Overspending on software? The real costs and options

 In SAM/IT Asset Management, Software

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:

  1. Let the assets remain idle … for a while. Keep whatever extra software you have on hand for when a need arises. This is a viable option for growing companies that are anticipating added headcount in the coming weeks or months. Just make sure your IT and procurement departments are in communication about what they have in stock.
  2. Redeploy the licenses. But check your contract first. Certain software comes with rules that say licenses cannot be recycled within a 30- or 90-day window. This is to prevent the rapid sharing of software — one employee using a program for 20 minutes, then passing it off to a colleague, and so on. Generally speaking, however, you can put the license on the shelf for short time and pass it on. In fact, 40 to 50 percent of software discovered in surplus has the potential to be reused, even though in practice, only 10 percent is actually reclaimed. Like the first option, this opportunity assumes the organization is expanding and will have a need for more licenses in the near future.
  3. Right-size your maintenance. If your surplus software is not likely to go back into circulation any time soon or it already meets your company standards, consider dropping maintenance on it the next chance you get. A large portion of IT budgets is consumed by recurring maintenance and renewal costs. Actively and intelligently managing your maintenance renewal can be an extremely good source of savings. Maintenance right-sizing can also be applied to software that’s deployed and in use if you have a good software asset management (SAM) program in place.
  4. Negotiate with the vendor. While you won’t necessarily be able to return the spare software, many manufacturers may be willing to consider the surplus when it comes time to renegotiate a new licensing agreement, especially if there is already a longstanding relationship between the two organizations. In these cases, the vendor might apply the excess money spent on the over-licensed software to another area or product.

Obviously, the goal of every organization should be to pay only for the number of licenses that it needs. But more often than not, the procurement and IT departments responsible for purchasing and managing software licenses don’t have complete insight into what’s being deployed and where. That’s where a SAM baseline assessment from an ITAM partner like SHI can help. Through a baseline assessment, your ITAM partner will scan all of your organization’s computers and devices, identify what software is deployed and where, reconcile those instances with the actual number of licenses owned, and make recommendations for how to bring your company’s licensing environment into compliance.

Think you’re over- or under-licensing software at your organization? Contact your SHI account rep to learn more about inventorying your company’s software licenses.

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