2015 NASPO Cronin Award Nomination. Professional Development in Software Licensing. State of Wisconsin
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1 2015 NASPO Cronin Award Nomination Professional Development in Software Licensing State of Wisconsin Submitted by: Wisconsin State Bureau of Procurement
2 Executive Summary Evolution and innovation in technology are driving big changes in state government. Behind those changes are IT contracts and, in most cases, a software license. Software applications or tools utilized by an agency are accompanied by a software license or similar legally binding agreement that covers its use. Whether explicitly included in a broader contract, or clicked through, end user actions may bind their organization to certain obligations they may not even be aware of. Not knowing the terms of these agreements is no defense when a software company believes a customer may be using more licenses than they have paid for or are using the tool for an unauthorized purpose. This challenge is compounded by the fact that purchasing software can be expensive, and negotiated savings on other contracts can quickly evaporate with just a single software-licensing audit gone wrong. As it relates to innovation, for the first time, Wisconsin introduced training to better equip staff to face these challenges. In Wisconsin, procurement activities occur in a decentralized environment. Our state is center-led, in that we have a central Bureau of Procurement that covers administrative functions and leads enterprise contracts. Most of our state agencies negotiate contracts directly and are delegated to conduct these activities on their own. When the topic of software licensing came up during meetings and other events with these delegated agencies, various levels of knowledge, awareness and control were discovered. The majority of feedback on the topic of licensing from agencies was in the form of questions such as we can negotiate those?, the reseller handles that, right? or what license? Through our administration of a software contract with various resellers (i.e. VAR contract), agencies can purchase virtually any type of software, as long as it is available through our awarded resellers. We noticed that agencies assumed that purchasing software through those resellers was the extent of their duties. Many did not review the licenses from the software publishers (Microsoft, IBM, etc), assumed that they did not contain terms of concern, or that the state s negotiated terms with the resellers automatically covered them in the software license--all risky assumptions. The challenge was clear, but the solution was more complicated. How do we reach purchasing agents and IT professionals at other agencies? How do we illustrate to them the importance and potential cost savings in negotiating these agreements? What could we provide to assist them in mitigating the risk of non-compliance with these terms? In discussion with staff, the Bureau determined that raising awareness and increasing the quality of education and training would provide these agencies with another tool in their toolbox as a service improvement to the training and professional development that the Bureau offers. The Software Licensing 101 class was created to be that tool, and the principles of that class are not only benefitting Wisconsin state agencies, but are fully transferrable to other states as well. Innovation To make the class effective for a broad audience required a focus on conceptual originality to make technical content relevant to purchasing agents and to make contractual content relevant to IT professionals. License Types for 500 Question Be careful of the address you list in this license; for this license type, you can only use the software at a specified location. Answer What is a site license? The Software Licensing class is delivered as a full day instructor-led course with three interactive exercises: 1) Terminology comprehension in the style of the quiz show Jeopardy The Jeopardy exercise is delivered in the morning session to allow purchasing and program staff to become acquainted with IT terms and the various methods of software delivery. 1 P a g e
3 2) Small group discussion of purchasing and software licensing scenarios where teams are asked to brainstorm the most effective sourcing approach The sourcing scenario exercise, delivered in the middle of the day, mixed the concerns of procurement professionals (cost, the fine print) with the technical needs of IT. 3) A hands-on writing and editing exercise where each individual is asked to analyze a software license/eula. The license editing exercise, delivered at the end of the day, requires all participants to apply the concepts they learned to the task of redlining the agreement. This registers with procurement staff that is typically more experienced with drafting contracts and is also applicable to IT staff attendees who now better understand the meaning of the terms they are agreeing to. The approach is unique in the structure of the class--instead of relying solely on lecture-style teaching, we designed the course to meet various adult learning styles, striving to make the class valuable to a new purchasing agent who is a visual learner, but also to an experienced software asset manager who is an auditory learner. Attendee Feedback on Class Value The most useful is knowing about the different types of agreements and what to think about with each. -Quote on the Scenario Exercise After going over each section on the PowerPoint, being able to look at an actual license and make desired changes was a great way to tie it all together and make sure we understood the concepts. I thought the exercise was good to make you think about the missing information that would be needed to improve the purchasing and license agreements. This is the first time employees have been offered any formal state-led training on effective negotiation of a software contract, and the class is -Quotes on the Editing Exercise modeled to meet the needs of learners that are brand new to the topic and those that are well-versed. While there are several books or guides that are available on the topic of understanding software licensing, tackling the topic itself through hands-on training is innovative in that it is difficult to find resources to deliver this type of structured training. The original pilot class was conducted in October 2014, and two classes have been held since then, training over 50 participants. In the future, the Bureau intends to offer the course at least three times annually and review moving some of the lecture material to computer-based training modules to reach a broader audience with a just in time model and provide previous attendees with a quick refresher resource. Transferability Unlike many of our other classes, this class affords only cursory content that is specific to the state of Wisconsin's purchasing rules, regulations, policies and procedures. Rather, we focus on best practices, principles and industry trends as it relates to the purchase of software and recommend ways to negotiate and engage software publishers in making licenses work for them and their customers. Further, all exercises are built on hypothetical scenarios that are also generic to any governmental or state entity. The principles are very portable and applicable regardless of the state in which the class content is implemented. I think it was good knowledge for any purchasing agent or procurement agent to have to at least be able to guide in the purchase of licenses and understand how and what to include in a license [to] protect the State. -Attendee quote on overall class value We estimate that implementation of this class in another state would require similar resources as the State of Wisconsin expends, starting with sharing the PowerPoint presentations and related material. Regarding instructors, we have (and 2 P a g e
4 recommend) three (3) staff (2 primaries and 1 backup) to facilitate the class. There are nominal costs required for hard copy materials, as this class requires only a modest quantity of paper for handouts. In the future, as more computer based training is developed, a subscription to a learning management system may be required to host web-based content and perform administrative functions for the class. The development of the course involved collaboration with our agency s legal counsel to review which licensing terms were deal breakers for Wisconsin agencies. The regulatory and legal environment of any host state would need to be updated in any training references. However, the majority of the curriculum is based on general licensing best practice. Service Improvement There are three primary service improvements related to Software Licensing 101 : First, the class is entirely customer driven and focused. After receiving feedback from our customers that there was a gap in guidance on how to manage software licenses, we collaborated with various stakeholders on the original course curriculum, including agency legal counsel, several Bureau staff, and an expert from the University of Wisconsin System, who specializes in managing their software licenses, to represent various perspectives. Following development, we piloted the training among representatives from multiple agencies and campuses with experience in procurement and software asset management. Using a multi-question, open comment survey and in-person contact, extensive feedback was received. Since the pilot, we have made many improvements in response to customer feedback and continue to refine as we learn what works best as more classes are held. For example, the Jeopardy exercise has been automated to better engage the class and more opportunities for small group discussion have been added. The Bureau of Procurement uses a 0-5 scale to measure satisfaction in participant surveys, and this class has maintained a 4.75 average score on all measured questions such as general satisfaction and relevancy of the content for attendees in their day-to-day work. Second, the class offers customers a valuable tool at no charge. Because of this training, agencies are better equipped to manage their software licenses with more strategies to use in negotiating the terms of these agreements. Benefits include improving the quality of their transactions by inserting more reasonable and favorable terms to protect the state in various areas such as governing law, limitation of liability, indemnification, auditing, remote disablement or service interruption, grant of access to the software, terms for true ups, maintenance and support terms, price caps and others. For example, it is common for a software license to require customers to pay then-current list price for maintenance payments that lapse or for additional licenses that the customer must purchase as a result of an audit showing improper usage. The class identifies these common scenarios, and teaches attendees to Clean It Up! by negotiating for pricing that is discounted at the same level as the original purchase. This is just one of many concepts taught in the class that yields potential value. Third, while the class is now part of the Bureau s annual training series, unlike other procurement classes we do not require participants to go through any pre-requisite courses to attend. This allows IT staff, who would not otherwise attend any procurement trainings, to obtain these skills. Cost Reduction Regarding cost reduction, we focus on achieving this in two ways cost savings realized from the implementation of these new skills and cost avoidance in reducing the price to the customer to obtain this training. Demonstrated Cost Savings The Bureau of Procurement is very fortunate to have resident experts that are highly skilled in the negotiation and management of enterprise software agreements (Microsoft, Adobe, Oracle, VMware, IBM, EMC). They know what to 3 P a g e
5 look for and are required to show the savings resulting from these efforts on every transaction. We ve seen examples of documented savings and cost avoidance, using the principles taught in this class: Oracle For a large PeopleSoft license negotiation, the state obtained: Same discount level of 89% for purchase of additional modules of PeopleSoft for one year after the original deal No cost increases for five years, 2% cap on years 6-10, 4% cap thereafter Two-year grace period allowing the state to stop maintenance payments without a reinstatement penalty Ability to move to successor products at no cost Negotiated license model to be tied to employee count instead of state budget total AND employee count Reduced support percentage from 22% to 20% We found that these skills yield savings and produce cost avoidance opportunities. We are confident that agencies that expand skills by this training method will likely achieve similar benefits over time. Training Cost Avoidance The Bureau offers this training to all interested state employees three times per year at no additional cost. The costs of holding the course are part of the Bureau s annual budget, which includes the cost to train state agencies on procurement best practices. Other Success Stories BMC Mainframe license was converted from a price based on all MIPS on the mainframe to a price based only on the MIPS used, saving $500,000 per mainframe upgrade. Upon acquisition of another company, negotiation with BMC resulted in $165,000 in mainframe upgrade savings by converting a site license to a MIPSbased license. AirWatch The state negotiated the cost per license down by 48% ($94,640 total savings) and reduced data storage fees (37% down from original), in addition to fixed promotional discounts held for first year. SAS During renewal, reduced annual increase rate from original license rate of 5% down to 3%, resulting in $64,000 annual savings Verizon for NetworkFleet GPS Negotiated terms required for state contracts, reduced licensing costs by 8% and device licensing costs by 10-41%. While there are other conferences and seminars available on this topic, they are held by private law firms, Gartner or ICN/Caucus, which all require expensive travel or expenses to hire an outside resource to train at a state facility. Specifically, a software workshop from ICN/Caucus costs $1,495, not including travel expenses. After research on relevant courses offered by the National Institute of Governmental Purchasing (NIGP), a similar training opportunity could not be found. The only training that was available was a 1.5 hour webinar (Purchasing Software: What to Ask for and Negotiating the License Agreement) for $185 (non-member). Most State of Wisconsin agencies do not have the resources to pay for such training, especially when combined with any requisite travel expenses. By providing in-house training through Software Licensing 101 valuable software licensing skills can be effectively taught without incurring any additional training expenses. Conclusion State IT procurement strategy needs to keep up with the pace of the markets and customers it serves. Agility is required to meet the needs of IT customers to prove that state procurement can be a strategic asset and not a barrier to technological innovation. However, agility needs to be balanced with the core principles of procurement due diligence, strategic sourcing, and stewardship of taxpayer dollars. This class is a tool to inform procurement and IT managers about the importance of software licensing agreements, but it is also a networking opportunity that brings these stakeholders together to collaborate on how to create better software agreements for the states which they represent. The State of Wisconsin is thankful for the opportunity to submit this application for the consideration of NASPO. Attached to this application is the class presentation, respectfully submitted as supplementary material. 4 P a g e
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