In the cloud era, software asset management can help solve a range of complex business problems

– The rise of SaaS and cloud services has created important strategic opportunities for software asset management
– Modern SAM platforms provide visibility and cost efficiency for large-scale app procurement
– SAM tools can reduce overall software spend by 22% and streamline audit compliance

For decades, software asset management (SAM) has ranked high on the list of the most thankless IT jobs. SAM involves cataloging all of the software products being used across an organization, from smartphone apps to massive deployments on data center servers.

“Most companies have hundreds or even thousands of apps, but have little overall visibility into what they are, much less the ability to centralize negotiations,” says Manish Srivastava, general manager of ServiceNow’s IT Asset management business unit. “And with the rapid adoption of SaaS, the problem gets worse every day.”

Software asset management is a difficult job that requires deep expertise in licensing and contracts, a broad understanding of procurement norms in all corners of the organization, and a determination to drag data from people who think they have better things to do. In the past, that attitude was understandable, because SAM was used primarily for one dreary but essential task: tracking usage of apps to avoid overuse penalties from vendors and the cost of responding to burdensome audits from those vendors.

“Frankly, software asset management administrator was a very specialized job, with no real career path to something better,” says Hyoun Park, CEO of Amalgem Insights, a Boston-based consulting firm.

Today, SAM is undergoing a rebirth. The rise of SaaS has made it easier for employees to sign up for their favorite apps. Studies have found that more than a third of all software investments end up as unused “shelfware.” With SAM, companies can easily jettison the ones that aren’t being used or aren’t worth the money. The more apps a company has, the more savings it can realize by identifying and rationalizing that spending.

The power of visibility

A well-executed SAM program can help companies choose the most productive, user-friendly IT tools for employees. Companies that invest in SAM technology can slash their annual spend on software by 22%, according to Deloitte. Knowing precisely which releases you have of every software product in your environment is also critical to optimizing security. After all, there’s no way IT can guarantee all vulnerabilities have been patched when it doesn’t all the software that is running.

The ability to get SaaS procurement under control may be the biggest advantage of modern, cloud-based SAM. In the years since companies discovered the benefits of renting software from SaaS players instead of hosting it themselves, many organizations have given employees free rein to try out everything from Box and Dropbox for online storage to sophisticated apps for designing prototypes.

Most companies with fewer than 1,000 employees today are paying for a similar number of SaaS offerings. Even larger companies with more than 5,000 employees tend to have one SaaS subscription for every two employees, says Park. Yet many of these technologies are used by only a handful of people, or by no one at all in cases where the original purchaser has left the company.

Completing a software audit can take up to a year, but can yield significant payoffs. “In a SaaS environment that has never been cleansed or properly managed, you can probably reduce your spend by up to 40% in the first year,” says Park.

Companies can continue to achieve significant savings in year two and beyond as they get better at analyzing SAM data and the business justification for each app. A good SAM product will show not only that employees are using, say, five expense-tracking services, but which ones are worth keeping. If the firm is paying for unused premium features, it can switch to cheaper or free versions. “In year two, it’s often possible to consolidate by another 20%,” says Park.

The third year is when the harder but most beneficial work usually begins. Rather than focus on how to reduce the cost of IT, the SAM team can focus on increasing the effectiveness of its software investments. For example, many firms are using tools such as SurveyMonkey or Qualtrics to get qualitative feedback on competing apps.

To get the most out of the investment, a SAM platform must be integrated with other key applications. Here are some of the biggest benefits:

Streamlined employee onboarding and offboarding. Automated SAM workflows can help new hires be productive on day one, by making sure their PCs and mobile devices are outfitted with apps that have been proven to enhance worker productivity. When employees leave the company, the reduced usage of their favored apps will be captured by the SAM program.

Centralized app management. By integrating the SAM program with the application portfolio management process, IT can make sure it’s making smart decisions about when to upgrade to newer or more fully-functioned versions of apps, or on when to transition to new ones—say, to avoid risks of running business services on underlying software technology that’s nearing the end of life.

Improved visibility and reduced risk. Better integration of SAM with other software services can boost the overall effectiveness of a company’s IT efforts. For example, integrating SAM with the IT service management (ITSM) change process can quickly show the licensing impact of adding more processors to run a particular application. Security operations can do a better job of patching up vulnerabilities if they have a complete inventory of the software being used.

Better usage tracking. By giving the SAM system access to data gathered by identity-management services such as Okta, IT managers can track app usage without manual sleuthing. Rather than a team of five or 10 people, “there’s no reason a team of one or two people can’t handle SAM in 2019,” says Park.

Today, ServiceNow and other modern SAM vendors are employing sophisticated machine learning algorithms to make it easier to identify such opportunities. For example, ServiceNow is developing technology that can analyze general ledger data to identify software spending, whether made via centralized procurement contracts or through an individual’s corporate credit card. This begins to give visibility into SaaS sprawl across the enterprise, which is the first step to managing SaaS spend effectively.

SAM continues to play its traditional role of making sure companies comply with their contracts with large software providers. As more customers move away from these legacy technologies, many large software vendors are auditing more customers. Penalties can run as high as seven or eight figures per audit, not counting legal fees, according to the Business Software Alliance, which represents many of these vendors. (More than two-thirds of U.S. businesses receive at least one audit letter per year, according to Gartner.)

Having a well-managed SAM process in place provides an accurate picture of the company’s software licenses, making it much easier to answer audit letters. “These audits will continue to increase,” says Srivastava, “because these large vendors are going to drive as much income as they can from legacy products as they lose market share in the years ahead.”