By John Smith

Many software contract negotiators focus mainly on software cost, but other factors that allow more flexibility of software deployment and portfolio composition will yield far greater benefits in this business climate of frequent reorganization, mergers and acquisitions.

An extreme example that shows where cost and not terms became the priority was highlighted at a recent Users Group meeting of a well-known ERP vendor; the CIO of a large DIY chain proudly announced that he had negotiated a 95% discount with that vendor. Subsequent details emerged that licenses had been bought for every employee when only about 15% of that number would have sufficed, thus bringing the effective discount down to around 67%. Considering that annual maintenance fees (which are usually not discounted and are payable every year) would be due on an inflated number of licenses, my guess is that the vendor was not dissatisfied with the outcome.

The license terms listed below are not necessarily offered by the vendor but we’ve found they can often be accommodated within the negotiation process.

These valuable terms could include, but are not limited to the following:

Removal of limitations on geographic and organizational scope.
Ability to change the portfolio of software licensed by allowing access to new functionality / feature sets. This is particularly useful when negotiating contracts for concurrent licenses, commonly used for engineering applications.
Allowing exchange of software as processes or organizational profiles evolve. For technology companies, a change in the design process may require a shift in the engineering application mix, for example.
Ability to increase quantities licensed at the access rate negotiated for the initial contract. (Again, this may be most suitable for concurrent licensed applications. In other cases, there are volume discount tiers that come into play).
Stipulation of behavior of the software under given circumstances (license time-out, abnormal end).
Ability to “park” unused software for a period of time and remove licenses from maintenance.
Definition of maintenance rates applying for the contract duration.
Ability to absorb mergers and acquisitions into existing contractual terms.
Definition of vendor interfaces to maximize efficiency and limit access by the vendor to specified individuals and functions.

By defining terms that allow an organization to change, yet still be effectively serviced by software contracts, large payments / adjustments / penalties may be avoided.

By John Emmitt

The Obama Administration has mandated datacenter consolidation for government agencies. Vivek Kundra, former Federal CIO, commented last year that in some cases, only 7% of existing Federal government datacenter capacity is currently being utilized. Jeffrey Zients, chief performance officer and deputy director for management at the Office of Management and Budget, stated in a recent Whitehouse blog that “on average these centers have been using only 27 percent of their computer power.” The datacenter consolidation program goes hand-in-hand with Kundra’s cloud computing strategy. The Obama administration has announced plans to shut down 178 datacenters in 2012, on top of the 195 centers expected to be closed by the end of this year.

With that sort of low utilization rate for existing datacenters, consolidation certainly makes sense and will save the Federal government millions of dollars on hardware, power and real estate costs. But this only solves part of the problem. As discussed in a recent blog, the Federal government must also modernize management of software assets to reduce costs for software licenses and maintenance. Software typically represents about 25 to 35% of the IT budget and that percentage has been growing while the hardware percentage has been shrinking. Software asset management best practices include consolidation of software vendors and applications to remove redundancies and maximize volume purchase discounts.

Left unmanaged, large organizations often have several applications that serve the same purpose. By consolidating applications, they can reduce license, maintenance and even internal support costs. Similarly, large organizations may have multiple groups buying software from different distributors or resellers. Vendor consolidation and centralized software procurement allow organizations to leverage their purchasing power to get the best discounts for the enterprise as a whole.

But there’s more—optimized license management also means that organizations can minimize shelfware, further reducing ongoing software maintenance costs. Automated software asset and license management tools allow organizations to track software usage and remove or reallocate unused applications. These tools also help organizations leverage their license entitlements (product use rights) to ensure that they get maximum use of the software while maintaining license compliance.

Here is a 5 step plan for Federal agencies to get started on an optimized software license management program:

Centralize software procurement and consolidate software vendors
Implement an automated license management solution that allows you to—
Consolidate vendors and applications
Track usage for key applications to eliminate shelfware and allow reharvesting of unused licenses
Leverage your license entitlements (product use rights) to optimize license consumption and reduce software cost.

By Dean Devlin & Chris Moore

Procurement of software generally takes place in both the public and private sectors on a very “local” basis, office by office, program by program, division by division. In addition, oftentimes complex license agreements, metrics, and entitlements are not well understood or communicated effectively throughout an organization to avoid over-purchasing software and license compliance issues.

As a result, government organizations and companies not only fail to realize the benefits of economies of scale, but also risk spending too much on unneeded software, as unused licenses might sit idle in other parts of an organization. While some might argue this approach provides accountability – buyers know what they need and procure it – in fact the opposite is true. Individuals, once they buy, tend to fail to monitor usage and tend to overbuy to be “safe.”

In addition, the ease with which users across an organization can download and deploy new software applications without understanding the licensing and compliance implications means that IT managers must be vigilant in their ongoing monitoring of software inventory and usage in order to avoid exorbitant and unforeseen costs. All of this results in little accountability for the actual usage of software licenses, as no one has any understanding of the complex issues around license entitlements nor incentive to manage it.

This leads to tremendous waste. Some experts in the industry believe that as much as 35% of software spending could be eliminated through better software asset management and optimization. Automated license optimization systems have saved private sector companies millions of dollars. It is time that government agencies adopt this commonsense approach as well.

Government leaders should implement policies that private sector organizations are beginning to utilize in order to save money and purchase software more effectively. Procurement officials should require departments and agencies to take an “enterprise wide” view of software purchased. By doing this, departments and agencies can realize economies of scale by putting their true purchasing power behind software procurement.

Additionally, departments and agencies should consolidate software management so that there is a central control and oversight of license usage. This step would enable government entities to optimize their software usage and purchasing, preventing costly overbuying and reducing software liabilities during audit “true-ups” – license fees and penalties paid to software vendors due to non-compliance with software licenses.

In order to incentivize smarter procurement of software by government buyers, Congress should require departmental Chief Information Officers (CIOs) to conduct an assessment of departmental systems and to determine that all existing licenses of the required software are being used and new licenses are necessary before obligating any resources to procure additional software. Additionally, Congress should require that departmental CIOs be the single buyers of software for government agencies in order to realize the greatest possible economies of scale, as well as implement next generation software asset management technologies.

By Darren Balakrishnan

Implementing a software asset management (SAM) program for your organization is not a trivial task. It is an undertaking involving multiple teams, spanning multiple departments and often in multiple countries. A workflow management tool should be an essential part of the overall software asset management solution that allows organizations to enforce best practice processes.

Some of the keys to implementing an effective software asset management program are:

Understand your organization in order to implement effective processes
Establish good intra- and inter-team communication—a centralized license, contract and asset management repository is critical
Implement processes that can be tracked, automated and enforced
Account for deviations from standard defined processes
Coordinate activities across all teams with effective project management
Allocate sufficient resources

Let’s look in more detail at a couple of these.

Good Communication

Its critical to have good team communication, especially between IT Procurement and IT Operations to ensure that license terms and conditions are understood and applied correctly throughout the organization. A centralized license, contract and asset management repository is critical to facilitate effective communication of license entitlements and license consumption to all parties. By properly applying product use rights, your organization can reduce license consumption in many cases, and this equates to lower licensing costs. Furthermore, you can reduce your software audit risk by maintaining continuous license compliance.

Track, Automate and Enforce Processes

Your organization must have an effective process to deal with managing hardware asset lifecycles (purchase request, introducing new devices on the network, configuring and reconfiguring the device as needed, retiring and disposal of assets) and software asset lifecycles (request for software, deployment, upgrade, removal/reharvesting, etc.) Both hardware and software request processes, for example, can be managed with a workflow process that allows (and even requires) multiple approvers to sign off on the request—in some cases this may be done concurrently. Rules can be established that automatically escalate the request as needed, to ensure that it progresses to a final decision point in a timely manner.

A software asset management program requires data from many sources. For example, the first piece of basic information required would be hardware and software inventory. You must be able to periodically capture software and hardware inventory from a potentially wide range of devices and operating system platforms. Ideally, your software asset management solution should be able aggregate inventory data from multiple sources covering UNIX, Linux, Windows and MAC OS platforms, as required for your organization.

Similarly, integrating the purchase order information into the software asset management system requires a process to ensure that all purchasing data is captured in usable form. During implementation, you need to gather data from your purchasing system and/or other sources. Gathering historical purchase order data is a labor intensive task. If you do not have a central purchase order process, consider data collection in phases. Implement a manageable process and set realistic timelines to complete these tasks and make use of vendor resources, when you can.

Some vendors can provide you with information on all the purchases you have made with them. For instance, the Microsoft Licensing Statement (MLS) can provide a full licensing history for your organization, no matter where the products were purchased or the type of purchasing method used (except the store bought, boxed products.)

For any software asset management program to be successful, you need to define effective, manageable processes. A workflow management tool can help tie together multiple sources of data, including service desk, configuration management and procurement systems to help automate and enforce all of these software asset management processes.

By Natalie Overstreet Lias

The breadth of activities potentially involved in an enterprise’s overall software asset management (SAM) practice will easily overwhelm the skill set of even the most capable software asset manager. This list is by no means exhaustive:

Software deployment tools (SMS / SCCM / Marimba / Altiris / etc.)
Data transformation (Excel / VB / SQL / Perl)
Inventory and infrastructure terminology and practices
Application evidence (installers, executables, registry entries)
Differences in product versions and editions
Individual applications vs. suites
Corporate purchase process (procurement / vendor management)
Procurement software (Ariba / SAP / etc.)
Software licensing terminology and practices
Licensing models/metrics (device, user, processor, concurrent, CALs, etc.)
Vendor contract types (Microsoft Enterprise Agreement vs. Select Agreement, Adobe CLP vs. TLP, etc.)
License entitlements (Product Use Rights)
Upgrade and maintenance programs
License limitations (academic, geographic, development)

Of course, this list doesn’t cover the additional political aspects of getting all these business functions aligned.

What is a software asset manager to do? Obtaining expertise in all relevant areas to achieve the highest level of software asset management optimization is a hopeless task. Clearly, the software asset management team as a whole must therefore provide this coverage.

In many organizations, the software asset management team is defined quite narrowly around the function of matching software purchases to inventory. It is generally the responsibility of the core software asset management team to also have knowledge of software licensing terminology and practices as well. This specific knowledge is often lacking in procurement or vendor management organizations, so maintaining clear and open lines of communication with your procurement or vendor management representative is crucial. In fact, it’s so crucial that it’s fair to say:

Software asset management requires a strong partnership between the asset managers and the procurement or vendor managers to achieve real savings, operational efficiency and ongoing license compliance.

But it goes deeper than that. If your enterprise has outsourced datacenters or other IT infrastructure functions, a poor relationship between your enterprise and your outsourcing partner can doom software asset management efforts. If the service level agreement (SLA) governing your outsourcing agreement is too inflexible, critical components of software asset management efforts like deployment of updated agents and accurate Active Directory data can take so long to get off the ground that critical milestones like software audits and true-ups have no chance of being met. This means that:

Software asset management is doomed if the IT infrastructure cannot meet the requirements to provide timely, accurate and complete inventory, organizational, contract and procurement data (regardless of who is ultimately “to blame”).

The broad skill set required and cross-functional nature of software asset management means that the broad SAM team (including the core asset management department and critical support from procurement, IT infrastructure, and other functions) must communicate well and truly behave as a team, with aligned incentives and common goals. Any political issues must be managed and defused for overall program success. Thus, the final critical ingredient:

Software asset management programs require engaged executive sponsorship with a mandate to get the job done.

With proper attention paid to the constitution and integration of a cross-functional software asset management team, the software asset manager can be a great software asset manager!

By John Smith

Apart from certain geographic exceptions, businesses generally want to be compliant with the contracts of their software vendors. Their motivations are both individual and corporate:

Company officers do not want to be held responsible for software license breaches
Corporations do not want to attract software audits by their suppliers– audits are expensive, not only in terms of unbudgeted true-up costs and potential penalties, but also from the standpoint of the staff time it takes to prepare the audit response

So in general, license compliance breaches result from some combination of failing to follow software asset management procedures, the absence of such procedures, and/or failing to use license management tools that would help prevent an actual breach from occurring.

The most notable example I have encountered was a semiconductor company that was discovered using licenses that were provided at zero cost for use by development engineers and were actually being used for production purposes. Concurrent licenses for technical applications such as these are delivered by a license server and are checked out by engineering users when they run the application.

In this case, it was not a deliberate misuse of licenses, as the development licenses were originally served from a server only available to development engineers. Rather, an over-zealous and unknowing license server administrator decided to improve operational efficiency by retiring an old license server and consolidating these licenses with the main group running on a production license server.

Despite this being an oversight, when the software vendor’s auditors detected the situation, a sizeable settlement was demanded and paid.

The take-away from this incident is that the customer is ultimately responsible for maintaining software license compliance according to the terms of the license agreement. Software asset management policies and procedures are required to be implemented and followed. The process must include communication of license terms and conditions across departments– for example, from IT procurement to license administrators in IT operations. License management technology can help by providing a central repository for software license contracts and entitlements. In this case, they could also have used the capabilities of the license management system to reserve the development licenses for use by members of a select group, so that production engineers would not have been able to use them and the license compliance breach could have been avoided.

1E and AppClarity integrate to provide comprehensive applications management including self service software provisioning and complete license visibility and control.

AppClarity offers an immediate reduction in software costs by intelligently helping organizations to reduce, reclaim and recycle their software assets. AppClarity financially quantifies software waste by presenting a rationalized inventory of installed applications, license cost and where installations are unused.

Watch an introductory video to learn more about AppClarity.

By: Randy Littleson

I had the opportunity recently to speak at two events on the topic of strategically managing application usage across your software estate. The focus of the presentation was on the business challenges people face in managing software application usage and detailed best practice business process recommendations to get ahead of these issues.

What we’ve seen time and time again is that organizations have focused on and are good at the upfront portion of the software asset management process (e.g., securing the best quote when procuring software) but lack processes and tools to manage these increasingly strategic and high spend assets on a continual basis (e.g., establishing processes to consistently and reliably deploy applications and to ensure that you are using the software you purchased the way you intended to, without over-buying licenses).

The presentation starts with the holistic software asset management business process and then drills into the deploy, manage and upgrade steps to discuss the Application Readiness and Enterprise License Optimization challenges (including Windows 7 migrations, virtualization, software spend management, etc.) and best practice business processes to deal with them. The presentation makes the case that with migrations and upwards of 30% of applications changing annually, Application Readiness needs to be a continuous process, and with software spend and license compliance risk on the rise, Enterprise License Optimization can deliver continuous license compliance, optimized usage, and cost reductions.

View the full presentation “Strategically Managing Application Usage Across Your Software Estate.”