Software Licensing Featured Articles

Software License Optimization: A Key to Efficiency

By Tara Seals, TMCnet Contributor

Most IT buyers are aware of the tangible impacts of software licensing complexities: Hours upon hours and thousands of dollars are spent on manually administrating licenses. And, millions of dollars can be spent rectifying compliance issues and avoiding audit risk. However, IDC (News - Alert) notes in a new report that equally as important is taking steps to spend software license dollars more effectively — buying only what’s needed and making sure that everything is being used.

This software license optimization (SLO) arena is becoming ever more important as the way we live and work continues to evolve.

“Managing the software licensing landscape within most companies is a complex task, which is made more complicated by the sheer number of contracts to be managed (hundreds, if not thousands) as well as the different types of licenses that must be administered,” said Amy Konary, analyst at IDC. “Industry trends such as virtualization, cloud, and increased flexibility in software licensing have added to this challenge, ensuring that the complexities associated with understanding and managing software assets continue to increase.”

It doesn’t help that software vendors are increasing the number and scope of their software license audit activities. IDC recommends that customers deploy SLO to self-audit in advance of an audit and identify and fix the underlying issues that can cause noncompliance.

IDC noted that IT buyers should understand the key triggers for audits as well, and be especially vigilant with license management when it comes to new software purchases, virtualization initiatives, merger and acquisition (M&A) activity and cloud migration.

In addition to minimizing compliance risk, there are opportunities for organizations to apply people, process, and technology to help make more informed software spending decisions.

Konary breaks the implementation of SLO into five stages: Ad hoc, opportunistic, repeatable, managed and optimized.?

In the first stage, companies tend to take a reactive response to audit reviews and license management, and find themselves in an inefficient state of affairs. Companies in this stage find that each snapshot or audit response takes several weeks or months to complete. Also, not one group or individual is responsible for management, hampering collaboration or cooperation, and many processes are supported by manual or paper-based.

A better stage to be in is the opportunistic stage, where there are occasional license management processes for a few key vendors, with some automation, usually done via spreadsheet or vendor-supplied tools. Communication is better cross-group than in ad hoc environments, but not all stakeholders are in the know.

Stage 3 is the repeatable stage, which features systematic license management via established processes. Automation exists to address clear risks such as vendors that audit regularly, software with challenging compliancy requirements and software installed in virtualized environments. Software licensing policies are known company-wide; and spending management is introduced for select applications by comparing licenses deployed to available license entitlements.

In this scenario, the business impacts begin to become clear: Konary said that organizations in this stage have licenses of close to 20 percent of software applications that are actively managed; however, this represents nearly 50 percent of software spending.

In the managed stage, things get much better. “The organization is beginning to understand usage patterns and available capacity to support demand and analyze spend priorities with existing and new suppliers,” Konary explained. “Software licensing policies are embedded in sourcing systems to help inform spending decisions. The software license optimization solution may be customized to address specific processes or applications. In addition, the company is beginning to collect usage data to help identify pockets of underutilization and opportunity.”

Here, more than 60 percentof software spending is actively managed.

And then there’s the end game: optimized environments, where more than 80 percent of software spending is actively managed.

In addition to the managed hallmarks mentioned above, these companies engage in gamification, what-if analysis and other processes to identify additional savings, while communication between IT, financial management, purchasing and capacity planning allows everyone to be on the same page.

“The solution includes alerts, the application of prepacked license rights, and license re-harvesting,” Konary explained. “A full range of licensing models are addressed, including simple/legacy and modern/complex approaches. The system collects usage data and maps this with available licenses and forecast demand to analyze the mismatch between the two on an ongoing basis.”

It may sound like an overwhelming transition to make, but the payoff is real, according to IDC. Overall, IDC believes that software license complexity will cost organizations an average of 25 percent of their software license budgets in 2015—complexity that can be better addressed and made to work strategically for the company.