Whilst 2010 is being purported as the year economic recovery begins, it appears that caution will prevail.
According to the latest National Computing Centre (NCC) survey of IT infrastructure plans in the UK, 28 percent of companies have had to make significant cost cuts in their IT operations and another 32 percent claim to have made moderate cuts last year. The prospects don’t look any rosier for 2010 either. Approximately 33 percent of IT departments are expecting to see their budgets reduce this year with 47 percent believing they will remain at current levels.
As a result, several companies are delaying infrastructure investments. In total, 38 percent of companies are postponing hardware upgrades, while 33 percent are putting software refreshes on hold. The NCC’s Evaluation Centre interviewed more than 100 companies for the survey, ranging from those in the public sector to IT and telecoms and companies of all sizes ranging from those with £5m turnover to more than £5bn.
These findings most likely are representative of companies across Europe too. Interestingly, analyst house IDC echoes these sentiments in its latest worldwide IT spending forecast: “IT spending will not fully recover from the global recession until sometime in 2011 and that worldwide IT spending will increase by just three percent in 2010 at constant currency.”
Against this backdrop, with software licences and maintenance typically representing one third of overall IT budgets, an optimised SAM programme can facilitate savings of 15–20 perecnt of organisations’ overall software spend. In light of this level of potential savings, it is truly surprising that SAM is seldom a top priority for CXOs.
Clive Longbottom, Service Director, Business Process Analysis at Quocirca recently commented: “Historically, keeping track of software licence consumption has been a bit ‘hit and miss’, and is often not high up on either the IT or the business priorities of enterprises. However, this attitude will need to change to make licence management tools an essential part of enterprises’ technology mix – more so as we move toward an even more complex virtualised world. SAM tools are required to manage the process and calculate true licence consumption for real cost saving benefits.”
Optimised SAM equals cost savings
To derive the highest rate of return from their investment in software asset management, enterprises need to take a comprehensive view of the SAM process. Often, enterprises focus simply on counting software installations and manually comparing this to purchase counts. But this approach overlooks several critical optimisations that can significantly reduce initial licence purchase, true-up and renewal costs. For example, software vendors typically specify Product Use Rights (PURs) that define licence entitlements provided by the purchase agreement and/or product. These rights vary from vendor to vendor and agreement to agreement. By applying PURs, organisations can reduce their license consumption dramatically in many cases.
An Adobe audit at a global manufacturer is a case in point. By using a sophisticated SAM tool, the company was able to apply PURs to optimise its Adobe licence consumption and reduce its licence liability by more than $3m.
Many software vendors have intensified their efforts to ensure licence compliance as a means to preserve their revenues. Indeed a reaction to the difficult economic times. The larger the software publisher, the higher the risk of audit faced by organisations, the result of which can potentially be one of the largest unbudgeted expenses for an enterprise. Unless organisations have their own automated SAM solution, they are at the mercy of the vendors when the auditors come knocking.
Other SAM optimisations include licence reharvesting and maintenance cost reductions associated with unused licences. Reharvesting is the process of reclaiming and reallocating unused licences to defer unnecessary new licence purchases. It requires the organisation to first know what software is installed and whether it is actually being used. Maintenance cost reductions can be realised for applications that have become “shelfware”. Due to the daunting complexity and dynamic nature of software license agreements, all of these optimisations can best be accomplished with an automated SAM solution that manages that complexity and minimises manual effort.
Other examples of SAM ROI
Rentokil Initial, one of the largest business services companies in the world, has an incredibly complex IT infrastructure. Upon automating its SAM processes in the UK, the company found that it was over-licensed to the tune of a six figure sum.
Similarly a multi-national brewing company, implemented an automated SAM solution to overhaul its IT asset management processes across nine countries. This included over 8,000 desktops and servers. Within the first year alone, the company identified software savings of $740,000.
The SAM challenge is perhaps more pronounced in Europe than it is anywhere else in the world. This is mainly due to the extensive organisational spread of enterprises as often they grow through multi-national mergers and acquisitions. This results in limited centralised control over assets which are located in many regions. Further, the licencing models used by software vendors vary from country to country, greatly increasing the difficulty of ensuring compliance for enterprises as single global entities. A multi-national organisation could be compliant at a European level, but may find it falls short at the country level, which can mean significant financial penalties.
Regulatory compliance can also be a driver for SAM. For Smurfit Kappa Group, a world leader in paper-based packaging, SAM was a critical element of its Sarbanes-Oxley (SOX) compliance project. It needed to manage software assets across 20,000 devices, ensure continuous software licence compliance, and minimise associated licencing costs.
Today, there is awareness of the risks associated with unmanaged assets, but there is a distinct lack of urgency to automate and optimise SAM in the corporate environment. It makes business sense to make SAM a ‘Board’ level priority – the legal and business benefits it delivers are hard to ignore, especially in a difficult economy. By optimising the SAM process, organisations can maximise software utilisation, reduce the financial risk of software licence non-compliance and reduce overall IT costs by five to ten percent annually. Especially today, SAM savings can help organisations meet new business needs, despite significant budget constraints.