March 09, 2009, 3:57 PM — Fiscal fitness is a top priority for business survival today, leading most companies to pursue ways to trim budgets, especially Information Technology (IT) spending that often accounts for an organization’s second largest expense after labor.
IT executives would be wise to use current market conditions as an opportunity to re-position IT as they also respond to the urgent needs of the business. They can cut spending, but should be wary of applying an ax where an aggressive scalpel is needed. Too heavy a hand may damage business results, harm customer relationships, and cause years of catch-up investments once conditions improve.
Effectively managing IT assets, for example, may enable IT executives to achieve tactical improvements, without damaging service levels or harming critical development programs.
Taking such an approach can have a significant impact. Beyond just IT governance, an effective software asset management strategy and infrastructure optimization can improve costs, reduce risk and increase IT and end user efficiencies. Consider the results from a recent KPMG survey Software Asset Management: A Key to Infrastructure Optimization. The survey of over 1,000 organizations found that as organizations gain control by proactively managing their software assets, they realize software asset management-related IT labor cost reduction of as much as 50 percent. This is prevalent with more mature organizations and specifically with organizations that use software asset management tools and processes to manage the software asset cycle.
However, according to the same KPMG survey, most organizations are struggling to manage their IT assets effectively and efficiently. The survey found that a majority of organizations – 86 percent – do not have an effective software asset management strategy or complete or accurate information about software deployments and entitlements. Of this 86 percent, 59 percent have limited control over their software assets and lack software asset management business processes and tools. The remaining 27 percent indicated they have some software asset management processes and tools, but typically don’t use the information for decision making because the information gathered from these processes and tools may not be reliable.
Software asset management, and the control and protection of software assets throughout their life cycle, is a critical component to any organization’s ability to successfully manage its IT and achieve infrastructure optimization. The implementation of many IT processes, including configuration, release, or change management, is dependent on the organization having accurate knowledge of its IT assets. When an organization does not know what software assets it has, where they are deployed, how the assets are configured and how or by whom they are used, IT management is seriously compromised.
Implementing an effective software asset management strategy can have its hurdles. The pace of technology innovation constantly presents new challenges. Two current examples of these include virtualization and open source software.
Virtualization adds a degree of separation between software and hardware, and introduces dynamically changing configurations that are arguably more difficult to track and manage. Open-source software also creates new challenges from an asset management standpoint. Some organizations may operate under the incorrect assumption that because the licenses are free they do not need to be managed. In fact, while open-source software still has compliance implications from maintenance and support standpoints, effective software management is also critical for many IT operational reasons that have nothing to do with compliance.
Nonetheless, license compliance and license optimization are important aspects of software asset management. A mature software management strategy can enable organizations to gain the greatest benefit from software license agreements, which are taking an ever-increasing share of IT budgets. An accurate understanding of license entitlements and deployments allows companies to negotiate with software vendors from a position of knowledge and to avoid paying for unneeded software. In late 2007, KPMG conducted a survey (Is Unlicensed Software Usage Hurting the Bottom Line?) of software publishers to determine how much revenue they might be losing due to inefficient software licensing oversight. One finding of that survey was that software publishers have significant business incentives for determining whether their customers are in compliance with their software licensing agreements. Over-deployment of software can cost organizations millions of dollars in unplanned expenditures and unrecorded liabilities.
A successful software asset management program should include formal, well documented policies and procedures, accurate hardware and software inventory and periodic self evaluation. Additionally, it’s useful to have a continuous monitoring function. Knowing what you have and where you have it is not a static, point-in time exercise. The speed at which IT changes makes it even more important to be able to get this information on a near real-time basis to ensure accuracy of software tracking.
The pace of technology innovation will continue to present new challenges for organizations. Managing software assets should continue to be a critical part of an organization’s overall information technology business strategy towards infrastructure optimization and cost reduction.
The views and opinions are those of the author and do not necessarily represent the views and opinions of KPMG LLP.
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