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Enterprises spend vast sums of money on software every year to handle essential tasks ranging from security to customer relationship management, and everything in between. But many organizations are leaving dollars on the table — billions by some estimates — because they don’t take the necessary steps to get their full money’s worth out of the software they purchase.
Research reveals that enterprises often fail to manage their software resources effectively to ensure that each dollar invested in applications delivers the expected returns. For example, one study found that the average U.S. company wastes 37 percent of its software spending on unused programs.
And more software dollars are squandered when users don’t fully utilize the applications they have access to. “In some cases, 50 percent or more of the features in some large applications are not being used to the extent that the organization is expecting, based on what it’s paying for,” says Peter Turpin, vice president of Snow Software, a vendor of software asset management (SAM) solutions.
So what can enterprises do to stem the tide of all the money they’re wasting on software they’re not fully using?
To address concerns about unused or underutilized software, organizations need a clear understanding of software adoption rates, which experts say is an important step toward realizing a satisfactory return on their investment (ROI) in software and significant savings for IT budgets. Homing in on software-usage data collected by asset discovery tools can play an important role in cutting costs. “I’ve routinely seen that when organizations actually track usage, they save anywhere from 2 to 5 percent in application expenses in the first year,” says Patricia Adams, IT asset management evangelist at Landesk. “It’s all because they had better visibility into what was happening in their software environments.”
Gaining these insights — and acting on them to optimize software ROI — requires a multistep strategy.
Creating an Accurate Software Inventory
Asset discovery tools within SAM solutions are the linchpin of software-optimization strategies. These tools not only help IT managers clearly see all the software being used within an organization, but they also track who is using each title and how often each application is accessed. Beyond looking at end-user adoption rates, the best discovery tools also track software running in data centers. “You can’t get to the point of optimization unless you’ve got visibility into what’s really happening within the data center, too,” Adams says.
These discovery tools send the information they gather to a central database that provides a consolidated view of all the software running in an organization. This central storehouse also incorporates purchasing and license information from resellers and vendors. IT managers can then query the database for optimization opportunities.
Leading discovery tools and database solutions include Snow’s suite of license management and inventory products. “In addition to offering an accurate view of how much each individual application is being used, the inventory database shows whether some users may be taking advantage of only a fraction of the capabilities,” Turpin says. “This is important for ensuring that IT departments aren’t spending more than they need to spend for software.”
Because Snow’s database can segment software titles by category — business automation applications or computer-aided design software, for example — managers can quickly see how many different titles of applications are employed in each group. This helps decision-makers find overlap and redundancies, as well as consolidation opportunities.
The suite also includes capabilities for hardware asset management, as well as storing software licenses and tracking which users are assigned to specific titles.
Solutions from both Snow and Landesk offer a key component for any discovery and optimization tool: the ability to automatically reassign licenses among users. Known as software reharvesting, this activity moves licenses into a central resource pool when the asset-management solution sees a license that hasn’t been accessed by an assigned user for a set time period, such as 60 days. “Then, if someone else needs the software, they quickly get access to it, and the organization doesn’t have to pay for an additional license,” Turpin says.
Similar pooling opportunities exist for data center licenses. For example, with Microsoft’s client access licenses, or CALs, organizations can reassign access to Microsoft servers as usage rates shift.
“Organizations need the ability to pull back and redeploy what isn’t being used. That’s where the optimization piece truly comes into play,” Adams says. “I haven’t come across any asset managers yet who say they’re not overworked or have resources sitting around idle. So having a tool that can automate the process of pulling back applications can save a huge amount of time and effort. Headcount constraints start to go away when you have that level of automation.”
Analyze the Value of Software
With a foundation of accurate inventory, licensing and usage data in place, IT managers can assess the value of their current portfolios and possible new investments.
The process begins by first assessing the potential benefits that may come with updating an application or moving to a new solution. “For example, perhaps you’ll see greater efficiencies because the new software will help people work faster with fewer errors. That’s always a win,” says Mike Fratto, principal analyst for enterprise networking and data center technology at Current Analysis.
To put this potential into a real-world context, IT managers must analyze all the costs associated with new software, including not only the license fees, but also any related expenses, such as the cost of support contracts and associated hardware, databases or other necessary resources.
Finally, decision-makers should compare the likely benefits and new costs with performance and expense metrics for the current operations. A comprehensive approach is required when assessing current costs. This assessment should consider the entire IT environment, including the performance of servers, networks and other areas that may be impaired by outdated or unnecessary software. “Once you’ve done all this work, you can determine an ROI timeline and measure your progress over time to see if you’re hitting your goals,” Fratto says.
But analyses such as these can be challenging. For example, even accurately determining licensing costs can be difficult in an environment of complex license agreements offered by various vendors. “There are so many elaborate calculations behind the applications, doing optimization analyses can be incredibly difficult,” Adams says.
She adds that each organization’s asset-management maturity level will also affect calculations. “Enterprises in early stages of maturity should be primarily focused on inventory accuracy,” she explains. “As they become more mature, they will start to see better visibility into their operations and develop more accurate reporting in areas such as capital expenses and operating expenses. This will improve their ability to create budget forecasts that meet actual spending. Then they can break out spending by service level or by tier of service. The detail behind the information becomes more in-depth as visibility becomes broader.”
Guidance for Software Management Success
For help in addressing these complexities and developing greater asset-management maturity, IT managers should first look to internal business and financial managers. “They can help you do the analyses and ask the right questions needed to create reliable, accurate models to make these business decisions,” Fratto says. “Companies that have strong relationships between IT purchasers and the business function tend to do the best when it comes to getting value out of their purchases.”
Third-party partners can also help organizations maximize software value. For example, CDW offers Total Software Management services, which include assessments of an organization’s current software environment. In addition to examining existing licensing and contracts, CDW experts study software usage rates, rogue IT issues and software audit concerns.
Additional software assessment help is also available from IT industry research firms. For example, Microsoft recommends that IT managers seek out guidance from analysts’ research, such as Forrester’s analysis on the Total Economic Impact of Office 365, when analyzing what they’ll be paying in licensing and support costs against productivity improvements.
Forrester analysts studied the benefits, costs and risks associated with an implementation of Office 365, which includes Office Professional Plus, Exchange, Lync, SharePoint, Yammer and OneDrive. The analysts interviewed three existing customers with multiple years of experience using Office 365 and conducted an online survey with 60 large organizations that also use Office 365. Prior to moving to Office 365, customers had implemented various solution components in a traditional on-premises model.
The Forrester analysts determined that with Office 365, customers were able to accelerate the deployment of the latest versions of Microsoft solutions, decrease technology costs, increase productivity and stay up-to-date with the latest features and solutions. The authors quoted one IT manager who said, “We were looking at our five-year IT plan, and the trends were clear. We knew we had to move to a subscription model in order to keep up-to-date on the latest technologies in an effective and efficient way.”
Based on the research and subsequent financial analysis, Forrester created a composite organization that hypothetically moved from an on-premises 2007 version of Microsoft Office software to Office 365 in the cloud. “The composite organization analysis points to total benefits of $8.8 million versus total costs of $3.2 million, resulting in a net present value of $5.6 million,” the report’s authors concluded.
Depending on the size of an enterprise, unnecessary and underused software represents thousands or even millions of dollars a year in wasted IT investments. But with the right tools and strategies in place, organizations can turn this waste into more productive users and robust ROI.
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