In my first post in the calculating product audit risk (PAR) series, I discussed how organizations should have two different strategies for managing their overall software estate. For the set of products where the value to the business or the risk of non-compliance is high, we suggest a “manage the product” approach. For the rest of the software portfolio, we suggest a “manage the risk” approach. To help differentiate between these two segments of the overall estate, we introduced the PAR value.
As a reminder, here is the PAR formula:
In general, the PAR value is meant to quantify the relative financial risk a product represents within the overall software portfolio. But before you can complete the math, you need to know where to find the factors that go into the equation. Here’s how: (more…)
When it comes to compliance risk, we suggest that organizations craft two very different strategies for their overall software estate. Depending on the software, companies should either manage the product or manage the risk.
Manage the product
For high-risk, high-value software products such as Microsoft SQL Server, IBM Websphere, and Oracle databases, companies should pay careful attention to what licenses are bought and allocated and how they are being used. Because these products represent a relatively large portion of software spend and compliance risk, the products should be watched and managed individually and reviewed continually to ensure license utilization is high and compliance risk is low.
Manage the risk
Lower cost or lesser risk software products generally don’t need the same level of attention. Because costs or compliance risks are relatively lower, these products represent a much smaller financial risk to your organization. Managing this group (which could include thousands of software titles) in the same way as high-value products is difficult and unnecessarily expensive. A more efficient approach is to set reasonable, firm policies to guide proper usage and compliance and then conduct occasional spot-checks to find and rectify situations in which those policies were skirted. Since this approach carries a bit more compliance risk, consider setting aside a small opportunity fund to deal with over-deploys or an adverse audit finding. (more…)
Many organizations struggle to keep tabs on their IT assets. The number of products, manufacturers, and licensing agreements is enough to make any person’s head spin. That’s why most companies use some sort of IT asset management (ITAM) to keep track of the various renewal dates and understand what licenses they have on hand. But even then they have little strategic direction for their licensing.
Software manufacturers too have their work cut out for them. They can’t afford to spend the time and money to find every potential customer for their software. In order to earn a reasonable profit on their products, they need a base of customers and a dedicated sales force.
To make the landscape more manageable for both the manufacturers and their ultimate customers, value-added resellers (VARs) serve as a liaison, helping manufacturers get their software in users’ hands while offering customers a range of manufacturer and software options that best fit their business objectives.
It’s too difficult for one customer to attain knowledge about every manufacturer, product, and licensing option on the market, just as it’s nearly impossible for manufacturers to gain clear insight into customer markets and needs. Since both spheres are so vast, VARs meet in the middle to fill the gap.
Value add for customers
No organization looking to license software or hardware has the time or resources to research every potential manufacturer’s products and compare the costs and benefits. VARs, on the other hand, have staffs devoted to staying up to date on the products available, as well as the nuances of every agreement. When customers work with VARs, they receive advice on which manufacturers and products can best support their goals, as well as guidance on manufacturer pricing. (more…)
There’s no denying that software asset management (SAM) is important. It prevents overspending and compliance breaches, and helps organizations anticipate IT needs. But how to actually handle SAM is a different story. Should an organization build an in-house software asset management (SAM) solution or outsource those services?
I recently received an email from a customer asking me just that. I should say up front that as an employee of a company that offers outsourced SAM services, I might be a little biased, but after ruminating on the question, I can only conclude that outsourced SAM services are the way to go for most organizations.
Granted, customers that opt for a tool-based, in-house SAM solution do gain greater control and retain privacy over their assets, but the costs quickly outweigh the benefits. These solutions take up the valuable time of existing IT workers and are difficult to manage without the right training and expertise. The only organizations capable of balancing these tasks are ones large enough to sustain and balance a licensing team, and not all companies have that luxury.
The instant a customer purchases a piece of hardware or software title, it’s bombarded by additional support needs, including:
- Solution software (the direct cost of the software)
- Deployments for production, test, backup, and other uses
- Hardware dependencies
- Supporting software (operating systems, virtual machine licenses, database licenses, etc.)
- Software maintenance (for solution and supporting software)
- Implementation (consulting support for installation, customization, integration, and training)
- System administrators (primary and backup administrators, training, turnover, etc.)
To save the headache, customers can opt for an outsourced and integrated SAM solution that manages all of their critical software assets without wasting valuable time and resources. Here are three reasons why it’s well worth a customer’s time and money to choose an SAM service to manage its software assets: (more…)
If your company has uncovered issues in underlicensing or overspending on software licenses — or even if you just want to be more proactive about IT needs – it’s time to rein in renewal management. Renewals can hit your company throughout the year from various vendors for everything from software maintenance to hardware leases. Even original equipment manufacturer (OEM) warranties eventually expire and create a need for a new warranty or new equipment.
The problem is that many companies fail to track these renewal or expiration dates. When the invoice for a renewal arrives without advance notice, they simply pay it based on their past agreements without stopping to think strategically about current and future needs. The issue is only exacerbated by the adoption of the cloud as perpetual licenses, which have no expiration date, get replaced by subscription and term licenses, which do expire.
By tracking expiration and renewal dates, as well as key dates internal to your company — such as when budgets are set — you can replace the reactive response to renewals with a more proactive stance that will not only potentially save your company money, but equip employees with the tools they need to do their jobs.
With advance warning of impending renewals, IT and procurement can take time to analyze and discuss any renewals, negotiate new agreements, or vet alternative vendors or solutions that better suit the state of your business. For example, your company might need to right size the number of commitments it has, reducing software maintenance to 800 desktops from 1,000.
Here are four points you should consider before renewing: (more…)
You might have a million dollars just sitting on a shelf in your IT department. That’s the savings realized by one company that dug into its software licenses, found that it had more licenses than it was using, and pushed forward an active redeployment program to get the idle software back into circulation. And while this was obviously a larger organization, many companies can realize a 2-5 percent savings by reclaiming and redeploying their unused licenses.
Unfortunately, many companies unwittingly throw away that savings by purchasing new licenses rather than reusing their dormant ones. The problem is that the process for software procurement is typically isolated from the process for redeployment of unused licenses. When new employees join the team, they often bypass IT, where the extra licenses live, and go straight to procurement, which spends money that might otherwise be saved through redeployment or an upgrade of an existing license.
While there are several options for overlicensed companies, redeploying unused licenses not only saves money, but can also optimize your procurement of other IT assets – realizing further savings by procuring hardware compatible with existing and unused licenses. Here’s how to jumpstart a redeployment program at your organization. (more…)
We recently calculated the costs and compliance risks of under-licensing software. But using more licenses than you’re paying for shouldn’t be your organization’s only concern. Almost every customer we come across is also over-licensing products in some situations. That is, they have purchased more licenses than they actually need.
How does this happen? Let’s say one of your employees retires or moves to a different company. She returns her computer (and the software licensed to it) to her IT department, which shelves the assets for future use. The next week, your company hires someone to fill the role. But, when that person is ready to set up her work station, she doesn’t go to the IT department. She goes to the procurement department, which purchases new licenses for her to use. Or, in another common scenario, the organization downsizes and the software gets “lost” in the confusion of the moment. The result is unnecessary outflow of cash and an unused stock-pile of licenses.
While this might not seem like a big deal at first glance, the costs of licensing over-compliance can negatively impact budgets, projects, reputations, and careers. Over-licensing software doesn’t have the same immediate, negative impact of under-licensing or an audit, but it can slowly drain resources from more productive uses. And the problem tends to self-perpetuate: Buying too many licenses in the first place very often results in buying too much maintenance year after year.
When idle licenses are uncovered, certain questions invariably arise: How much did the unused licenses cost, and what other projects were cut or had their budgets slashed in order to cover the expense? Who sanctioned this purchase? Why don’t we have better records on what we own and what we are using? And lastly, now that we have identified all these unused licenses, what do we do with them?
Organizations that have a surplus of unused software licenses have four options: (more…)
When it comes to software licensing compliance, manufacturers are stepping up their game. All the major software vendors are ramping up their audit frequency. Gartner and other industry pundits have noted this acceleration for the last few years, and there doesn’t appear to be any slackening of the pace. Just as notable, software vendors are also increasing the intensity of their audits, digging deeper and harder into some of the areas in which they’ve traditionally given customers some leeway.
Most of the penalties a customer can suffer from a manufacturer audit are not immediately apparent or quantifiable. Nonetheless, there are very real costs for poor software license governance and manufacturer audits. They include: (more…)
Although IT asset management (ITAM) gets VERY complicated VERY quickly, the key to selecting a partner can be boiled down to two simple questions: Who do you trust? Why do you trust them?
In a recent article, Paul Sheehan argues that companies that sell software licenses cannot function as independent and objective third-parties when it comes to helping clients manage those assets. The argument has merit. But, the author also clearly states that he works for a company that does not sell licenses, but does provide ITAM services.
I work for a company that does both, so it’s not surprising that I have a differing opinion. I believe that a world-class VAR with a world-class Software Asset Management (SAM) process is the best SAM partner a customer can have.
Here are the top six reasons why it’s not only possible – but likely – that the IT asset management solutions offered by a company like SHI are second-to-none.
- SHI is not your average VAR. Under the same private ownership since 1989, SHI has the advantage of answering to only one group of key stakeholders: our customers. With a 99 percent annual customer retention rate and clients who have been with us for 10, 15, and 20 years, SHI’s account teams are never put in a position to make decisions based on meeting quarterly Wall Street expectations. Our only interest is in the health of the long-term relationship we have with our clients. (more…)