Nearly every company I know is faced with budget constraints, but very few recognize just how much money they have tied up in software licenses and how much of that they could save with strategic software license management.
The challenges of managing software include constant negotiations with vendors, different acquisition methods and license types (pre-loaded and downloaded, volume purchases, and hosted applications), and multi-user software with enterprise, transaction, processor, concurrent user or named user constraints.
Pitfalls of Software License Mismanagement
A lack of visibility into actual software usage can lower a company’s profits. Over-licensing, (“shelfware”), caused by a desire to ensure users always have access to the software they need, unnecessarily increases software costs. Under-licensing, typically the result of trying to save money, leads to denial of service and reduce productivity. And some companies do both, over-licensing in some departments and under-licensing in others. Sharing software licenses could reduce costs and increase productivity, but most managers have only a local view of their software assets, making it difficult to identify and resolve these allocation issues.
Using Strategic Software License Management to Optimize Expenses and Increase Productivity
There are next-generation software asset management tools out there that provide comprehensive information about actual license usage. This information enables IT managers to implement strategic software license management in order to purchase and pool software licenses in a way that corresponds exactly with usage needs. With strategic software license management, organizations obtain the maximum return from their software investment by optimizing every dollar spent.
The following five-step methodology for implementing strategic software license management demonstrates the value of license sharing and usage-based purchasing across the enterprise. At each step unnecessary spending is reduced, under-utilized licenses are redeployed, and end-user productivity is enhanced.
Step 1: Centralize All Software Licensing Operations
Decentralized licensing, a common feature of today’s IT landscape, makes it difficult to see how, when and where licenses are being used. This lack of visibility can result in too many or too few licenses purchased. It also forces multiple administrators to become licensing “experts,” resulting in operational inefficiencies.
By centralizing software license management, IT can pool the licenses at headquarters and satellite facilities so enough are available wherever they are needed. IT managers and administrators obtain a single view that allows them to manage licenses and servers across the global enterprise. This in turn allows them to inventory current software assets to see which licenses are available and when they will expire. Under-utilized licenses can be re-deployed or shared among departments, eliminating shelfware and unnecessary purchases while boosting end-user productivity throughout the organization.
Centralization enables proactive management, which includes receiving alerts regarding problems before they affect end-users and customers. Resolving issues early helps ensure ongoing productivity and lower administrative costs. Centralization also makes much better use of valuable IT staff resources. Instead of needing a licensing expert at each location, the IT department can designate one administrator to manage all servers and licenses globally.
Step 2: Leverage Accurate Usage Statistics
Relying on data that has even a five percent error margin can result in costly mistakes. Consider an organization with 4,000 licenses, each costing $5,000. A five percent error in peak usage data translates to more than $1 million of unnecessary costs over the life of the license contract.
Unfortunately, traditional software asset management tools monitor only when users install software on their desktops, not the use of software licenses or specific modules. Users can’t “check in” a license when they are done with the application, which forces their companies to buy excess licenses. Such packages present this information as a crude, highly inaccurate approximation of basic license usage, and they don’t, for example, accurately report on bundles of software sold as software suites.
With a next-generation software asset management tool, however, an organization’s data will match the software vendor’s license management results, and IT managers can base their purchase and renewal decisions on complete, accurate data derived from historical usage over time.
Step 3: Analyze Usage Reports
By segmenting and analyzing usage data by project or user group, managers can gain granular insight into their organizations’ actual software usage. This enables them to address key issues such as:
- Reducing Spending on Unnecessary Software Purchases – Eliminating or reducing update and support costs for unnecessary, unused, or under-utilized software is a painless way to reduce software costs. In addition, vendors often sell software licenses at significant discounts if the licenses are purchased as part of a “competitive upgrade.” There is no better software to trade in than software your organization isn’t using.
- Managing Peak Demand – The best way to determine how many software licenses are needed is using peak demand periods. If peak demand is set at 90 percent, then, for example, if an organization has 10 licenses, peak demand occurs when only one or none is available.
By understanding the usage patterns that emerge relative to time of day, week or month, IT managers can determine average duration of usage and decide whether to allow denial of service, and, if so, for how long. A denial of service lasting only a few minutes may be acceptable if it significantly reduces software licensing costs. A longer denial of service, however, may be unacceptable because of a serious impact on users or customers. Analyzing usage data enables IT to manage according to peak demand, and it provides the granular, user-level and department-level information they need to make usage-based purchasing decisions.
Managing software assets based on peak demand is most critical for shared licenses, such as floating licenses. If an organization has enough shared licenses to meet peak demand, there will be sufficient capacity for off-peak times as well. It is also important to encourage users to change wasteful and inefficient behavior, such as “hoarding,” which occurs when users refuse to exit applications not in use because they’re afraid of being denied service in the future.
Optimizing Software Renewals and Remixes – Analyzing usage data can also help managers avoid erroneous assumptions leading to costly software renewals and remixes. It’s been estimated that some IT departments spend 10-20 percent of their budgets on software updates and maintenance they don’t need. In addition, usage data over time can help managers verify whether shifts in usage trends are permanent or just upturns and downturns in the business cycle. This allows them to optimally redistribute the mix of software offered by a vendor. For example, a product design project may require one set of software tools to build a conceptual model, another set to build a prototype, and a third set to test the prototype.
By analyzing usage data, IT managers can determine how best to weight the percentage of each software product and module within their remix. This ensures that users have the right number of tools available when they need them, and allows enterprises to derive the most value from their software contracts.
Step 4: Automate Software Licensing Operations
As long as a company continues to pay maintenance fees, managers must constantly reevaluate their usage patterns and reassess their licensing needs. By automating the collection and generation of key data, they will always base their business decisions on the latest information.
Automation can also be used for departmental chargebacks. Sharing software licenses among departments saves money, but the departments must be able to cross-charge for the shared usage. Managing these chargebacks manually with monthly spreadsheets is extremely time consuming and inefficient. Automating chargebacks makes it easy and cost-effective to share software licenses while improving internal accountability. IT organizations can use automated chargebacks to allow individual departments to purchase specialized software while keeping them accountable for the cost.
Automated chargebacks also enable IT departments to establish shared license pools with prioritized resource allocation. This allows departments or users with high-priority needs to “reserve” a fixed number of shared licenses, ensuring software availability. The reserved licenses and any additional ones they use are billed back to them, providing better cost-efficiencies across the board.
Step 5: Select the Right Software Asset Management Tools
Implementing a successful strategic software license management strategy requires a comprehensive set of next generation software asset management capabilities. Such next generation solutions are called Enterprise License Optimization solution and they make managing software easier, reduce the burden on administrators, and increase end-user satisfaction. When evaluating next software asset management tools, make sure they:
- Generate accurate and complete usage data—down to the feature and module level—that both software vendors and customers can trust
- Give license priority to critical users and excludes unauthorized users from access to software licenses
- Use alerts to notify administrators of potential problems and use job schedules to automate routine maintenance and generation of usage reports
- Generate advanced warnings when licenses are about to expire
- Allow administrators to stop unlicensed applications from running if such use violates licensing terms
- Allow organizations to strategically manage application usage and optimize at the usage level, thereby reducing software spend
The day is long past when IT professionals can leave the vagaries of software licensing to chance. The stakes are too high, the issues too complex and the downside too severe. With companies of all sizes struggling to squeeze every penny of value out of their assets, strategic license management has become a key element in the IT mix.
Brent Pietrzak is the Vice President, Client Service, for Flexera Software and consults with large enterprises on the best ways to optimize high-value software licenses such as engineering applications, SAP, Microsoft, Adobe and Oracle to deliver business benefits on an ongoing basis by helping them fully use the licenses they have, buy only the licenses they need, and control license costs.
About Martin Thompson
Martin is also author of the book "Practical ITAM - The essential guide for IT Asset Managers", a book that describes how to get started and make a difference in the field of IT Asset Management.
On a voluntary basis Martin is a contributor to ISO WG21 which develops the ITAM International Standard ISO/IEC 19770.
Learn more about him here and connect with him on Twitter or LinkedIn.