Post-merger software savings 'simple'

25 April 2007
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26 April 2007 | Antony Barton

IT directors are failing to make the most of savings opportunities afforded by mergers and acquisitions, despite claims that they are easy to achieve.

Recent research by Computacenter found only 13 out of 100 IT directors thought software savings were easy to accomplish following a merger.

But IT experts at a Computacenter round table held this month said the hardest thing is identifying where IT savings can be made. Once this is done, they say, carrying them out is relatively simple.

Cherry Freeman, software business unit director at Computacenter, said first, find out what software is owned and used by both companies. An earlier study by technology research firm Gartner found fewer than 10 per cent of firms had a software asset management policy.

Once software has been identified, merged firms can make savings by ridding themselves of unnecessarily sophisticated software; ensuring what they keep is used to its full potential; and using excessive licensing to negotiate better deals.

Recent research from technology firm Ovum found proper management of software assets can deliver 25 to 40 per cent of IT cost savings post-merger. Freeman said this represented a considerable sum when the biggest software agreements for the largest FTSE 100 firms probably cost £5 million to £50 million.

Tony Wright, group IS vendor manager for The Carphone Warehouse, pointed out that while mergers represent an opportunity to make IT savings they also present risks, which could increase costs.

He warned firms to speak to software suppliers before a merger to ensure, for example, they don't illegally and unknowingly use software that hasn't been paid for.

Further difficulty could arise if new software licences are introduced that the account manager on the supply side does not understand.

"Nearly every vendor has slight differences in the way they license," he said. "Some of the vendors are using third parties to understand their own licences. You have to be very careful as a purchasing manager to ensure what you're being told by the vendor is correct and legal."

It is also essential to clarify the responsibilities of IT and procurement ahead of a merger so savings can be properly credited. Freeman said removing duplicate software could reduce the engineering headcount, for example, and this should be recognised as a procurement saving.

Wright added that when an employee resigns, the company will reclaim the company car, which could be worth £10,000. If the employee came from the IT department they could have £10,000 of software on their PC, requiring maintenance costs each year, yet this may go unnoticed.


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