Building the Business Case for Software Asset Management. Key Insights on Achieving Compliance and Savings to Gain Executive Buy-in for SAM

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1 Building the Business Case for Software Asset Management Key Insights on Achieving Compliance and Savings to Gain Executive Buy-in for SAM

2 Table of Contents Introduction: Strategically Managing Software Licenses is Imperative for Keeping Business Operating Costs Low 3 Strategic License Management What Does that Mean? Making the Business Case for Strategic License Management Business Drivers Benefits Strategic License Management: One of the Best Areas in IT to Achieve Hard Savings, Bringing in Fresh Financial Resources Advanced License Optimization Overall Benefits of Strategic License Management Using Real-Life Examples A Specialized SAM Tool-set is a Requirement How an ill-suited License Management Technology Undermines Benefits Conclusion /16

3 Introduction: Strategically Managing Software Licenses is Imperative for Keeping Business Operating Costs Low It is nearly impossible to imagine running a business without software because it permeates every aspect of operations. Imagine the number of employees in your organization and the computers in use desktops, laptops, tablets, servers, mainframes and the amount of software used on them on a daily basis. Now consider the impending costs to license each and every software program. The numbers are staggering and growing exponentially. Major software vendors know that their products are ingrained in day-to-day business operations and leverage this dependence financially especially for ongoing support and maintenance. While organizations may be able to negotiate significant discounts in volume purchase agreements, the price trend for software is inevitably going up. Business operation s deep-seated reliance on software makes tracking and analyzing licensing investments a necessity for keeping operating costs in check. And every business has the goal of keep operating costs low. According to a report from Info-Tech Research Group in 2009, Software Asset Management (SAM) can drive savings of 30% or more on software licensing and administration. 1 Thus, Software Asset Management is imperative to achieving common business goals. IT and procurement professionals have long recognized that SAM is something we should be doing, but do not have the executive support necessary to get an internal SAM initiative off the ground. In order to help better communicate why your organization needs a strategic SAM program and a specialized-for-purpose tool-set to buttress the program, this white paper discusses: The risks of not managing licenses The drivers for and returns of strategic software license management The key challenges to address when exploring a SAM tool-set The rewards of a successful SAM program [1] Info-Tech Research Group ( ). Asset Management Saves 30% or More on License Costs, Info-Tech Research Group. Retrieved October 27, 2014, from 3/16

4 Strategic License Management What Does that Mean? Strategic License Management (SLM) is an approach to SAM which puts the importance of software assets and the cost of software licensing into perspective. It requires more than spreadsheets and part-time attention. At its core, Strategic License Management encompasses people, processes, and a tool-set for tracking: What software, versions, and editions are used within the organization and on which devices Licenses purchased and leased by the organization including the terms and conditions of volume contracts, maintenance agreements, and entitlements such as product use rights and the license metric This information is respectively maintained in a central software inventory and a license and entitlement inventory, creating the foundations of Strategic License Management. SLM is an advanced approach to Software Asset Management because it places the quality of the data at the center of its processes to ensure the most reliable results, and thus the highest savings potential and strongest foundation for decision-making. To achieve the highest level of data quality, SLM comprises additional services and consulting expertise, while the specialized tool-set delivers embedded data quality management features and quality gates. In other words, SLM is a complete solution package for SAM beyond only a tool, covering expert consulting, data handling services, and an advanced tool-set. Accordingly, the organization is fully equipped to immediately and confidently reconile its software usage with its licenses and entitlements to determine its compliance position; that is, if it has enough licenses to cover its software usage or has over-purchased, and then take action to improve its position. Subsequently, various departments in the organization are enabled as follows: Finance, Accounting, and Controlling can fully account for software spend, and clearly connect these expenses to software usages to perform software cost allocation, chargeback and accounting related to software. Focusing on the tool-set, Strategic License Management can be broken down into two stages Software License Optimization (SLO) and Advanced License Optimization (ALO). SLO is the automatic and correct deployment of license entitlements for immediate cost savings and accurate license compliance reporting. SLO is expanded upon in this white paper in the section: Making the Business Case for Strategic License Management. Advanced License Optimization builds on the savings of SLO and delivers immediate short-term cost avoidance and long-term increased hard savings. It encompasses processes and enhanced features in the SAM tool-set, gaining greater depth of data and automated data quality management for complete data reliability. Consequently, ALO enables the business to optimize its licensing costs to an absolute minimum, while maintaining compliance, accurately budgeting, and strategically planning license purchases to keep business operating costs low. ALO is expanded upon in this white paper in the section: Strategic License Management: One of the Best Areas in IT to Achieve Hard Savings, Bringing in Fresh Financial Resources. Technical Stages of Strategic License Management Enterprise IT can take control of the software product lifecycle and monitor software usage in terms of compliance and audit defense, ensuring correct and optimized licensing for desktops, notebooks, tablets, servers, virtualization, and the data center. Other areas of IT including security and the service desk can also use the foundations of SLM to better manage software related issues and requests. Procurement, Strategic Sourcing, and Vendor Management can take control of the software portfolio, prepare for true-ups with greater ease and efficiency, and drive contract renewal negotiations. 4/16

5 Making the Business Case for Strategic License Management If managing software licenses is so important and beneficial to the business, why doesn t executive management make Strategic License Management a priority? Explaining to an executive why physical assets such as vehicles, facilities, employees, servers, laptops, and so on should be managed is easy and understandable because these tangible assets are seen, touched, and heard on a daily basis. If a physical asset goes missing, breaks, or is left unutilized it is immediately noticeable. Even the importance of software management e.g. patches, security, software development, etc. is clear, because its impact on daily business or lack thereof is immediately felt. Yet even though long-term software license purchases are so vital that they are ultimately decided in the office of IT directors and CIOs, once the contract is signed the software asset is often treated with an out of sight, out of mind mentality. Software assets licenses and contracts are unique. They cannot be tasted, touched, heard, or smelled. More frequently software licenses and contracts are digital, intangible and can only be read. Moreover, when was the last time you read through a license agreement before clicking I Accept? There is also little to no emotional attachment or brand loyalty to software assets. If a software license or contract goes missing or unused, it has no measurable effect on the daily business routine. So, while the benefits of software are clear, the value of the licensing behind it may be completely unknown or forgotten especially for software assets acquired many years ago. For this reason the importance of Strategic License Management is not top-of-mind for business executives; and it is up to IT and procurement professionals to proactively make the case for it. Business Drivers Despite their lack of tangibility, software assets are just like every other business asset: they have a lifecycle, carry benefits, and come with varying degrees of risk. The risks that software assets carry are three-fold: Financial: the asset generates costs beyond the initial investment, frequently in the form of support and maintenance fees and administration costs Contractual and compliance: the software can only be used within certain contractual terms Legal: the asset is constrained by certain laws, most commonly copyright and intellectual property laws, but also Sarbanes Oxley and tax laws There is no way around it: businesses that do not have an effective or efficient way of tracking software assets are exposed to these risks. They are operating in a knowledge vacuum deficient on software licenses which causes contract, compliance, and legal risks, and over-purchased on other licenses which subjects the organization to financial risk. Moreover, they have no policies or processes to track, measure, prioritize, or mitigate the risks. To make it clear that software assets carry risks that, if left unmanaged, can undermine business goals, emphasize the prominent exposures that would make sitting at the desk in a C-suite most uncomfortable, e.g. increasing costs that cannot be justified and being caught breaking rules. 3 Unjustified Cost Increases: Software maintenance contracts and support costs make up a palpable percentage of many IT budgets, and the costs continue to increase year after year. The risks associated with ever-increasing maintenance and support fees are not always obvious to executives who may assume the costly payments must be for good reason. Maintenance fees pay for two services: 1) ongoing software development that provides new product features, updates, and bug fixes, and 2) support fees for phone and Web-based support for times when the business needs help with using or administering the software. Typically, maintenance contracts run for the entire lifecycle of the software, meaning the business pays these fees from the day the licenses are purchased until the software is obsolete and sometimes even after that. Double-digit percentage increases are not uncommon. Some contracts may go up 10% annually like clockwork. Other contracts may have been under special promotional pricing for the past x-number of years, which has now expired. A study from InformationWeek shows, it s not uncommon for 30% or more of software purchases to be undeployed, resulting in a substantial effective increase in maintenance spend. 2 Maintenance contracts are a large, ongoing expense that have huge potential for optimization as demonstrated in the following three examples: [2] Keegan, S., & Alpert, A. (2012) Step Plan for Cutting Software Costs, InformationWeek. Retrieved December 6, 2012, from twimgs.com/ audiencedevelopment/jc/whitepapers/software/12stepplanforcuttingsoftwarecosts.pdf 5/16

6 1. Unnecessary spending is illustrated in the following example: a company s license inventory shows that 1,200 licenses are available for an engineering program, but software usage reports show that the licenses never pass 50% utilization. Thus there are 600 spare licenses, meaning the company has over-spent. Additionally, the 1,200 licenses are under an annual maintenance contract, which costs 20% of the licensing fee. Had Strategic License Management been implemented, which provides a consolidated license inventory and transparent software usage information, the overspending could have been avoided. However, there is still the opportunity to optimize the maintenance contract when it s renewed. With the information delivered by Strategic License Management the business can trim down the maintenance fee to match its actual license utilization achieving immediate cost savings. 2. A little bit of investigation can reveal that maintenance is still paid for expired contracts, often because a payment schedule was set up and never canceled. 3. Do not be surprised to find that annual maintenance pays for upgrades even though the business uses the software three versions behind because there is fear that the upgrade will create more problems than it fixes. Skipping one upgrade may make sense, but when the business is consistently not adopting new versions, does paying maintenance really make sense? A look at the potential savings earned by canceling the maintenance agreement vs. reinstatement fees is often worth the effort for many products. Being Caught Breaking Rules: Software license audits have become commonplace, so license compliance and audit risks should already be top-ofmind for business executives. In 2011 Gartner developed a survey to track the growth of software license audits, the results of which showed that 65% of responding organizations were the subject of at least one audit in the previous 12 months, up from 61% in This is a significant increase from [the] survey in 2007, which found that 35% of respondents had been audited. 3 Common risk factors that can trigger an audit are company size and suspicion of non-compliance due to inconsistent license purchasing behavior, organizational changes (e.g. restructures, M&As), and a history of license misuse, as shown by research conducted by Ernst & Young. 4 To complicate matters, many software publishers like Adobe, Attachmate, Autodesk, IBM, Microsoft, McAfee, Oracle, SAP, Symantec, and VMWare have established Customer License Compliance Programs, which are permanent operations to recover millions of dollars in license revenue annually by regularly targeting enterprises for invasive audits. Microsoft and other software publishers now use imbedded, automated technology that detects and reports license misuse directly back to the publisher. This new age audit technology can request on-the-spot payment for unpaid software, block access, and prevent unlicensed software from working, which can hinder employee productivity substantially. These fixed Customer License Compliance Programs and audit technology generate significant, unplanned expenses for businesses that do not manage their software assets appropriately. A sample calculation can make the financial risk clear: A business sources software from 80 different vendors. 10% of the vendors have Customer License Compliance Programs in place and each send the business an audit assessment letter annually. A full-time employee needs 20 work days to respond to each letter, assuming that no Strategic License Management tool-set supports the employee s efforts. With an annual salary of $90,000.00, handling the audit assessment letters each year costs the business $39, annually. If one of the assessments letters turns into an invasive audit, it will require at least 3 full-time employees to manage over 6 months for an additional $135, in costs on top of the original overhead expense. That is a total of $174, in personnel expenses alone that can be significantly reduce by a specialized SAM toolset. Add in legal fees and the resulting charges for under-licensing, which can easily tally up to $500,000.00; and business executives can face well over a million dollars in unplanned audit costs in all. Strategic License Management tracks license purchases and software usage, helping businesses streamline spending, legally sort ownership of software assets, and ensure compliance with licensing terms. Thus, Strategic License Management helps the business fend off audits on all possible levels. [3] Disbrow, J. B. & Bona, A. (2012, January 27). The Software Vendors That Are Auditing Now and What to Do About It, Gartner Inc. Retrieved November 15, 2012, from [4] Ernst & Young LLP. (2011). Software compliance without tears - Monitoring customers software usage in a complex world - Software asset management survey. Retrieved February 20, 2011, from TEARS.pdf 6/16

7 Benefits Aside from legal terms and conditions, software licenses and contracts contain entitlements which are very valuable to the business the license owner because they grant usage rights, most commonly called Product Use Rights (PUR). Tracking product use rights are imperative to compliance because they define how the software can be used and permit the business to use the software in certain ways that would otherwise require an additional license. PURs state, for example: Where the software can be installed, e.g. laptop, desktop, home computer, terminal server, mainframe, virtual machine, etc. How the programs are allowed to be opened/accessed, e.g. remotely, via smartphone, tablet, or workstation How the programs can be used, e.g. multiple installations, by only one or multiple users, only for research and development, only for back-up, etc. Whether you can upgrade or downgrade between product versions Some example PURs include: Upgrading the software to latest version as soon as it becomes available, at no additional cost (upgrade rights) Purchasing the license for the latest software version, but allowing installation and use of an older version (downgrade rights) Installing and using multiple versions of the software on the same machine (right to multiple versions) Having one copy of the software on a computer at work, and a second copy on a laptop as long as the user of both machines is the same (right to secondary copy) Installing and using the software on a physical machine, as well as on one or more virtual machines Accessing the software remotely (right to remote access) As pointed out in the previous section, Strategic License Management What Does that Mean?, Software License Optimization is one goal of Strategic License Management because it delivers the processes and tool-set to automatically and correctly deploy license entitlements such as product use rights for accurate license compliance. As early as 2006, Microsoft published a white paper stating, According to Gartner, companies that build effective Software Asset Management (SAM) programs can reduce their IT spending by up to 30 percent the first year, and 8 to 10 percent during subsequent years. Clearly, there is a significant financial incentive to focus on SAM solutions. 5 Depending on how many licenses the business owns, how the software is used and how often, the value of the entitlements can represent millions of dollars. Without SLO, an organization simply counts licenses, counts installations, and compares the two numbers. This is called the counting and comparing method which ignores two key elements of the software asset: the license metric and the entitlements granted in each license, resulting in lost value as shown in the following examples: The counting and comparing method ignores the entitlement or right to multiple versions granted within certain licenses, and assumes that each version of the software installed requires its own license. The same is true with the right to secondary copy, when a single user has both a desktop and laptop computer with the same software version installed on each. This method of license management assumes that one license is required for each software installation, leading to the wrong license demand result. Consequently the business appears to not have enough licensing to cover its software use, which is a major risk in an audit situation and could trigger unnecessary license purchasing ultimately wasting valuable funds and needlessly inflating operating costs. Downgrade rights alone can drastically reduce or even eliminate the compliance risk of underlicensing and the need to purchase additional licenses. Many businesses have, for example, purchased Microsoft Office 2010 licenses, but have Microsoft Office 2008 installed on their machines and used universally by employees. Without knowledge of the downgrade rights the business cannot apply them, making it difficult to reconcile the Office 2010 license purchased against the installed Office 2008 versions. Consequently, the business appears to have over-spent on Office 2010 licenses and be in breach of Office 2008 licensing. Server software is not licensed per installation. The metrics for these licenses involve the combination of various factors, including: CPUs and cores, processors, virtual machines, and the hardware manufacturer. Therefore, counting the number of installations of server software products does not help the organization to determine how many licenses it needs to cover the installation. In this case the counting and comparing method completely fails to produce a compliance position. Thus, Strategic License Optimization delivers key returns on license investments because it records and manages the contents of licenses and software contracts including entitlements to mitigate risks, ensure full utilization of the value of licenses, and avoid over-spending. [5] Microsoft in combination with Universal Management Solutions (2006). Return on Investment: The Financial Benefits of Software Asset Management, Microsoft Corporation. Retrieved November 4, 2014, from download.microsoft.com/download/9/6/6/9669fb5f f9d-bd78-fd1a6139eeb5/ FinancialBenefitsOfSAMWhitepaper.pdf 7/16

8 Strategic License Management: One of the Best Areas in IT to Achieve Hard Savings, Bringing in Fresh Financial Resources When a company is at the beginning stages of Software Asset Management it might be hard to image, however, license compliance and SLO are the most basic benefits of SAM and are therefore considered a given in this section of the white paper. Here Advanced License Optimization - the benefit of Strategic License Management above-and-beyond compliance and SLO - is described. Followed by the overall benefits of Strategic License Management using real-life examples, that IT and procurement professionals can use to make their business cases especially robust. Advanced License Optimization As previously outlined, ALO builds on the foundation of SLO, encompassing processes and enhanced features in a SAM tool-set which create greater depth of reliable data and automated data quality management. ALO is the marriage of Strategic License Management with IT service management: it combines information about the business software usage patterns and dynamic IT architectures with automated analysis of all licensing options available to the business, delivering reports on: The most cost-effective license edition or metric currently owned by the organization to cover existing software installations How to strategically allocate licenses to produce the lowest-cost license position in an audit situation The optimal license model to purchase in the future, based on historical software usage information (demand planning) The optimal hardware configuration and virtualization architecture to instantly reduce the demand for licenses thus producing short-term cost reduction and long-term cost control The lowest cost licensing edition or metric for planned hardware and virtualization configurations using automated comparisons of all available licensing options on simulated infrastructure scenarios In short, ALO is understanding in a dynamic IT environment what the business software usage is at any given moment, and then deploying the most cost-effective license option. ALO represents the strategy in Strategic License Management, equipping organizations with the analytics needed to strategically plan license purchases and IT architectures with a constant eye on the cost-benefit analysis of each licensing scenario. Licenses are then intelligently allocated to produce the lowest-cost license position for compliance. 8/16

9 ALO changes the static picture of the compliance position into a motion picture. It takes the guesswork out determining which licensing option is the most economical for the business and how to reduce the demand for licenses, as follows: For certain products software publishers grant the organization a right to choose between different license models. Examples are Standard, Enterprise, or Datacenter editions for Microsoft, Named User Plus (NUP) or Processor-based licensing for Oracle, and virtual capacity or full capacity for IBM. The optimal choice, however, is not always the one associated with the lowest upfront price tag, but rather determined by a set of factors including the present licenses owned by the organization, and/or the infrastructure on which the software will be installed (e.g. hardware configurations, virtualized machines, server With clusters). Advanced License Optimization the business has direct comparisons of the available licensing options and can see that: The benefits of ALO can be best described in an example, here using Microsoft SQL Server: An organization already owns 20 SQL Server 2008 R2 Enterprise Edition licenses and 40 SQL Server 2008 R2 Datacenter Edition licenses. It has SQL Server version 2008 R2 installed on a server with 4 CPUs, which hosts 8 virtual servers (vs). After Software License Optimization, Datacenter licenses are applied to the installations because there are more of these licenses available in the company s inventory of owned licenses, making them the first viable match to achieve compliance. The image below illustrates the described licensing scenario. 20x MS SQL Server 2008 R2 Enterprise 40x MS SQL Server 2008 R2 Datacenter License Inventory SQL 2008 R2 SQL 2008 R2 SQL 2008 R2 Installed vs1 vs2... Standard Edition licenses are the most economical licensing option; however, because the company does not have Standard Edition licenses, it would have to buy these, which would be unnecessary spending because there are enough SQL Server licenses in the inventory. In this case, ALO reveals that Server Enterprise is actually the cheaper licensing edition, and 4 CPUs that there are enough available licenses to choose this edition without incurring additional costs. Furthermore, if the need for additional licenses presents itself, procurement DC 2008 R2 managers can draw up analyses of the current infrastructure to immediately determine the DC most 2008 cost-effective R2 licensing option to purchase, or even simulate new infrastructures. DC 2008 R2 Now, extend this automated ALO process onto the hundreds or thousands of DC servers 2008 in an R2organization s data centers and the potential hard savings quickly rise vs8 Considering that the number of virtual machines and their relationship to physical devices changes regularly, in addition to the IT service desk modifying hardware Infrastructure taking the impact of their changes on the need for Optimization is a permanent, ongoing task. It simply cannot be done manually to this magnitude. Strategic License Management the sum of all its parts must be supported by a designed-for-purpose tool-set to unlock the full potential of software assets and achieve key, ongoing license cost optimization. Particularly, the data quality and completeness are prerequisites to achieving ALO. In the next section of the white paper, A Designed-for-purpose Tool-set is a Requirement, the necessity of specialized license management technology is presented in more detail. Chosen license option after SLO calculation 9/14 9/16

10 With Advanced License Optimization the business has direct comparisons of the available licensing options and can see that: License Datacenter Edition Enterprise Edition Standard Edition Entitlement Entitles unlimited virtual servers Entitles 4 virtual servers Entitles 1 virtual server Metric Price Cost Total Per processor $55,500 4 x $55,500 $222, Per processor SLO result! Best $45,500 4 x $45,500 $180, match now! Per vserver $6,500 8 x $6,500 $52, Best option! Standard Edition licenses are the most economical licensing option; however, because the company does not have Standard Edition licenses, it would have to buy these, which would be unnecessary spending because there are enough SQL Server licenses in the inventory. In this case, ALO reveals that Enterprise is actually the cheaper licensing edition, and that there are enough available licenses to choose this edition without incurring additional costs. Furthermore, if the need for additional licenses presents itself, procurement managers can draw up analyses of the current infrastructure to immediately determine the most cost-effective licensing option to purchase, or even simulate new infrastructures. Now, extend this automated ALO process onto the hundreds or thousands of servers in an organization s data centers and the potential hard savings quickly rise to 7 and 8 digit figures. Considering that the number of virtual machines and their relationship to physical devices changes regularly, in addition to the IT service desk modifying hardware configurations to meet their own expectations--without taking the impact of their changes on the need for licenses into account--the implications are significant. Optimization is a permanent, ongoing task. It simply cannot be done manually to this magnitude. Strategic License Management the sum of all its parts must be supported by a specialized tool-set to unlock the full potential of software assets and achieve key, ongoing license cost optimization. Particularly, the data quality and completeness are prerequisites to achieving ALO. In the section of the white paper, A Specialized SAM Tool-set is a Requirement, the necessity of fit-forpurpose license management technology is presented in more detail. 10/16

11 Overall Benefits of Strategic License Management Using Real-Life Examples Reduce IT administration costs Over the years, the identification and consolidation of license-relevant software data has proven to be very resource-intensive and error-prone. Voith GmbH, a global leader in plant construction and mechanical engineering, provides a real-life example. A decentralized infrastructure and different legal and cultural parameters presented Voith with specific challenges for its Software Asset Management initiative. In 2012 Voith implemented a specialized Strategic License Management technology. The objective of the project was not only to install a license management tool-backbone to track license compliance, but also to establish the required processes, and technical and policy foundations for SAM. Michael Bonk, Head of Commodity Competence Center IT & Corporate License Management describes the benefits of Strategic License Management at Voith: With the support of Aspera SmartTrack [a Strategic License Management technology], license compliance is guaranteed. By centralizing license management with standardized, automated processes, overhead costs were significantly reduced. Furthermore, the transparent overview of license demand allows us to negotiate significantly better with Microsoft. The ability to make quick decisions based on up-to-date data and automatically created reports is also a benefit of SAM at Voith. Strategic License Management helps businesses like Voith more efficiently administer licenses and prepare for contract true-ups through automated processes, Software License Optimization, better reporting features, and executive dashboards. Respond to audits faster and protect against future audits Strategic License Management greatly reduces the amount of time and effort it takes to effectively respond to an audit request, while minimizing the risk of having to purchase software at higher prices and paying fines. The truth is, most people can t get the executive support necessary to get a Strategic License Management initiative off the ground until a painful license compliance audit breaks the sound barrier - and the budget. This means the first major audit usually takes months of effort because licenses need to be hunted down and there are no adequate tools in place to ease the process. And without a system to create compliance positions there is no viable way for the company to verify the results presented by the auditors, leaving the business at their mercy. With a specialized Strategic License Management technology businesses can: Keep track of licenses, entitlements, and software installations and usage, as well as the compliance position, to proactively catch out-of-compliance situations early when they can be corrected, rather than in an audit when the company would be required to disclose under-licensing Dramatically decrease the amount of effort and time required to respond to an audit request as well as deliver the required data during an audit Protect the company during an audit with a sound data basis and reports Fend off sales by compliance which is an method that software publishers are using increasingly to push license sales as indicated by KPMG research: Over half of our respondents [software companies] said their compliance programs reported into sales or sales operations within their company, and only 13 percent into their finance function. 6 Responsible business leadership involves identifying the risks threatening the business, and controlling and diminishing those risks before they get out of control and have negative consequences. Strategic License Management identifies license compliance risks and establishes a set of well-defined policies and best practices to ensure cost-effective management of software assets throughout the organization. Cost saving through more efficient use of software licenses Implementing a Strategic License Management technology often achieves ROI in just 6 to 12 months. An efficient program and the right technology help businesses to exhaust cost saving potential and reduce shelfware. By maintaining a license and entitlement inventory, and comparing this to license demand, companies can identify available licenses, and thereby make a business case for Strategic License Management by re-allocating available software licenses where they are needed instead of purchasing new licenses, while not re-allocating licenses when in violation of contract terms to mitigate audit risk. Furthermore, businesses can use Strategic License Management to track software usage using this information, automatically triggering a process that uninstalls unused software to recover licenses which the company can later re-deploy with new requests at no cost. [6] Baguley, P., Lamoureux, T., Lo, V., Pink, R. (2013). Is unlicensed software hurting your bottom line?, KPMG LLP. Retrieved November 4, 2014, from kpmg.com/us/en/issuesandinsights/articlespublications/documents/is-unlicensed-software-hurting.pdf 11/16

12 After implementing Strategic License Management, a global sports apparel designer and manufacturer found that more than 70% of all requests for desktop software could be satisfied by re-using existing licenses. This was possible through software metering policies, which required that software not used within 6 months be uninstalled, and the license subsequently be made available in the license inventory. This resulted in six-digit savings. The company consolidated all available licenses following its organizational and geographical structure - starting on a global level and inventorying licenses down to local offices. The Strategic License Management technology drove this process and added compliance security by sorting available licenses to the correct inventory based on the licensing terms and conditions. This transparency also enabled the company to defend audits more efficiently, with a constant eye on its compliance position. All these facts resulted in an ROI within a period of 6 months. Eliminating obsolete contracts and improving the business negotiation standpoint and purchasing conditions Through Strategic License Management, organizations keep track of software licenses, know exactly what type and how many licenses the business needs, and can accurately project what it will need in the future. This puts the company in the driver seat when it comes to negotiating contracts with software vendors. With better information about software usage and owned/leased licenses the company can save money by: Consolidating local contracts and entering into higher discounted volume licensing programs Negotiating better prices for one-off purchases Reducing installations of unused software Securing better maintenance terms. A fit-for-purpose license management technology reveals areas for cost saving such as the opportunity to combine contracts. As a result, the complexity of contract management is kept to a minimum, transparency increases, and executives are able to use the technology to identify potential areas for significant cost savings with little to no effort. The cost savings achieved here can be monumental as one automotive manufacturer found out. Through Strategic License Management technology, this internationally operating corporation gained an overview of all the software contracts across the entire organization and learned that it had duplicate contracts with many vendors, sometimes as many as five of the same contract. By combining these contracts the company was able to save hundreds of thousands of dollars by qualifying for higher volume discounts. Accurate budgeting and cost-charging of licenses costs Organizations with enterprise agreements and centrally purchased licenses often need to account the costs back to the respective divisions that serve themselves from these corporate assets. Without the ability to track which licenses owned by the organization belong to which enterprise agreement, in conjunction with inaccurate software usage and installation information, cost allocation is nearly impossible to clearly document. Often the result is push-back from the respective company divisions due to lack of cost transparency. Strategic License Management changes the situation: not only are licenses directly linked to their over-lying enterprise agreements, but software installations and usage are monitored. This information is maintained and mapped out to the organizational and accounting structures of the business ultimately enabling enterprise licensing costs to be distributed fairly and accurately across the organization. In turn, this increases acceptance for internal cost allocation. Evonik Industries AG is one of the world s leading specialty chemicals companies. Since 2009, Software Asset Management has been firmly established at Evonik as a critically important discipline for cost efficiency supported by Strategic License Management technology. A critical success factor of SAM at Evonik is the cost-charging of centrally purchased and managed software licenses. This requires exceptional data quality and corresponding processes. For example, usage-based cost allocation would not be feasible if cost centers are missing or incorrect in the technology. Some specialized Strategic License Management technologies even follow accounting rules, taking into account the different international tax rules and transfer prices. Today Evonik has service-based billing of central software license costs, whereby the cost allocation always take place according to one of three following models: software installation, according to cost center, or according to account. We have established an economical, as well as legally secure license management system. Additionally, our planning and budgeting processes are optimized, so that today with the help of Aspera SmartTrack [a Strategic License Management technology], we are able to calculate the cost of software packages based on actual software usage, explains Dr. Michael Markiewicz, Corporate Software License Officer at Evonik Industries. Communicating these benefits within your organization can help executives visualize the value of Strategic License Management, and may ultimately convince them to put a SAM project on the agenda. People are much more willing to prioritize a project that they perceive as valuable and not as a necessary evil. 12/16

13 A Specialized SAM Tool-set is a Requirement In a large company keeping an overview of all purchases, payments, and assets is a difficult task without a specialized, fit-for-purpose license management tool-set. Individual cost centers or groups, depending on the organizational structure, traditionally have their own software agreements and contracts, as well as their own procurement procedures and policies, leading to limited oversight and less transparency on the management level. As early as 2004, a paper co-published by the Business Software Alliance and Gartner testifies to the value of Strategic License Management, and to the additional benefits of a specialized, fit-for-purpose technology: Associated with this [Software Asset Management] are significant cost savings one organization, in the transportation sector that has had SAM processes (but no specific tools) in place for some years, has achieved cost savings of 10 percent per annum over four years on licensing, maintenance and support, and new purchases. In comparison, a Taiwanese Telco that has installed both SAM processes and a SAM tool, has experienced cost savings of 19 percent on its software licensing costs in the first year, and 17 percent on its software repair and maintenance costs. This organization expects benefits to flow to Five years later in 2009 Info-Tech Research Group came to a similar conclusion about Strategic License Management technology: SAM tools not only help companies gain control over their assets, but they also help save money and ensure ongoing license compliance. 8 How an Ill-suited License Management Technology Undermines Benefits When an organization has the foundational license management policies and resources in place and is ready to implement a Strategic License Management technology, business leaders frequently assume that the best, most efficient route is to leverage technology from vendors they already know. This leads them to default to the IT asset and service management enterprise solutions already in place, regardless of if the technology s license management capabilities were taken into consideration when the enterprise solution was chosen. Known as ITAM or ITSM suites, these technologies support many other IT initiatives and processes within the organization, such as service desk, hardware asset management, software deployment, and configuration management. IT directors and CIOs affinity to suite solutions is understandable, because they are inclined to stick with what already works and is available. However, a lack of knowledge of the different depths of information required to drive existing IT initiatives and processes, and to enable Strategic License Management, make it difficult to recognize the deficiencies in the suite technology. This lack of knowledge ultimately leads to rigidity when the organization is ready to implement a tool to support Strategic License Management processes and resources. To demonstrate the depth of data required for license management, here are two examples: 1. It s easy to be discouraged in the pursuit of license compliance and Strategic License Management without the appropriate technology at hand. The typical organization often has hundreds if not thousands of software titles, differing software delivery platforms, and multiple license types governing its software use. The more diverse the business operations, the more complex the IT architecture is, and thus the licensing scenarios. There is a huge volume of raw data that must be collected, analyzed, and collated to turn into useable information, including a large amount of legacy entitlement records scattered across offices. To complicate matters, software programs are typically known by several dozen different names, and licensing rules are complex and vary from publisher to publisher. Sometimes within a single publisher, the licensing varies from version to version of the same software product. For example, for just over 3,200 Adobe software products, the company has nearly 90,000 different SKUs available, each of which correspond to a license on average that s 28 different licensing options per product. [7] Business Software Alliance and Gartner Inc. (2004). The Business Benefits of Software Asset Management, Gartner Inc. Retrieved Novmeber 4, 2014, from [8] Info-Tech Research Group ( ). Asset Management Saves 30% or More on License Costs, Info-Tech Research Group. Retrieved October 27, 2014, from 13/16

14 A-Model for SAM 2. The appropriate technology takes the purchase data and licenses, as well as the hardware and deployed software, into consideration as demonstrated in Aspera s A-Model for SAM above. The licensing information is gathered from procurement and ERP tools like Ariba and SAP. The licensing terms and conditions and entitlements are not provided or tracked by these systems and must be supplied externally. Many ITAM and ITSM suites lack this particularly important data. Information about software installations and usages, including scan data (e.g. files, ISO tags), electronic software distribution (e.g. MSI), Windows Registries (e.g. ARP), and software metering data, can often be gathered using a discovery or inventory tool provided by the ITAM or ITSM suite. Basic hardware data for license management is often available in a central asset management system (e.g. CMDB), but additional data (e.g. manufacturer, CPU types, number of CPU sockets) is generally not consistently tracked in the system as part of standard processes although this information is a requirement for license management. The organization is probably enjoying the benefits of virtualization, therefore information about physical to virtual machine relationships and clusters must also be tracked to determine the compliance position. Often this requires the implementation of a separate tool: a virtual machine manager. Additionally, for server software licensing, configurations are paramount (e.g. User profiles for SAP, hardware configurations for IBM, database settings for Oracle). Each publisher particularly IBM, Microsoft, Oracle, and SAP - requires a different set of data to manage its license metrics. Just consider the data you need to make sense of Microsoft licensing for its server software: Server status Installed product including edition Processor model Number of processors or used sockets License metric CALs Number of virtual machines License status (e.g. Software Assurance) In other words, Strategic License Management requires multiple sets of information, which must also be correctly combined and manipulated to accurately determine the licensing and compliance position of the organization and provide analytical reports. Thus, ITAM and ITSM suite solutions frequently rely on the counting and comparing method to cover basic license management functionality, and anything above that such as Software License Optimization and Advanced License Optimization requires manual work. The business must essentially re-invent the process for each software product. Functional inefficiencies in an ill-suited technology can undermine the overall performance of a Strategic License Management initiative. Precious funds and resources are squandered on lengthy implementations, overly complex interfaces and customizations, and patch-work components. In the end, manual involvement for key processes is still a painful necessity, and the business has not been able to yield the benefits of Strategic License Management. 14/16

15 Conclusion Simply put, the future of business is software. Trends such as Bring Your Own Device, the Consumerization of IT, the Internet of Things, and the Cloud all rest on the dynamic employment of software. When the future is software, then wisely managing license purchases and software usage must be a strategic business concern today. There is no way around it: Not doing Strategic License Management will cost substantially and expose the business to unwanted risks. If the company is underlicensed it faces legal and compliance risks, which result in hundreds of thousands often millions of dollars in unplanned expenses. If the company is over-licensed then it is wasting assets and faces financial risk in the form of inflated maintenance fees. The benefits of Strategic License Management go far beyond risk mitigation and touch multiple departments including IT, procurement, and financial. With licensing transparency, software usage, and license demand, the organization is able to significantly reduce its software investments by as much as 30% - and strategically control licensing costs. Hard, quantifiable savings are achieved by a number of Strategic License Management activities including lower administration costs, recycling licenses, and trimming maintenance agreements to reflect actual licensing needs. Effective Strategic License Management requires a specialized technology to achieve goals. Software licensing is inherently complex, and the necessary data to manage licenses and compliance is often not provided by discovery or ITAM and ITSM suites. Without a specialized tool-set, organizations are unable to determine their compliance position accurately (based on entitlements and license metrics), miss out on the opportunity to optimize and minimize costs, and may be discouraged to pursue Strategic License Management to its fullest potential. When Strategic License Management becomes a C-level priority, executives signal everyone--including software vendors--that compliance and license cost management are imperative, strategic goals for the business. And when SLM is implemented and tangible savings are realized, Software Asset Management business as usual becomes proactive, productive and profitable. 15/16

16 For more information and to arrange a private introduction to Aspera and our software license management solution, please contact: Aspera Technologies Inc. 119 Braintree Street, Suite 602 Boston, MA USA Phone Fax Aspera GmbH Dennewartstrasse Aachen, Germany Germany Phone Fax Aspera GmbH and Aspera Technologies Inc. Aspera GmbH and Aspera Technologies Inc. All rights reserved. The content and structure of this document are protected by copyright. Any reproduction of the information and data contained herein, especially the use of texts, text passages or illustrations, requires written prior consent of Aspera. Aspera and the license management logo are registered trademarks of Aspera GmbH in Germany and/or other countries. The information contained herein is of general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.

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