March 2010
Enterprise License Optimisation: More Software at Less Cost
Although high-value applications, such as those offered by IBM, Microsoft, AutoDesk, Oracle, and SAP are more important than ever, many enterprises today face tight software budgets. Fortunately, a new set of tools and best practices, Enterprise License Optimisation (ELO) can help companies stretch their software budgets.
Facing economic pressures software vendors are raising their prices. SAP, for example, has moved customers to a premium support service costing 22% of the base licensing fee, up from 17%. Oracle has increased the cost of certain database options by up to 40%. To increase revenue, vendors are performing more software license audits and creating more complex licensing models. Meanwhile, the growth of virtualisation has created a "virtual sprawl" of software instances, increasing the potential for non-compliance and higher licensing costs.
Today's standard solution, Software Asset Management (SAM), can't meet these challenges. SAM solutions focus on counting what you have, they do not provide the visibility into license usage that companies need to effectively manage complex compliance scenarios, optimise software usage, negotiate effectively with vendors, and reduce software costs.
ELO solutions, however, let organisations proactively manage software license usage and tie that usage to specific software entitlements so they can deliver more software at less cost.
ELO-Enabled Practices
ELO offers several key capabilities that SAM solutions can't match:
1. ELO-enabled technologies make it easy to extract sophisticated usage data-including such subtleties as indirect access. SAM technologies are typically unable to show the usage of the components of back-office applications.
2. ELO clearly illuminates every nuance of complex license agreements. SAM provides little insight into entitlements for the components of complex, high-value applications (SAP, for example, specifies multiple types of named users in its licensing model), and it can't track entitlements across multiple contracts for various departments and business units.
3. Only ELO lets organisations map usage to complex license agreements. For example, SAP requires a precise understanding of each user's role and behaviour to accurately categorise the license type. With Oracle, organisations must be able to compare the advantages and disadvantages of a processor-based vs. a named user license model.
4. Only ELO enables IT departments to track usage trends for software components across the enterprise. This key capability, not available with SAM, reveals opportunities for increased savings. For example, trend analysis may reveal a decline in the use of a very expensive component of an application in favour of a less expensive component. This means the organisation can adjust its contract.
By adopting ELO practices, companies have complete and continuous control over complex license environments. They eliminate spending on unnecessary "shelfware" licenses and maintenance fees and unify purchases and contracts across the enterprise, all while mitigating the risk of under-licensing and negative audit outcomes. By allocating software entitlements where they provide the most value, companies can more accurately forecast and plan future spending and conduct smarter, fact-based negotiations with software vendors. Companies implementing ELO have seen a 15 to 25% reduction in high-value software costs.
Implementing ELO
Despite the substantial benefits of ELO practices, many enterprises resist adopting them. Most lack the tools required by ELO, so they can't discover the various modules and components of their high-value software suites, track usage of those modules and components, and correlate software instances to servers. In addition, their existing SAM solutions can't maintain comprehensive information on all vendor agreements regardless of structure or complexity, reconcile what they own against what they have installed, or provide the reporting and analytics to pinpoint opportunities for savings, consolidation, and re-allocation.
Besides these technical limitations, ELO involves multiple business domains. Finance managers focus on determining necessary vs. unnecessary spending. Procurement managers focus on the best way to structure a deal. And IT managers focus on making the best use of whatever software assets they have. These groups must work together for ELO to be successful, but few organisations have the time and resources to ensure these groups develop the expertise they need and engage in the necessary collaborative activities.
The solution, however, is simple. Companies can work with an ELO partner that can:
- Recommend and implement the right ELO tools
- Offer expertise in vendor licensing rules, policies, business practices and negotiation strategies to provide specific, unbiased recommendations for optimising license and maintenance spend
- Review license re-allocation, providing counsel during active negotiations with vendors
- Provide ongoing ELO activities, including monitoring changes in application usage, identification of potential compliance issues, and preparation for contract renewals and audits.
In the coming years, high-value software will only become more critical to operational efficiency and more expensive and complex. The most cost-effective way to respond to these challenges is to adopt ELO to optimise and manage software spend.
