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In this guest post, Procurement Leaders invites Andy Joeres of Snow Software to look at how businesses are taking a different approach to Software Asset Management (SAM) and what lessons procurement professionals should be looking to learn.
When existing customers were asked to identify the key business drivers for the adoption of SAM in their organisations, the answers provided highlighted a significant shift in attitudes.
A few years ago, the drivers would probably have been related to compliance and reacting to a software vendor's audit. Now, the emphasis has shifted, with 36% of respondents citing a requirement to "identify and drive software procurement cost savings". Clearly, SAM is now as much about enabling smarter purchasing and procurement, as it is risk management.
The reason behind this is because data captured by a SAM solution enables an organisation to effectively audit itself on an ongoing basis, and at the same time, access hard facts about current licenses owned and software usage. They can track whether the licenses bought reflect what they are paying for and, more importantly, what they actually need.
Many organisations have reacted to the outcome of an audit by ‘playing it safe' and overestimating their licensing requirements with an ‘all you can eat'-type license agreement. This is rarely cost efficient and experience shows that having access to solid facts about current licenses and software usage can pay for itself in just months, by being able to clamp down on unnecessary expenditure, renegotiate with software publishers for volume licenses and avoid additional support and maintenance agreements.
For example, since implementing its SAM solution, Man Investments, a hedge fund manager, has seen cost savings in excess of £2.3m achieved in 24 months. Cost savings of over £1.2m were recorded using SAM data to finely tune negotiations for renewal and support agreements, in line with usage records. A further £1.1m cost avoidance was achieved through re-harvesting existing licenses 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 licenses for a long time. Now, SAM has become a ‘business-as-usual' process for Man Investments, which spans the time a user requests new software, daily compliance checks, preparing budgetary figures for procurement negotiations with vendors, re-harvesting surplus licenses and helping the service desk to retire an asset.
In addition to re-harvesting unused software, it is also possible to sell surplus licenses that are no longer required at all to other end user organisations, on a newly emerging ‘second-hand' software market. Following a court ruling in Germany, the practice of re-selling (or recycling) software licenses has been legitimized and SAM data plays an important role here too.
Current trends to migrate towards cloud applications are often motivated by the desire to reduce costs. Keen to secure ongoing revenues, software vendors are encouraging the switch with substantial discounts being offered to those that make the move. But do these discounted software subscriptions 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 licenses today, what the actual entitlement is, how the software is being used and how frequently; and how might that change in the future.
SAM data is clearly becoming an essential part of procurement for organisations that want to ensure they are not over-spending on software licenses. Whether they are for traditional on-premise licenses, 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. Hence the reason why SAM is now so central to enabling smarter purchasing and procurement.
Andy Joeres is UK managing director of Snow Software.