Software asset management is about smarter purchasing

Andy Joeres is UK managing director at Snow SoftwareSoftware asset management (SAM) has traditionally been a function focusing on risk management and compliance, but research suggests this attitude has changed and SAM is increasingly relevant to procurement operations.

During a recent customer poll, we asked users to identify the key business drivers for adopting SAM in their organisation. Three or four years ago, the answer would probably have been compliance and reacting to a software vendor’s audit. Now, 36 per cent of respondents cited a requirement to “identify and drive software procurement cost savings”. SAM is now as much about smarter purchasing as it is risk management.

Data in a SAM solution enables an organisation to audit itself on an ongoing basis and understand for example, whether the licences bought reflect what they are paying for and using. In response to being burned by a software audit in the past, many organisations have reacted by ‘playing it safe’ and overestimating their licensing requirements. This is rarely cost efficient and experience shows that access to hard facts about licences and software use can pay for itself in months, by cutting unnecessary expenditure, the ability to renegotiate with software publishers for volume licences and minimise support and maintenance agreements. 

For example, Man Investments, a hedge fund manager, has seen cost savings in excess of £2.3 million. Cost savings of over £1.2 million came from using SAM data to finely tune negotiations for renewal and support agreements in line with use records. A further £1.1 million cost avoidance was achieved through re-harvesting existing licences and avoiding unnecessary support contracts. Standard usage policies were established to uninstall software that is not being used and as a result, Man has avoided buying new software licences for a long time.

It is also possible to sell surplus licences that are no longer required to other organisations, on a newly emerging ‘second hand’ software market. Following a court ruling in Germany, the practice of re-selling (or recycling) software licences has been legitimised and SAM data plays an important role here too. According to the rules, any organisation which has purchased a perpetual licence for software can re-sell those software licences and any associated agreements, e.g. maintenance and upgrades, onto another third party. Provided the software licence has been purchased in the EU, it can be resold to any other country worldwide. But if it was originally purchased in the US, it can only be sold within the US. 

Current trends to migrate towards cloud applications are often motivated by the desire to reduce costs. Software vendors are encouraging the switch with substantial discounts, but does this represent value for money? The only real way to answer that question is through SAM data, to verify some key considerations: the actual cost of software licences today, what the actual entitlement is, how the software is being used and how frequently; and how might that change in the future.

Nottingham Trent University benefited from analysis like this, identifying that only 20 per cent of the 500 licences purchased for one software vendor were being used. This enabled it to reduce licensing costs by £30,000 for that vendor and the university expects to achieve savings in excess of £200,000 within the next three years.

SAM data is clearly becoming an essential part of procurement for organisations that want to avoid over-spending on software licences. Whether they are for traditional on-premise licences, or cloud subscriptions, it’s difficult to get software purchasing agreements right without having a good handle on what applications are actually being used by which employees and what they really need.

Andy Joeres is UK managing director at Snow Software

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