Mar 04 2016

4 Licensing Mistakes that May Boost Costs and Increase Risks

Smart IT leaders use contract renewals to optimize software purchases according to an organization’s needs.

Managing software licenses to guard against the disruption of failed audits or the excessive cost of overprovisioning has never been easy. According to industry analysts, licensing complexities have only increased in recent years.

“We’ve seen the number of software titles explode in customer environments over the past decade, and managing it all has gotten a lot more complex,” says Amy Konary, research vice president for software licensing at IDC. “The threat of an audit is very real, and companies shouldn’t wait until they’re facing one to get a handle on their software licenses.”

What’s the best way to avoid problems? Veterans say no single tool or policy can ensure license compliance while also keeping costs under control. The key is to recognize the importance of a formal software asset management (SAM) strategy.

One way to stay on top of licensing issues is to view contract renewals as a trigger to re-evaluate licensing practices and avoid four common mistakes that can have a long-term negative effect on costs and compliance risks.

Error No. 1: Failing to Balance Software Purchases with Strategic Requirements

Routinely renewing a contract without first analyzing current requirements can lead to excessive costs and productivity shortfalls. For example, managers must guard against the buyer's remorse that would result if they extended a license for an email program only to realize that the organization really needs a full collaboration suite. Negotiating a license that bundles these applications together could provide more benefits, while also yielding bundling discounts.

One key is to act well before a license’s expiration date. “We start renewal conversations with our customers four to six months in advance of a contract’s expiration,” says Ursula Rakowski, a licensing account executive at CDW.

The extra time not only gives software buyers a chance to review needs, but also avoids having the existing contract lapse and the added costs associated with negotiating an entirely new agreement.

Error No. 2: Maintaining Expensive Shelfware

“One of the biggest mistakes many companies make is to sweep the license management problem under the rug,” says Anil Desai, an independent IT consultant. One common example is when software buyers intentionally purchase more a better hedge against failed audits than closely managing software assets to meet operational requirements.

Overprovisioning licenses isn’t the only cause of shelfware; the failure to quickly eliminate obsolete titles is another contributor to bloated inventory. “Organizations are often quick to deploy software resources, but they’re not as good at decommissioning programs as needs change,” Desai says.

He adds that excessive licenses aren’t the only problem. Companies may also pay for unnecessary support contracts that only intensify the pocketbook pain of shelfware.

The antidote is a combination of formal policies and SAM tools designed to help the IT department make more accurate software purchases. For example, the LANDESK IT Asset Management Suite integrates modules for software compliance, software license entitlement, discovery, asset lifecycle management and financial management. Together, these components show which software assets are running and how they’re being used so managers can make informed decisions about asset lifecycles.

Similarly, Snow Software offers a suite of products for inventorying and managing licenses across multiple platforms. In addition, Snow solutions can meter usage rates. “If a particular piece of software hasn’t been used by an individual in a year, a company licenses of a widely used program than necessary, with the belief that excessive spending is may reassign the license to someone who really needs it,” Rakowski says.

Error No. 3: Enduring License Duplication

Another budget buster is redundant licenses, which often materialize when buyers representing different departments separately contract for the same software titles without realizing they’re already covered by an enterprise agreement. As with overprovisioning, the financial consequences extend beyond just the unnecessary licenses themselves to include costly software maintenance agreements associated with the extraneous programs.

SAM tools are a prime resource for avoiding duplication. They enable IT administrators to create a centralized enterprise view of software resources and compare them with contracting records to quickly uncover redundancies.

Error No. 4: Ignoring Alternative Licensing Models

One thing that software buyers can count on is that contract terms will continue to evolve as computing models change and software vendors adjust their business strategies. No matter what the catalyst is behind these changes, software buyers risk settling for unfavorable contracts if they don’t thoroughly examine all new options rather than automatically sticking with past choices.

One of today’s most fundamental choices is whether to select on-premises, cloud or hybrid software deployment models. For example, an on-premises edition of Microsoft Office traditionally sells as a per-device volume license. However, an individual user license for the cloud-based Office 365 supports multiple endpoint devices such as notebooks, desktops, mobile phones and tablets. “That gives users a lot more flexibility versus a traditional volume agreement,” Rakowski says.

However, the key to understanding the impact of any new option is a detailed cost analysis. “We estimate the costs of these choices over nine years, which would usually cover three agreement terms,” Rakowski says.

By avoiding these four common miscues, enterprises can ensure that their applications remain a strategic resource rather than a source of risk as audits continue to rise.

Learn more about software management: CDW Total Software Management. And learn about the "5 Steps for Turning Software Renewals into Business Opportunities."

Darryl Sebro

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