Software asset management – it’s a term we find ourselves running into at multiple intersections these days. Our clients are talking about it more than ever as they try to wrangle ever-growing software portfolios. So are the vendors our customers do business with (for different reasons… more on that later). The discipline has been around for quite a while, but the need for it has become more urgent for a number of reasons.
It’s been estimated that the average enterprise uses 500+ software applications. That’s a conservative estimate given the role the cloud continues to play in growing and shaping the enterprise software portfolio. Sanjay Beri, CEO of cloud app analytics and policy firm Netskope, recently suggested that medium and large-sized businesses use anywhere from 300 to 400 cloud applications today.
The reality is most companies don’t have a clear view of what software applications (cloud or on-premise) are actually being used across the business – and that’s a serious concern as the risks associated with not knowing become more severe. Software spending, particularly in the cloud, continues to accelerate. Over-licensing and over-subscription are rampant in the enterprise. Functionality redundancies across applications, services and tools are commonplace. Purchases made outside of master agreements routinely occur and often at the expense of previously-negotiated pricing and discounts. One net result is enterprises are spending far more than they should on software because they have inconsistent (or non-existent) software asset management.
An equally significant threat is software license compliance. Poor visibility into what software licenses the organization owns, where they are installed, who’s using them and how they are being used – and how all of those factors compare with product use rights – create ripe conditions for unintentional noncompliance. Extreme examples include SAP’s cases against Diageo and AB InBev, in which the vendor sought $71M and up to $600M respectively in licensing back payments and damages.
Other asset management concerns include: Is maintenance/support on autopilot? Are there opportunities to forego or downgrade support on certain software? Conversely, how are upgrades, updates, patches being handled to protect the organization against security threats?
With so much on the line, it’s no wonder software asset management (SAM) is getting more attention these days.
What is software asset management?
Software asset management, like its parent IT asset management, is a set of practices that manage and optimize the purchase, deployment, maintenance, utilization, and disposal of software applications within the business. SAM is also its own software category with vendors like Flexera, Snow, Aspera and ServiceNow leading the way.
It’s also a path for certain legacy enterprise vendors like Microsoft to extract new revenues from clients. Case in point: the Microsoft Software Asset Management Engagement. Microsoft bills it as “(a way) to help you get the most from your software investments, ensure that you are licensed correctly, and implement the right policies to properly manage your company’s software assets.” But anyone who’s participated in one knows that it’s actually Microsoft’s way of taking a look under the hood to inspect for software license non-compliance. While the reasons that Microsoft lists for doing a SAM engagement are absolutely valid and consistent with SAM best practices, make no mistake about it: The primary reason that Microsoft pushes SAM engagements is to generate revenue.
(Side note: here’s another post on what you can do to better manage your Microsoft software estate without engaging Microsoft).
Most enterprises have embraced SAM, although the formality and sophistication with which it’s deployed varies widely by organization. Some have teams, asset management software and processes specifically devoted to SAM. Others are just dipping a toe in the water.
5 Benefits of Software Asset Management
SAM delivers many benefits – some more impactful than others. Here’s our perspective on the top five based on what we see across our enterprise client portfolio:
1. Cost savings. Proper visibility into and management of your software portfolio enables you to identify multiple opportunities for IT savings. Examples include:
- Are you over-licensed or over-subscribed?
- Are you paying support for unused (or underused) products?
- What software license agreements are up for renewal and when? How much runway do you need to prepare?
- Are there functionality redundancies across the portfolio? Can you eliminate and/or consolidate certain products/services?
- Are purchases being made outside of master or enterprise agreements with your large vendors?
- Are enterprise agreement purchases being priced according to negotiated pricing and discounts?
- Are all software purchases across the enterprise being approved and executed according to IT sourcing policy?
2. Lower risk of software license audit and penalties. The volume of software license audits is increasing as are the penalties vendors hand out. Vendors like Microsoft, SAP, IBM and Oracle bank on customers’ lack of visibility into the software estate and understanding of product terms. Companies that employ strong SAM processes and tools are better able to understand how software assets are being deployed and used. Those that demonstrate strong SAM capabilities can reduce their risk of a software license audit and avoid or minimize noncompliance penalty fees.
Note: Conventional SAM tools and processes only go so far. To fully minimize audit risk, you must have a deep understanding of vendor-specific licensing and subscription programs as well as product use rights and terms.
3. Licensing optimization. Strong software asset management is the first step in optimizing licensing and subscriptions across the software portfolio. As noted earlier, it helps eliminate overbuying and over-licensing. It also provides a baseline for selecting best-fit license types, building in maximum flexibility based on current and future-state requirements, and minimizing the risk of cost-oriented surprises.
4. Stronger security posture. How well you manage your software assets can have a direct impact on your ability to fight against cybersecurity threats. Mature SAM processes are version-aware, and provide visibility into aging assets that need to be updated or eliminated. They scan for unauthorized software. They keep authorized user rosters up to date. A recent Harvard Business Review article sums it up nicely: “That’s because cyber criminals are opportunists who seek the path of least resistance. Rather than wasting efforts attacking hardened firewalls, they instead snoop out the often-overlooked back doors to a company’s network, such as unsupported or unapproved software, abandoned user IDs, poor password protection, or the unmanaged server under an IT analyst’s desk.”
5. Better IT asset utilization. The shift to on-demand computing has forced companies to take a closer look at how they consume IT resources. How are IT infrastructure and software being utilized? At what capacity and by how many users? Are there new or existing licensing or subscription programs that are better suited to the business’s current requirements? Are changes in virtualization strategy or server infrastructure going to lead to licensing consequences? Effective SAM tools and policies are foundational to these inquiries, and the cost modeling that accompanies them.