Many organizations that perform software asset management opt for convenience. They rather focus on easy-to-manage products than on the software they spend the most on. This creates a false sense of security, while in reality enormous financial risks lurk.
Software asset management (SAM) is an emerging discipline and is still very much in its infancy within many organizations. CIOs often simply add it to someone’s responsibility, whereas SAM requires specialist knowledge. Without the proper knowledge, the designated SAM manager will likely take a shortcut and will overlook the software with the greatest financial risks. This results in easy-to-manage desktop products such as WinZip getting too much unnecessary attention. Through a SAM tool (for example Snow, Flexera or Landesk) you immediately see the number of installations and you know how much you need to pay the supplier – hassle-free. However, this software only takes up a small portion of the IT budget, so real financial benefits cannot be achieved here.
SAM thus becomes an activity that hardly contributes to company results. In fact, organizations face big risks, as no attention is paid to products taking up most of their software spending: enterprise software. Microsoft, Oracle, IBM and SAP are the biggest players in this field worldwide. Their software forms the backbone of virtually every large organization and forms the basis for their revenue models. Without this software – such as databases and CRM systems – companies cannot make money. Most large companies almost always make use of multiple providers for their enterprise software – for example, a combination of Oracle and SAP. They do this to prevent vendor lock-in and to maintain a strong position in future negotiations. Generally, these two software publishers take the largest chunk out of the IT budget.
However, managing enterprise software is a complex matter: installations and usage cannot simply be measured with a SAM tool, as is the case with desktop software. Specialist knowledge is required to understand the contracts and licenses, you have to take a deep dive into the IT infrastructure to measure the actual use and this involves a lot of manual work. An IT employee who does SAM as a sideline lacks these skills and is therefore more likely to ignore enterprise software – because he is often unaware of the risks and the financial consequences.
These financial consequences are considerable. It is precisely because of the complex contracts and installations that the risk to violate contractual agreements with Microsoft, Oracle, IBM and SAP is much greater. If you do not keep track of these contractual agreements, chances are that you are faced with a situation that you have too few Oracle Database licenses or that you do not use the software exactly as stipulated in advance. If such a ‘compliance issue’ is revealed during an audit, these four software suppliers are known to demand a substantial back-payment. There are plenty examples of multi-million dollar claims.
Risk over convenience
The reason for organizations to perform software asset management is to prevent risks. This is becoming increasingly important now that software is the largest capital asset of companies and software spending is rising. If you want to perform SAM properly, do not choose convenience. Do not let yourself be led by what the SAM software you have purchased can measure, also look into where the most risks lie. These risks lie in the products that you spend the most money on: enterprise software from Microsoft, Oracle, IBM and SAP. Therefore, don’t mind the desktop products and focus on enterprise software, as this is where most financial benefits can be achieved