5 Advantages of Software License Optimization That Go Beyond Cost
On the surface, the goal of software license optimization (SLO) is simple enough: buy only the licenses/subscriptions needed based on current and future business requirements.
Cost management is the most obvious driver. Software vendors are notorious for trying to sell you more than you need, sometimes to the tune of millions of dollars. But what about the other benefits of software license optimization? There are more advantages of software license optimization than meet the eye. In this blog post, we’ll explore 5 advantages that go beyond cost.
1. Reduced software license audit risk
To optimize software licensing, companies first need to collect actual software deployment data and compare it against entitlements to identify usage gaps (over- or under-utilization). Companies also must determine if the licenses are being used in accordance with the vendor’s product terms. This process inherently identifies areas of potential compliance risk, thereby giving the customer the ability to remediate any non-compliance before the vendor initiates a software license audit.
Here's another way to think about it. Essentially, SLO is preventative maintenance to prepare and protect your company in the event of an audit. When a software audit does (inevitably) occur, consider these three software audit management tips:
- First, conduct internal license position assessments annually on your top three software vendors, by spend. This serves as a pre-season analysis for the real audit. Often, a company’s unintentional compliance issues are uncovered and can be rectified.
- Next, prioritize license management education. Of course, most companies do not have time to educate everyone on the ins-and-outs of software requirements, rights, restrictions, etc. However, choosing a few on-premise software estates – such as Microsoft or IBM – and educating teams through ongoing communications is critical to improving your organization’s audit readiness.
- Finally, determine your rules of engagement for all interactions with software vendors that are prone to audit. Unfortunately, almost any engagement with a software vendor representative can trigger an audit. Thus, be clear who is permitted to communicate with your representative and what can and cannot be shared. Clear and detailed instructions can help eliminate unnecessary audits.
2. Faster, More Effective Renewals
Whether an EA, ULA, EULA or some other flavor of enterprise agreement, renewals can be painful. These agreements are complex and intentionally confusing, and typically require multiple iterations in the negotiation cycle. Furthermore, they happen every 3 to 5 years, which means companies must understand all the various licensing, subscription, offering and pricing changes that have occurred during the duration of their agreement. Oh, and let’s not forget changes in the company’s own requirements during that timeframe. It’s no wonder NPI recommends companies prepare at least 6 months in advance of a large software renewal event.
Software license optimization eliminates much of the pain in the renewal process by establishing a true baseline to feed into renewal requirements. By knowing what you need (and don’t need), you can approach renewals with accuracy and expedite the buying cycle.
3. Better Security
Fact: you can’t manage what you don’t know you own (hence the rise of software asset management as a discipline). Another fact: by 2025, worldwide cybercrime damage is expected to reach $10.5 trillion. This equates to 15% year-over-year growth. Given the expansiveness of the typical enterprise software estate, this is a concerning reality.
As discussed in this HBR.org article, organizations must have a complete picture of their infrastructure (including software). Organizations should know what’s deployed, how it’s being used and by whom, and if it’s up to date.
Once again, license optimization of your most important software estates inherently provides a layer of visibility into software deployment so that organizations can identify potential areas of vulnerability.
4. Increased Leverage During Software Negotiations
There’s a saying in enterprise software sales: “Mystery equals margin.” Enterprise software vendors have long benefitted from complex, confusing, and always-changing licensing models. For most customers, it’s difficult to stay up to speed on the hundreds or thousands of SKUs and licensing permutations offered by even a single software vendor, much less the hundreds of vendors they do business with. And, while many vendors offer guidance on how to manage software assets, they also know a lack of understanding ensures the deck is stacked against customers during negotiations.
One way to level the playing field is to demonstrate a strong understanding of your software estate as well as the vendor’s software licensing – which (you guessed it!) just happens to be a byproduct of software license optimization.
A few additional negotiation leverage tips include:
- Validate your software usage and propose a right-sized renewal. Unused licenses lead to spend waste, and enterprise vendors profit from this extra fat.
- Develop and analyze scenarios. There are many ways to configure your future state to (1) meet your usage rights needs, (2) optimize license and support/maintenance costs, (3) build in future flexibility and (4) avoid unexpected costs. Build models for various scenarios – each of which will have pros and cons. This exercise will help you make the best decisions for the business.
- Beware of the grey areas surrounding compliance. Just because you’ve read your vendor agreements and usage rights documents doesn’t mean you have full understanding of that vendor’s licensing and compliance requirements. This is an area where expert assistance is not just valuable – it’s critical. Don’t wait until an audit to clear up any confusion.
- Enlist help. Do you have Ph.D.-level licensing knowledge for each of your software vendors in-house? Do you have visibility into each vendor’s product roadmap? Are you 100 percent confident in your ability to spot compliance gaps as you optimize your software estate? If you answered no to any of these questions, consider providing your IT buying team with licensing expert resources to turbo-charge effectiveness and accelerate confident decision-making.
5. Future-Proofing for Flexibility
Part A of the software license optimization exercise is buying the best-match SKUs for your current requirements. Part B is anticipating future-state requirements and building in as much flexibility as possible while you are at the negotiating table. This is especially important for businesses with M&A activity on the horizon, businesses with seasonal workers and/or user requirements, and companies undergoing IT transformations that will lead to material expansions or contractions in licensing demand. Software license optimization in effect helps “future-proof” the software estate so it can respond to changes in licensing demand with more agility and less negative cost impacts.
Software Licensing Optimization Tips to Consider
To optimize licensing across the software estate, companies need to understand the different licensing and subscription offerings that a vendor offers and the various permutations available to them. This intel is dual-faceted in that it’s not just about understanding the options available, but also about analyzing them in context of the business’s broader IT and business strategy:
- What are the user requirements today versus three to five years from now?
- How can usage profiles be utilized to best advantage?
- Will demand for the solution expand or contract due to seasonal demand, M&A, or other factors?
- Does the business plan to move this piece of the IT ecosystem to the cloud in the long or short term?
The challenge for most companies is that vendor-specific license optimization insight is not typically found in-house. That’s why many turn to NPI’s vendor-specific licensing “Ph.D.s” who have extensive understanding of a vendor’s licensing and/or subscription programs, and understand how to best map them to the buyer’s unique situation and requirements.
Here are some additional software license optimization tips:
- Use your reseller wisely. Resellers should be relied upon to help manage inventory and increase knowledge of a vendor’s technology and products, but not to provide licensing optimization guidance. Remember, their goal is to maximize vendor revenue – they are usually driven by financial incentives and are just not objective enough to be your only resource for asset planning.
- Develop and analyze scenarios. There are many ways to configure your future state to (1) meet your usage rights requirements, (2) optimize license and support/maintenance costs, (3) build in future flexibility, and (4) avoid unexpected costs. Build models for various scenarios – each of which will have pros and cons. This exercise will help you make the best decisions for the business.
- Beware of the grey areas surrounding compliance. Just because you’ve read your vendor agreements and usage rights documents doesn’t mean you have full understanding of that vendor’s licensing and compliance requirements. This is an area where expert assistance is not just valuable – it’s critical. Don’t wait for an external audit to clear up any confusion.
- Enlist help. Do you have Ph.D.-level licensing knowledge for each of your software vendors in-house? Do you have visibility into each vendor’s product roadmap? Are you 100% confident in your ability to spot compliance gaps as you optimize your software estate? If you answered no to any of these questions, consider providing your IT buying team with licensing expert resources to turbo-charge effectiveness and accelerate confident decision-making.
NPI: Software License Optimization Specialists
At NPI, our software license optimization specialists can help you proactively identify areas of over- and under-utilization across your large software estates as well as spot areas of compliance risk. From there, we can help you right-size your deployments according to you your organization’s current- and future-state requirements, and remediate any compliance issues before they become a larger headache.
Interested in learning more? Reach out at (404) 591-7500 or via our . We look forward to starting a conversation.