June 01, 2009, 9:11 PM — If you are one of the very few IT Directors or Line of Business Owners on the planet lucky enough not to be affected by the current down turn in the economy, and you haven’t had your budget slashed by 30 to 50 percent or more, then there’s probably no need to read any further. If, on the other hand, you are part of the vast majority for whom dealing with the reality and impact of today’s economy is inescapable, then what follows will certainly be of value.
Organizations today are faced with multiple business and information technology challenges, including the need to cut costs, improve management and utilization of existing software licenses, and boost IT productivity in the face of headcount reductions. And, while this seems relatively straightforward and somewhat intuitive, as the cliché goes, it is easier said then done. Certainly if cost wasn’t a factor, you could find any number of vendors willing to sell you software asset management solutions, or any number of tools that would boost productivity. The real question is this: Can you really cut costs while at the same time meet the other objectives? Conversely, you might ask yourself just how much are you likely to save if you are able to improve the management of your software assets and increase productivity of your IT staff.
A common practice to cutting costs today is to simply defer software purchases until a later date when theoretically there will be more money in the IT budget for such expenses. I’m not sure when this professed day will happen, but I’m certain it isn’t any time soon. Ultimately, I’m not convinced that simply postponing purchase decisions will really reduce costs to the level necessary to keep most businesses afloat. As a case in point, in the article "The True Costs of Software", Alan MacCormack, Assistant Professor in the Technology and Operations Management unit at Harvard Business School stated “In most cases, the price of software proved to be less than 10% of the total cost of ownership”.
So then, what’s the answer? According to Ron Brill of KPMG, referring to a survey KPMG conducted of more than 1,000 organizations, “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.”
We must examine factors other than the cost of software licensing if we expect to achieve the levels of cost reductions mandated today. Here are some areas that affect the total cost of ownership (TCO) of software, and are excellent places to find ways to significantly reduce costs.
1) Evaluation: The cost of searching for the right software, due diligence on vendors and products, reference checks, POCs
2) Procurement: The process for securing the initial funds to purchase a product, clearing vendors and products with internal standards bodies (architecture governance boards), etc.
3) Deployment: Cost to do the initial install, and stay current with upgrades of the latest software, ensuring that versions don’t interfere with each other or with other products, packaging the software and rolling it out, etc.
4) License allocation: Ensuring licenses end up in the hands of people who need them; and don’t remain stuck in the hands of people who no longer need them
5)Inefficient usage patterns: The fact that one generally pays a great deal for each tool, but that certain tools are only needed for a limited period during a particular project, or for just a particular type of project
6) Compliance: Ensure that the number of licenses deployed is equal to the number of licenses that were purchased
7) Vendor management: Negotiating contracts, processing maintenance renewals, etc.; requires adapting to how each vendor does business and educating the vendor on how one does business, getting vendors added to the preferred vendor list, etc.
8) Budgeting: On going work, once software is brought in-house, to optimize next year’s licensing purchases and renewals – how many do I need, by project, by role, etc. Includes the cost of making special purchases outside of budgetary cycles
9) Training: There is a cost of training. There is a cost of not training. The more training, the more one can leverage the tools and experience the benefits. The key is to find the right balance and frequency.
