forms, we want to focus on the use of punitive audits today.

Understanding punitive audits 

A software audit is a review of a software program to ensure it is meeting quality standards and the scope of customer use. While auditing licenses are important to ensure compliance, they are also subject to abuse. Over the past several years, there have been a growing number of reports of the rise in software audits by legacy software providers not only to ensure compliance but as leverage in cloud negotiations

These audits can take several forms or “flavors,” if you will. The most common form is the direct audit, in which a customer will receive a letter from their vendor noticing the intent to conduct an audit and giving customers a set amount of time to respond. More difficult to identify are “soft” or “stealth” audits that generally start out as one thing (such as a sales call) and quickly turn into something very different (namely, a threatened audit if the customer refuses the product pitch).

Regardless of the form, these audits are not about compliance. Rather, they are about driving up the vendor’s bottom line and sales numbers. They present customers with a simple choice: spend potentially millions of dollars undergoing an extensive audit or simply purchase vendors’ products for them to go away.

Even more troubling, these audits are generally conducted under non-disclosure agreements (NDAs). In addition to limiting choice, legacy software providers engaging in this behavior are limiting customers’ voices. Silencing customers prevents them from reporting this abuse – and allowing them to make public their experiences and warn other organizations. 

Whether direct or stealth, these tactics are a cornerstone of some legacy providers’ cloud growth strategy. They are quite literally the “ABCs” – or “audit, bargain, cloud’ – for some sales teams. 

Using the ABCs to take advantage of customers 

Legacy software providers have long taken advantage of customers with unexpected audits. For example, Oracle has been accused of deploying predatory and unfair business practices against their customers, such as surprise audits to seek out significant licensing penalties. These are part of a larger effort to drive greater sales of their software products and unfairly restrict customers’ use of competing products. Customers have publicly described being “extorted” by Oracle during these audits, receiving demands to pay “potential use” licensing fees on servers where no related software is even installed and/or running.

These predatory practices have become so lucrative that they have given birth to what some have begun to call  “software licensing trolls.” – the very ugly, though as yet less pervasive, step-cousin of patent trolls. What looks like aggressive auditing practices is actually much worse. As an article in Westlaw Today points out, “software license trolls are weaponizing the software audit process and squeezing millions out of unprepared targets.” We will explore the evolution of this business practice in a later blog post. 

Customers, especially small businesses, are at a disadvantage and are often forced to capitulate to big legacy software companies

Unfortunately, these aggressive and predatory tactics often work. The threat of drawn out and expensive litigation with legacy providers causes fear among even the most well-equipped customers. Customers know any litigation will be resource-consuming, high-risk, and almost certainly a losing battle.

Companies will often try to resolve their audit, only to eventually give in to legacy provider’s unreasonable demands. To make matters worse, oftentimes customers must reconfigure their entire cloud environment to concede to legacy provider’s demands. If they don’t comply, they will face losing the benefits of their previous investments. Simply put, audits present customers with a lose-lose scenario.

The City of Denver has become a case study for this kind of retaliatory auditing. In 2016, Oracle pursued a large audit against Denver with only 3 days notice. The city ended up paying Oracle nearly $4 million after being initially threatened with a potential $10 million penalty for overuse. This audit was only brought to light as part of an investigative report authored by CBS News in coordination with Palisades Compliance. No doubt, there are thousands more audits ongoing at this moment in the dark, by nature of their very design. 

Customers should prepare themselves 

Predatory audits harm companies and stifle innovation. Customers should be able to make their own cloud choices without the threat of retaliation from legacy software companies. For now, though, customers need to take the steps necessary to prepare themselves against predatory audits.

The Coalition for Fair Software Licensing is pleased to enjoy the support of many experts who are specialists in navigating software licensing audits – experts who are as frustrated as we are with the threat that punitive licenses present. We are happy to connect customers facing threatened or actual audits with these experts given their alignment and support for the Principles of Fair Software Licensing.

As a healthcare software provider, our ability to utilize the cloud provider of our choice impacts more than just our business – it affects the health and well-being of patients everywhere. Restrictive software licensing imposes real-world threats like pricing increases that directly influence how we are able to assist healthcare providers and the patients they serve. We support the Principles of Fair Software Licensing to protect both cloud customers and the communities they serve.

Healthcare Technology Company

Cloud computing has brought low-cost, on-demand IT services to every corner of the economy, raising productivity and innovation levels at enterprises of all sizes. And intense competition and innovation among cloud providers continues to drive costs down while adding new customer capabilities.

But some incumbent IT vendors are imposing restrictive software licenses to limit how customers can take advantage of competing cloud offerings.

NetChoice supports the Principles of Fair Software Licensing as a roadmap to drive innovation, serve customers, and promote competition in IT services.


Frustration, use limitations, threatened audits, and significant additional expenses. That has been our experience with unfair software licensing. Organizations need transparency from their software providers.

We support the work of the Coalition for Fair Software Licensing to protect customers and ensure IT spend is effective and free from surprises.

Global Building Materials Supplier

Unfair software licensing practices in the cloud are a global issue, and CISPE is pleased that the Coalition for Fair Software Licensing is taking the Principles to North America.

Originally launched and jointly conceived by customers and cloud providers in Europe, we encourage customers around the world confronted with unfair software licensing practices to consider the Principles as a powerful framework for positive change.


As start-ups, it is essential that we retain flexibility to use the cloud infrastructures that fit best our aspirations and those of our customers. The Principles of Fair Software Licensing help the next generation of software and service providers to avoid lock in and ensure a fair playing field for all. Seeing their adoption in North America adds weight to this important movement for innovators in Spain and worldwide.

Carlos Mateo Enseñat

President, Asociación Española de Startups (AES), and Promoter of the NUBES Initiative in Spain

Developed in Europe by CIOs and cloud providers, the Principles of Fair Software Licensing are supported by digital organizations in Italy such as Assintel. Assintel welcomes the Coalition for Fair Software Licensing’s embrace of the Principles in North America. Fair licensing of software in the cloud is a global issue for businesses of all sizes. In Italy, our government recognises this challenge and just updated its antitrust bill to put an end to unfair software licensing practices.

Businesses in North America can benefit just as well as those in Italy from a best practice framework for software licensing.

Paola Generali

President, Assintel

As a longtime advocate for open systems and open networks, CCIA supports the competitive ideals reflected in the Principles of Fair Software Licensing for Cloud Customers as the Coalition embarks upon its efforts in North America.

Matt Schruers

President, CCIA

Some legacy software providers are attempting to extend their current on-premise market dominance into the cloud market through aggressive and restrictive contracts, licensing terms, and software audits.

While many promote ‘cloud freedom,’ in actuality they are employing tactics designed to lock out competition and innovation while increasing profits for themselves at the expense of their customers. No longer can legacy software providers be allowed to disguise their predatory practices.

I am proud to align myself with the Coalition for Fair Software Licensing in shining a light on these issues and putting forth actionable solutions.

Craig Guarente

Founder and CEO, Palisade Compliance

Despite the current spotlight on antitrust issues in Washington, behemoth software providers continue to misuse their legacy status and market power to target business customers with predatory audits and trap those customers in restrictive licensing agreements.

Through our practice — dedicated to representing software licensees against these very tactics — we have seen first-hand the real world effects of such licensing practices. Both growing and established companies are routinely kneecapped by unexpected costs, forced to waste immeasurable resources in spurious audit defense, and stymied in their efforts to make the technology changes they believe are necessary for their business.

We support the Principles of Fair Software Licensing and believe they represent an excellent and necessary step towards much needed business consumer relief and will help open the market to smaller providers in the cloud ecosystem.

Arthur S. Beeman & Joel T. Muchmore

Founding Partners, Beeman & Muchmore, LLP

Consumers benefit from a competitive, dynamic information technology marketplace. Competition drives innovation and ensures that customers get the benefit of fair pricing.

Overly restrictive, abusive licensing agreements from IT companies with market power, on the other hand, impose costs on government and corporate customers of reduced innovation and long-term price increases. We support the Principles of Fair Software Licensing and policies that encourage innovation, competition, and licensing practices that give customers the freedom to mix and match solutions from a wide variety of vendors.

This is particularly critical in the market for cyber security solutions since hackers are innovating every day, leveraging new strategies, new tactics, and new technologies to support their illegal campaigns. The only way to defeat nation states and trans-national criminal organizations is for the government to ensure that the IT market for cyber security is as competitive as possible and customers have the freedom to choose.

Cybersecurity Provider

The Alliance for Digital Innovation supports the Coalition for Fair Software Licensing’s efforts to protect customer choice and advocate for access to modern, secure commercial solutions.

As advocates for public sector customers, we think that government mission owners and enterprise information technology and cybersecurity leaders should have access to as many modern commercial solutions as possible.

These solutions are critical components to driving digital innovation and security in the public sector, and ADI supports removing barriers that slow adoption of those solutions, including restrictive licensing practices.

Alliance for Digital Innovation

As an attorney, I have represented enterprise software customers for years and have routinely seen enterprise software companies deploy predatory business practices, including falsely inflating alleged non-compliance gaps, to increase profits and limit customers’ ability to go elsewhere.

These practices produce causal effects throughout the economy including increased prices, as businesses across various sectors are forced to spend resources dealing with these unforeseen issues. I support the work of the Coalition for Fair Software Licensing to help my clients and enhance an economy that provides opportunities to all.

Pam Fulmer

Founder and Partner, Tactical Law Group LLP

We believe licensees should be able to deploy licensed software in a way that best suits their business, including their choice of cloud provider at no additional cost. Having experienced licensing practices inconsistent with the Principles of Fair Software Licensing, we support the Principles and urge others to support both them and the Coalition for Fair Software Licensing.

Insurance Industry Business

Startups, often operating with limited resources, need the freedom to assemble the technology infrastructure that best suits their needs.

Cloud computing infrastructure is central to startup growth, and the Principles of Fair Software Licensing will help maintain accountability, mitigate unnecessary costs, and promote innovation in this environment.

Industry-wide adherence to these principles will level the playing field for startups.


Get Involved

Learn more about joining the Coalition or expressing support for its Principles