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Software Licensing: Unloved and Undervalued, but Critical to Digital Transformation

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Software licensing is the often-neglected ‘annoying little sibling’ of IT management.

Despite the potentially serious consequences of failing to ensure an organisation’s software estate is correctly licensed, it is often seen as a tick-box exercise – rather than a strategic management process. Today, as organisations look to transform their operations digitally, software licensing has never been more important – because digitalisation is changing the way we work, think and live.

PwC predicts that by 2020, an entire generation – Generation C (‘connected’) – will have grown up in a digital world, used to being connected everywhere, all the time. How does this brave new world affect software licensing? In short, from the cloud, to mobile devices, to the Internet of Things, digitalisation adds a whole new layer of complexity to enterprise IT. Consider that today, there are some 14,000 vendors with more than 800,000 software releases, and it’s easy to see why licensing has become a significant management challenge.

The tangled web we weave

When it comes to licensing, this complexity is two-fold. Firstly, organisations are having to respond to the push toward digital transformation by developing and delivering services that meet the needs of employees and customers. Moreover, technology and service delivery models continue to change rapidly – with ‘on-demand’ services becoming more popular – which complicates the picture. Yet further difficulty comes from the need to satisfy increasingly complicated governance and compliance requirements. Against this backdrop, managing software assets becomes an afterthought, and organisations are often unsure about their licensing position.

Secondly, software licensing agreements themselves are notoriously complex. This means it can be very hard to understand how changes to the IT environment impact licensing. Software agreements are also typically inflexible, built for an era when the vast majority of deployments were on-premise. As organisations’ IT needs change, licensing must change; organisations need to know, for example, how moving from on-premise to cloud will affect their licensing status. This is a dangerous position given the ever-present threat of an audit from a vendor. A robust software license management strategy is therefore essential in coping with this complexity.

Unpicking the knots

A key part of such a robust software license management approach is gaining clarity over what software is in place. Organisations need deep, real-time visibility into their software estate to locate areas of over or under licensing and take remedial action. This level of visibility also helps organisations spot opportunities to reduce costs by optimising licensing – a practice that Gartner believes can save up to 30% on software costs. Optimisation could include things like ‘bundling’ licenses from a single vendor, recovering and reusing unused license rights, or cancelling unneeded maintenance and support contracts

To achieve this, organisations need to make certain they remain in control of their software estate. This can often mean installing an overall software management ‘layer’ that helps unpick the knots of the current licensing estate. In obtaining this degree of transparency, CIOs and purchasing managers can make far more informed and confident decisions on software use, as well as generate data for analysis so they are well-armed for any contract negotiations. This data helps build a solid business case, so CIOs can make decisions based on fact – ensuring software investments deliver value back to the business.

A digital future poses more questions

In addition to the impact of trends such as cloud computing and mobile devices, platforms such as the Internet of Things (IoT) will grow in influence – according to Frost & Sullivan, for instance, there will be over 45 billion connected devices by 2023. These emerging technologies will add further to the IT management burden, and the IoT in particular is raising many questions about licensing. One issue is around ‘indirect licensing’ – the theory being that every single one of the potentially millions of connected devices reporting to a database via an API could be identified as single user and thus need an appropriate license.

This clearly could result in enormous costs to organisations. As yet, questions such as these are unresolved, and are being picked over by many stakeholders. What is certain, is that as smart homes, cities and workplaces become the norm in a digital future – new issues around licensing will continue to arise, alongside the entrenched problems of inflexibility and complexity. Only one thing is clear – organisations cannot afford to treat software licensing as an annoyance, but instead, must make it a strategic business priority.