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Management

Software Asset Management: safe to outsource?

Friday, 01 December 2006

Peter Kay, General Manager at FAST Consultancy Services, takes a look at the thorny question of effective, long-term Software Asset Management (SAM) and explores the options open to finance and IT directors who want to get the maximum return on their software investment, but are concerned about a lack of IT resources Offer any finance or IT director the opportunity to reduce business risk, minimise costs and increase the lifetime value of their IT assets and you’ll be lucky to escape with all your fingers. If you go on to explain that these are just some of the benefits of Software Asset Management (SAM), you’ll almost certainly get some quizzical looks and need to explain exactly what this means. You’ll probably then find the finance or IT director is hooked on the idea – until he puts it to the IT manager, who knows that like many business processes SAM is usually far easier said than done!

First of all, a definition: SAM is the term used to describe an ongoing management process designed to get the greatest efficiency out of a company’s software investment, while keeping the cost of that investment to a minimum. Among other things, it involves streamlining the software buying process, ensuring that users have the software they need to do their job effectively, making sure that every piece of software used by the company is legal and compliant, and monitoring software maintenance and support contracts on an ongoing basis to ensure they are appropriately used and priced.

The benefits of SAM

On paper, the benefits of SAM are evident. For a start, a SAM programme ensures that a company owns no more than the software licences it needs. With software costs constituting approximately one-fifth of an organisation’s IT budget[1] (and growing), most organisations can save a considerable amount of money by getting rid of superfluous licences. As an illustration, in March of this year, industry analyst firm Gartner Group published a report saying that 42 per cent of Customer Relationship Management (CRM) software licences bought by companies are unused, resulting in a projected 20–30 per cent increase in cost of ownership of the software by 2005[2]. A properly run SAM programme will identify exactly how many licenses of any application are needed, eliminating the problem of costly and useless ‘shelfware’.

‘Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!’– The Red Queen[3]

As well as reducing IT costs, SAM will also eliminate the problem of illegal software. Employee access to the Internet has resulted in a huge headache for IT departments. Many IT managers spend endless hours reconciling software licences, only to find that by the time they’ve finished, someone, somewhere in the organisation has downloaded a software programme they shouldn’t have, and the business still has illegal software. Like Alice and the Red Queen, an IT manager could spend his or her time doing nothing but running to catch up with an always-moving target. A dedicated SAM programme overcomes this massive waste of resource by ensuring that every piece of software is licensed, leaving the directors of the company free from the very real risk of heavy fines and even imprisonment for illegal software use.

SAM is about much more than just balancing cost-effectiveness and compliance, though. At its heart it is about getting real value from IT by ensuring that everyone in the company has the right software tools they need to do their job in the most productive and efficient way possible. With increasing numbers of technology applications now critical to business success, a well-run SAM programme makes a vital contribution to the bottom line.

The drawbacks of SAM

However, in spite of the obvious benefits outlined above, very few companies have put an adequate structured SAM programme in place. A recent survey conducted by FAST found that 77 per cent of UK companies spend less than 4 per cent of their total desktop budget on managing and controlling the use of software and 69 per cent spend less than five ‘man’ days per month on software management. So why the reticence? For one thing, it’s all too easy for SAM to fall off the boardroom agenda as companies prioritise more tangible aims such as fending off competitors, increasing revenues and keeping up the share price. At the IT level many managers say it boils down to three main barriers: worrying about what they’ll find if they start a SAM programme; the costs and resources they think will be needed; or simply not knowing where to start.

All three are valid issues. The volume of illegal software in companies has rocketed in the past few years, thanks to widespread access to the Internet and the advent of CD re-writers. However, with legislation like the Copyright Design and Patents Act (1988) carrying a maximum penalty of ten years’ imprisonment for using non-compliant software, the ‘head in the sand’ approach is highly dangerous. As regards cost and resources, it is true that running a comprehensive internal SAM programme can take a lot of time and effort.

Software licensing is a complex business and companies who licence software from many different vendors face a huge challenge, sorting out the spaghetti of individual licence agreements and their corresponding maintenance and support contracts. The challenges of effective SAM reinforce the importance of taking the process seriously from the outset and breaking down the project into manageable, measurable chunks.

Starting a SAM programme

For any IT department embarking on a SAM initiative the first objective must be to achieve software compliance. This is not only because there are well-documented steps to make this as straightforward as possible, but also because it is the quickest way to break the vicious circle of trying to keep up with illegal software copies.

The first step towards achieving compliance is based on introducing policy and procedures to stop employees downloading or purchasing software, whether illegal, free shareware or legal software that the IT department should be purchasing.
The second stage is to carry out a comprehensive software audit. In the past this might have seemed like a daunting task, however a number of sophisticated business support tools are now available, providing a single reference point for the ongoing management of all software assets, allowing accurate software asset registers to be maintained against audit discovery tool and manual discovery processes.
Thirdly, a Software Licence Reconciliation (SLR) phase must take place to ensure that all installed software is ‘matched’ with held licences and usage. Importantly, this stage must initiate an ongoing dialogue between the Purchasing, IT and Finance functions of your business to ensure maximum long-term ROI (Return On Investment).

Long-term success.

The final step is the real challenge: ongoing management. Adding a SAM programme to an already burdened IT department may not be feasible and hiring additional headcount impossible. With limited in-house resources, managers may look outside their organisation to develop a SAM strategy and then implement the programme on a regular basis.

Outsourcing has several real business advantages, the first being that the job actually gets done – not just once, but as the ongoing process that SAM needs to be if it is to be effective. The second advantage is cost: after establishing a compliant environment the costs of an on-going managed SAM programme is priced from £1,000 per month[4]. This includes monthly periodic auditing of data, taking responsibility for initiating

and maintaining cross-function communications, reconciling new software data into a report and reviewing the licensing options. When compared with the amount of money being lost through superfluous licences – not to mention the cost of a potential fine or prison sentence – the cost of an outsourced service becomes a compelling choice.

Outsourcing any service is a strategic decision that requires some careful considerations. If you are going to entrust an external third-party with access to your internal accounts and systems you need to be sure about your business objectives for doing so and have a clear set of measurement criteria in place to benchmark the success of the relationship.

What value do you expect the partner to deliver?
What are the parameters of the relationship?
What service expectations must they meet?
Who owns responsibility for the strategic and tactical roll-out of the programme?
When and where might an escalation of ownership be appropriate?
What reporting needs to be in place and what controls are required?
How will you establish and maintain good communication channels between your internal and external teams?
How will the output of your programme be reported up to Board level?

The best managed services relationships are based on mutual partnership and objectives. If you don’t feel there is trust, respect and understanding with a possible partner, keep shopping.

The bottom line

With companies increasingly investing in new software applications and employees being largely free to download software from the Internet or introduce it via CD-ROM, the need for vigilance regarding software licences is critical. Properly managed and executed a SAM programme will deliver a return many times greater than its cost. It’s crucial to remember that SAM is an ongoing process that requires investment in skills, resourcing and expertise to deliver the productivity and performance improvements your business needs. If your organisation is serious about eliminating business risk, reducing IT and management costs and maximising the value of its software assets, but doesn’t have the time or resource to introduce and maintain a SAM initiative, you would be wise to consider outsourcing to a trusted third-party for the long-term peace of mind and cost savings this will bring.

To discuss outsourcing your Software Asset Management to FAST Consultancy Services contact Peter Kay on 01628 760359 or email: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

1. Source: Gartner Group
2. Press Release: Gartner Survey Shows 42 per cent of Purchased CRM Software Goes Unused, 6th March 2003
3. Through the Looking Glass, Lewis Carroll, first published 1896
4. Figures based on FAST Consultancy Services’ outsourced SAM programme

(This article was originally published in Director of Finance 2004 edition)