Published on March 6, 2014
nexB - Software Audit for
Acquisition Due Diligence © 2014 nexB Inc.
Agenda • About nexB – – • What nexB does Our experience Software Audit: M&A – – Software Audit Process – • License Violation Risks & Recent Audit Issues Software Audit Tools Additional Information – Why nexB? – Contact us – Lessons Learned © 2014 nexB Inc.
About nexB What nexB does • Enable component-based software development – Software provenance analysis services – Software asset management tools • • – – Acquisitions Software product releases Expertise in all software IP • © 2014 nexB Inc. Software audit services Active OSS developers
About nexB Our experience is our diﬀerence • nexB recognized by the buyers and target companies as: – experts in software origin analysis – a fair and trusted intermediary • nexB identiﬁes issues along with practical remediation steps • 300+ software audit projects completed to-date © 2014 nexB Inc.
Software audit: M&A License Violation Risks Free Software source code available Binary-only (Proprietary) Adobe Reader many Java libraries Freeware / Shareware source with limitations (Proprietary) FOSS Attribution Copyleft Microsoft Sun shared source SCSL BSD GNU GPL GNU LGPL CDDL MPL © 2014 nexB Inc. EPL Apache MIT
Software audit: M&A Recent Audit Issue Examples • Dependency Issue “Workarounds” • License violation © 2014 nexB Inc.
Software audit: M&A Emerging Audit Issue Examples • Cloud computing and Dual Licensing • Personal Devices and Application store markets © 2014 nexB Inc.
Software audit: M&A Software Audit Process © 2014 nexB Inc.
Software audit: M&A Software Analysis Scope Commercial Code Original Code Open Source Code © 2014 nexB Inc.
Software audit: M&A Software Analysis Deliverables • Complete inventory of OSS and third-party components in Development codebase(s) • Bill of materials for Deployed product components • Speciﬁc Action items and recommended actions for resolution that can be factored into the deal terms – Including possible exposure for older product versions – Detailed analysis for copyleft “contamination” • Checklist of commercial components as input to due diligence for contract review • Analysis of how much code is original versus borrowed (OSS) or purchased (Commercial) © 2014 nexB Inc.
Software audit: M&A Preparation – 1 week (1/2) • Establish NDA with seller – Two-way or three-way • Scope audit eﬀort – Audit proﬁle (questionnaire) – Size of code base - # ﬁles and lines of source code – Disclosure of known third-party and open source software – Onsite or remote access to the code • • Prepare/agree quote – always ﬁxed fee, no surprises Schedule project © 2014 nexB Inc.
Software audit: M&A Preparation (2/2) è Many targets are anxious about the process – General level of anxiety is inversely proportional to prior M&A experience of executives – We do some hand holding to make them feel comfortable – Assure seller that they review all ﬁndings ﬁrst so no surprises – Explain the process and tools to the seller © 2014 nexB Inc.
Software audit: M&A License & Origin Analysis – 2 weeks (1/2) Analysis Activities • Scan ﬁles for license, copyright and other origin clues • Match target code to reference code repository for origin and license detection (based on digital “ﬁngerprints”) • Map Deployed code to Development code to: – Validate that we have a complete Development codebase – Filter issues based on the eﬀective Deployed/Distributed code • Analyze software interaction and dependency patterns for copyleftlicensed components as needed • Additional domain-speciﬁc investigations typically for embedded devices and applications of media codecs © 2014 nexB Inc.
Software audit: M&A License & Origin Analysis (2/2) Results • Software Inventory and Bill(s) of Materials • Draft Action items & recommendations © 2014 nexB Inc.
Software audit: M&A Review & Report – 1 week (1/2) Activities • Review draft ﬁndings with product team – Ask product team to respond to each Action item • Accept recommended solution or propose another approach • Acknowledge & investigate • Not a request to ﬁx anything during the audit – Incorporate feedback and answers from product team into the Software BOM and Report – We may “agree to disagree” – e.g. we then present two points of view: ours and the seller’s. • Complete ﬁnal report – Second review cycle with product team – Release the report – Conference call with buyer to present ﬁndings & answer questions © 2014 nexB Inc.
Software audit: M&A Review & Report (2/2) Results • Final Software Inventory / BOM spreadsheets • Final Report - narrative with executive summary, project data and summary of the Action items and Responses © 2014 nexB Inc.
Software audit: M&A Software Audit Tools • nexB typically uses a combination of tools for a software audit – Our own DejaCode™ toolkit is the primary tool – Other tools used as needed or as licensed by a customer (open source or commercial) • Multiple layers of analysis – Direct scan for license and copyright notices – Component matching for open source and publicly available thirdparty components (freeware/proprietary) – Analysis of source code and pre-built libraries (binary) – Interaction and dependency analysis as needed • Review and validation by software experts • All require expert humans to interpret the results! © 2014 nexB Inc.
Additional Information Why nexB (1/2) 100% of our customers are repeat customers and references We have a balanced approach – Automated code analysis AND analysis by software experts – Direct consultation with engineering, management and legal teams – Concrete Action items with recommended nexB action resolution and seller Responses © 2014 nexB Inc.
Additional Information Why nexB (2/2) • Trusted third party – Mitigates conﬁdentiality concerns of a seller company – Maintains proper segregation of information during acquisition negotiations – Enables objective analysis with appropriate consideration of feedback from all parties © 2014 nexB Inc.
Additional Information Contact us Contact person: Pierre Lapointe, Customer Care Manager email@example.com + 1 415 287-7643 More information: http://www.nexb.com/ © 2014 nexB Inc.
Additional Information Lessons Learned – Acquisitions (1/2) • Schedule is always a major issue • Initiate a software audit early because – Seller company will probably not have done this before – Negotiation of an NDA takes longer than you expect – Negotiation of access to artifacts and people takes longer than you think • The review of ﬁndings and recommendations may require several iterations with target company – Get answers for open issues – Get agreement about remediation strategies – Get agreement that report is objective and reasonable © 2014 nexB Inc.
Additional Information Lessons Learned – Acquisitions (2/2) • Identify the “crown jewels” and key platforms of the seller technology – Concentrate the audit on the most important parts – For products with multiple operating system versions, focus on the most important platforms • Some issues can be speciﬁc to the open source policies of the Buyer – For instance tolerance for certain version of open source licenses or proprietary Linux drivers varies among companies – We apply Buyer company policies if available, – Otherwise we apply “conservative” community standards – Exceptional cases may require additional discussion with legal and and business teams to evaluate the risks © 2014 nexB Inc.
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