Sep 11 2017

The Triple Threat That Impacts Software Spending

How your business can overcome challenges associated with virtualization, cloud and shadow IT to make the most of its software investments.

Software license costs account for a significant portion of the typical IT budget — as much as 30 percent — and they represent a substantial cost for businesses. It’s up to IT procurement teams to keep these costs in check while meeting the current and future software and infrastructure needs of the company without overbuying licenses, or not buying enough.

Software procurement, sourcing and vendor management have always presented a challenge for businesses. Complex software license agreements and license models make buying and managing software difficult. Software audits have been a growing trend, but they are highly disruptive to businesses and often result in large, unbudgeted expenses. Further, virtualization, cloud and shadow IT amplify these challenges. However, there are clear strategies businesses can use to overcome them.  

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The Impact of Virtualization on Software Licensing

Many IT organizations are increasing the use of virtualization in their data centers. Public, private and hybrid clouds leverage virtualization technology to enable the compute elasticity that is one of the major benefits of the cloud

However, virtualization complicates software procurement and license management because of the highly dynamic nature of the virtual data center and the complexity of virtual use rights for software. 

Virtual machines (VMs) are rapidly spun up and down in response to fluctuations in demand, and they are moved from one physical host to another across data centers, and even continents, for load balancing and maintenance operations. Each of these VMs will often have a unique set of software installed, with many different combinations of operating systems, databases, middleware and other applications.

The procurement team has to ensure that the right software is available with the appropriate licenses for every software component running across a variety of server hardware types in the virtualized data center. That includes software running on VMs, and virtualization software running on physical hosts. Determining the licensing requirements in this complex and highly dynamic environment can be difficult, yet most companies rely on cumbersome spreadsheets to tackle this task.  

Cloud Services Put Onus on Companies to Manage Software

Many software publishers are pushing customers to move to newer product lineups delivered via Software as a Service, like Microsoft’s Office 365. But the migration to the cloud is not limited to tools for end users. 

Well-known enterprise application building blocks, such as Oracle Database, Microsoft SQL Server and IBM WebSphere, are also available in cloud versions, and the list is growing quickly. A mix of independent software vendors offer Platform as a Service and Infrastructure as a Service in the public cloud, which let you bring nearly any piece of software into the cloud, whether your licensing agreement allows it or not.

The advantages of moving to subscription-based cloud services include a shift from capital expenditures to pay-as-you-go operating expenditures, no vendor lock-in, and easier maintenance for hardware and software updates. In response, many businesses are clinging to hybrid environments that combine data centers with private and public clouds. These hybrid environments result in a complicated mix of vendors, purchase agreements and licensing rules that procurement teams have to navigate and help manage.

Many believe that the cloud eliminates the need for solid organizational control of software licenses. It actually places the onus even more squarely on companies to carefully manage the software lifecycle. 

With cloud and subscription licenses, the pendulum swings from a state where enterprises are at risk of underbuying software to a state where they are at a much higher risk of overbuying software. Overbuying is all but a certainty if the software supply chain is not well managed.  

Shadow IT Exposes Companies to Risk

There is an additional wrinkle introduced by cloud services. Because it’s so easy to purchase cloud services, business units and employees in many companies are going around IT and procurement to obtain the services they want directly from cloud providers.

Shadow IT is outside the governance and control of the IT department. It exposes the enterprise to budgetary risk as cloud accounts and instances proliferate across the company without oversight. These costs can quickly spiral out of control.  

How to Address Virtualization, Cloud and Shadow IT

IT and procurement teams can optimize software spending by tackling the challenges presented by virtualization, the cloud and shadow IT. But have no fear! Here are some pointers on how your IT team can address each threat.

  • To optimize license purchases for physical and virtual infrastructure, companies can determine where software is running and what physical and virtual processing resources the software consumes, including VMs, hosts and other supporting infrastructure.
  • To manage cloud services usage and spending, enterprises can optimize costs and utilization by comparing usage of the different types and levels of software available to what’s really needed.
  • To improve software governance and eliminate shadow IT, businesses can use an enterprise app store to provide self-service access to authorized applications, streamlining service delivery.

As companies move into virtualization and cloud services, the already difficult task of optimizing software and services procurement becomes even more challenging. To optimize software and cloud services spending in this increasingly complex environment, the procurement team needs broad and deep visibility into the enterprise software environment, its vendors and users.

The right software license optimization solution can provide that visibility and maximize the value of enterprise software and cloud services to the business. The result is lower software and cloud services costs and that go straight to the bottom line. You can’t do much better than that!

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