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1 WHITE PAPER How Enterprisewide Software Deployment Can Help Optimize Resources Sponsored by: Adobe Amy Konary May 2012 Randy Perry Global Headquarters: 5 Speen Street Framingham, MA USA P F IDC OPINION Companies today are focused on reducing the total cost of ownership (TCO) of key software assets and better managing their software environments to meet rapidly evolving business and technology needs while reducing compliance risk. One way of accomplishing this, for software that is widely used throughout the organization, is to take advantage of volume purchase offerings and enterprise agreements (EAs) in particular. The benefits of standardizing on desktop software across the enterprise range from cost and time savings to reduced risk and increased customer satisfaction: A TCO analysis showed that enterprise licensing saves IT organizations $131 per license in IT labor costs annually. In addition, the study found that on average 70 seats is the breakeven point where an enterprise license becomes more cost-effective than individual software licenses. Evaluating and purchasing a desktop application for an entire organization at once consumes two-thirds less time and cost than purchasing the software in individual or small groups. As well as the pricing benefits of purchasing in volume, centralizing purchasing can help rationalize software inventory through improved tracking, helping avoid purchasing more software than is needed and reduce compliance risk. Building version uniformity into the environment via enterprise licensing can help customers manage their software portfolio and streamline deployment. Users of multiple versions of unmanaged software tend to have 43% more calls to the service desk and require desk-side service. Furthermore, proliferation of multiple versions of unmanaged software drives compliance, compatibility, and control costs up by 30 40%, adding a 17% total overhead for desktop management.

2 IN THIS WHITE PAPER This IDC white paper, sponsored by Adobe, describes the benefits of enterprise standardization for desktop software applications that are widely used across the enterprise. Reasons for standardization, including key qualitative and quantitative benefits, are discussed. METHODOLOGY The basis for this white paper is IDC's ongoing research into the best practices of enterprise software license programs, specifically those offered by leading desktop software providers. Our research includes interviews with software publishers as well as their partners and their customers to understand key attributes and benefits of enterprise licensing. The document also includes feedback from two in-depth interviews that IDC conducted with Adobe Acrobat customers in 2012, as well as three previous in-depth interviews. Definitions When considering volume license offerings, IDC reviews the characteristics of several agreement types. Many independent software vendors (ISVs) offer EAs as well as transactional agreements that provide volume discounts. Enterprise agreements are signed by organizations that standardize on a specific software product for all their users. These agreements are usually global. Customers that purchase via enterprise agreements qualify for an ISV's highest discount levels. Definitions of what constitutes an enterprise vary. Transactional agreements have low minimum purchase requirements and reward customers with tiered discounts for volume purchases. Volume license offerings can help simplify the software purchase process for customers by including clear and consistent messaging and discounting, a common membership available through any channel, and detailed volume license certificates. These programs typically include attainable thresholds to entry so that medium-sized businesses and even some small businesses can still benefit when they standardize on software across their environment. Table 1 highlights the general characteristics of these programs. 2 # IDC

3 TABLE 1 Standard Volume License Offering Characteristics Offering Attributes Transactional Agreements Enterprise Agreements Products included All commercially available Most/all (Sometimes there are exclusions.) Customer size Small/midsize* Midsize/large* Customer profile Small to medium-sized customers; purchase generally on a transaction basis; no contract with vendor or longterm commitment; purchases typically limited to a single geography Designed for medium-sized or large national and/or multinational customers deploying a significant volume of the vendor's product Customer benefits Access to products plus support from a single source; low minimum purchase requirements with incentives for larger orders; no up-front negotiations or contracts required High-volume software license program that offers substantial discounts; designed to reduce the cost of evaluating, acquiring, maintaining, upgrading, and managing the vendor's software Volume hurdles/price levels Based on points or dollars; typically no minimum requirements; total points on a customer's initial order determine the volume purchase level for the specified time period; may have tiers based on program-level points that determine the discount Based on points or dollars; minimum points requirements apply; total points on a customer's initial order determine the volume purchase level for the specified time period; numerous program-level point breaks to determine discount levels Payment options Up-front payments Up-front or annualized payments Software maintenance options Maintenance and support available at the time of purchase; coverage is for a specified time period or the end of the agreement term, whichever occurs first Maintenance and support typically included with the volume purchase Sales channel Resellers Direct and resellers Reorder minimums No minimums May have reorder minimum based on points or dollars Penalties for failing to meet minimums No penalties; initial purchase determines the level of discount Initial purchase determines the level of discount (This initial discount may be revoked if forecast purchase amounts are not met.) Product fulfillment Electronic delivery or physical media, depending on vendor capability Electronic delivery or physical media, depending on vendor capability * Small business = 0 99 employees; midsize business = employees; large business = 1,000+ employees Source: IDC, IDC #

4 SITUATION OVERVIEW The often-repeated mantra within today's IT departments is "do more, with less." Technology innovation continues at a rapid pace, but IT staff and budget numbers have stayed relatively flat at many companies. In the case of software, IT has been focused on reducing the TCO of key software assets and better managing software environment to meet the rapidly evolving needs of internal customers while reducing compliance risk. For software that is widely used throughout the organization, one way to accomplish this is to take advantage of volume purchase offerings and enterprise agreements in particular. These buying programs are designed to provide substantial savings in exchange for purchasing in volume. THE BUSINESS VALUE OF ENTERPRISE LICENSING IDC constructed a TCO analysis to measure the impact of enterprise licensing on costs and efficiencies using two sources: 1. IDC's business value database, which draws from the experiences of hundreds of companies regarding IT support requirements for deployment and management of desktop software 2. Interviews with customers that migrated from individual to enterprise-level licensing (IDC obtained both quantitative information and qualitative information about customers' experiences with enterprise licensing.) Since shifting to enterprise licensing agreements, companies have experienced stronger business relationships with vendors and a reduction in licensing costs stemming from improved efficiency in the IT organization. Summary of Key Benefits Customers may choose to purchase software via an enterprise agreement for a variety of reasons. The following sections summarize the key benefits. Reduce Total Cost of Ownership The value of enterprise licensing goes beyond the license fees alone. According to IDC, on average, companies that have implemented enterprise licensing save $131 per user on IT labor costs associated with license management annually across the following areas (see Figure 1): Procurement. Evaluating and purchasing software for an entire organization at once consumes two-thirds less time and cost than purchasing the software in individual or small groups, saving $29 per user annually. 4 # IDC

5 Deployment. Desktop software deployed as part of an image requires one-third less time than individual deployments outside the image, saving $42 per user annually. Administration and maintenance. Proliferation of multiple versions of unmanaged software drives up compliance, compatibility, and control costs by 30 40%, adding a 17% total overhead for desktop management. This is the largest area of annual savings $55 per user. Help desk. Users of multiple versions of unmanaged software tend to have more calls to the service desk and require more frequent desk-side service, driving up annual support costs by 30% or $5 per user. FIGURE 1 Average A nnual IT Labor Costs per User $45 $142 $131 per user $16 Procurement Deployment ($) 300 $100 Administration and maintenance Help desk $316 $261 0 $19 $14 Individual Enterprise Note: Administration and maintenance includes maintaining PC images, user administration and provisioning, application deployment, patch management and deployment, compliance, and downtime recovery. Source: IDC, 2012 The savings on management cost suggests that companies may consider purchasing enterprise licensing even if the number of users is lower than the minimum number of seats required for the contract. Figure 2 illustrates the comparison between the total licensing fees for individual licensing and enterprise licensing. It also shows the breakeven point for an organization where the total costs of enterprise-level licensing become less expensive than individual purchasing IDC #

6 The enterprise license curve in Figure 2 is based on: Companies having a minimum of 100 seats at a cost of $300 per seat Enterprise services accounting for 20% of per-seat fees An enterprise licensing progressive discount that increases at 100; 250; 500; 750; 1,000; 1,500; and 2,000 seats FIGURE 2 Comparison of Total License Fees 900, , ,000 ($) 600, , , , , , ,000 Number of seats Individual Enterprise Source: IDC, April 2012 Given these parameters, companies of any size should consider enterprise licensing when their number of seats approaches the breakeven point: 70. It is no secret that volume pricing discount is one of the key customer benefits of desktop software standardization. As well as the pricing benefits of purchasing in volume, centralizing purchasing can help rationalize software inventory through improved tracking. This also increases the predictability of purchasing because most agreements will require that customers audit themselves only once a year and renew every few years. One customer that IDC interviewed for this paper previously purchased via transactional licensing programs and paid more money for it. "We were spending a little over $4 million per year with Adobe, and we know that we were buying repeat licenses. It just seemed a little silly that we were buying this much software via a transactional program. When we moved to enterprise licensing, we saved $6.5 million over three years, which is more than 50%." 6 # IDC

7 In addition, cost predictability is a benefit because the EA is a fixed cost for the term of the agreement. This makes budget forecasting easier. As one customer said, "The benefit is that it gives us an absolute guaranteed cost without any variation." Save Time for Procurement and Product Evaluation Customers also see efficiency gains with enterprise licensing. Because the EA is global in nature and generally covers a range of products in a suite, customers do not need to submit an individual PO and get budgets approved each time that they need additional licenses. One customer estimated that it was processing hundreds of POs (plus the associated budget approvals) a year when it was purchasing desktop products by the transaction. Enterprise licensing eliminates this need. In addition, individual business can reduce the number of time-consuming (and organizationally redundant) product evaluations with an EA. This also reduces risk because business units aren't creating one-off agreements on their own without considering the enterprise. Reduce Compliance Risk Software license audits are common in the software industry. When organizations purchase by the transaction, the risk of a compliance fee is high. One global customer that IDC spoke with said that at any point in time, it was going through a desktop software audit in one of its offices and that the audit would always result in a compliance fee usually to the tune of $200,000 a year. With an EA that covers all of the desktops, this risk and the time and cost associated with it is eliminated. Create a Partnership with the Vendor A key benefit of enterprise licensing is the ability to create a partnership with the software vendor. Rather than being viewed as an individual user in the eyes of the ISV, the customer is viewed as an enterprise and therefore exercises a greater degree of influence. This influence can help drive the publisher to provide more enterprise-ready software, for example, if that is what is needed. IDC recently spoke with a number of EA customers of a particular ISV that were offered the opportunity to shape the product and licensing approach of a new version of the ISV's products. Some publishers offer price protection as a key benefit to their customers that purchase via EAs. Prices are protected during the contract term and remain fixed, unless a list price decreases, in which case the customer's purchase price also decreases. Customers that enter into EAs are typically provided with a dedicated representative who ensures the delivery of an increased range of services to the company. One customer IDC interviewed for this white paper mentioned, "They deal with us as a company versus as single users. There is more deployment support, and they are quicker to respond to our requests." 2012 IDC #

8 Streamline and Improve Internal Support With enterprise standardization and centralized management, IT can maintain the application environment more effectively and efficiently. Figure 1 shows that the primary IT labor cost with regard to licensing is administration and maintenance (60 67% of total cost). A cost comparison between individual purchasing and enterprise-level purchasing reveals a 17% reduction in administration and maintenance costs, from $316 to $261 per user. Organizations experience the greatest percentage reduction in procurement costs a 63% savings. In total, enterprise licensing reduces IT labor costs by 25% on average. Solutions that are based on industry standards can also help promote common architectures for business applications, making it easier to integrate new applications and functionality into core business processes. This interoperability promotes application agility, allowing for rapid response to changing business conditions as well as the ability to more fully exploit all the capabilities of the software. Customers have been able to reduce the time it takes to review their license status because the IT organization has the ability to view licenses across the entire environment instead of having to investigate this on a user-by-user basis. IT organizations can standardize their patching process across the environment to help ensure that clients are up to date. Building version uniformity into the environment via enterprise licensing can help customers control the number of versions in the environment, improve productivity, and streamline deployment. As one customer said, "Version control used to take up a lot of our time. Before the agreements, it was very hard to understand and see what was out there in terms of licenses." For each new release, the staff would assess the software versions in use, check for compatibility with patches or updates, and then release customized packets for each version. Another customer said it has moved from supporting hundreds of versions internally (prior to the EA) to five. One customer elaborated: "Giving everyone the rights to use whatever products they need to do their jobs creates productivity gains. In the old days, buying transactionally, business units would skip upgrades every now and again because it would just cost too much money. Whereas now, because they are all paying for it anyway, they can always stay current and get the benefit of the new platforms, faster processing processor, better automation, etc." In addition to impacting IT efficiency, improved internal support directly benefits end users. By ensuring that each user has an up-to-date version of the application, companies can eliminate compatibility issues that can lead to system crashes or at least a call to the help desk. When problems related to users climbing the learning curve on new versions occur, the help desk quickly identifies the problem and can issue guidance. As a result, the cost of lost user productivity is reduced by about 38%. 8 # IDC

9 Table 2 shows the improvement in user productivity because of improved internal support. TABLE 2 Annual User P roductivity Savings per U ser ($) Individual Enterprise Downtime 14 8 Help desk 10 7 Total Source: IDC, 2012 FUTURE OUTLOOK In today's tough economy, a centralized IT approach including standardization for certain desktop tools can help reduce spending and maximize budget. IDC expects to see more enterprise-level agreements as software customers look to save cost and money and reduce risk by level-setting their environments, consolidating ownership, and creating standardization and uniformity. IDC also expects more vendors to develop formal software volume purchasing programs in the next few years as these programs are viewed as a way of not only increasing customer and partner loyalty, commitment, and satisfaction but also helping increase revenue. In addition, these programs will be designed to reward enterprisewide commitments at companies of all sizes, meaning that the threshold for participation will be attainable even by small and medium-sized businesses. Challenges Customers should go into EAs with open eyes. IDC advises that customers try not to be too focused on specific license discount levels and instead focus holistically on the benefits of standardizing on the software. Looking for products where there is a "saturation of use across the enterprise" will help identify the areas where investing in an EA will deliver the most benefit. Setting up the initial agreement is no trivial task. It will likely take customers a few months or more to sort through data and figure out what they have and what they need. Furthermore, EAs can be complex to navigate. There are no industry standards for volume license programs, which means that no two vendor programs are exactly alike. In addition, vendors frequently make changes to these programs, and even if they are small alterations, they can potentially have a large and unpredictable impact on customers IDC #

10 Finally, when customers that are buying in large volumes decide against EAs, it is usually because they believe that they can get a better discount in an individual negotiation. The problem with this approach is that it is focused on the license cost alone and does not factor in the savings in time and productivity that an EA can help provide. In addition, customers that purchase transactionally must invest the time and effort involved with being in almost constant negotiation with a software vendor as well as managing multiple contracts with different termination dates and the increased compliance risk that goes along with this. CONCLUSION According to IDC's analysis for this white paper, the benefits of adopting an enterprise licensing approach can be far reaching. IDC recommends that as a starting point, IT conduct a broad analysis to uncover the types of software that are valuable to users across the enterprise. Then, consolidating ownership and standardizing desktop applications across the enterprise represents can result in a host of qualitative and quantitative benefits. Copyright Notice External Publication of IDC Information and Data Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason. Copyright 2012 IDC. Reproduction without written permission is completely forbidden. 10 # IDC

Global Headquarters: 5 Speen Street Framingham, MA 01701 USA P.508.872.8200 F.508.935.4015 www.idc.com

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