Saving costs with Software Asset Management (SAM)

Software is essential for almost any business. Globally, more is spent on software than on hardware — this year more than 320 billion Euros (£230bn), as calculated Gartner. Software Asset Management (ie: good, substantive management of your software) is by this estimation, more important than ever. It helps to reduce financial and compliance risks, but most importantly it offers a tremendous opportunity to reduce costs. In this article, we look at the different ways you can engender these savings.

A complex matter

Software Asset Management (SAM) is a complex issue, which requires a lot of specific knowledge of software contracts. An average company has about three hundred and fifty vendors that each can quickly deliver ten to three hundred products. For enterprises, this number is often much higher, sometimes up to ten times. Each product has its own terms and conditions, which they give you. Moreover, a distinction must be made between products with a short lifespan (desktop software such as Microsoft Office) and enterprise software such as Oracle, IBM, and VMware, which lasts much longer and which rarely requires the purchase of a new version. Both investments are often amortised over three years, while enterprise software can involve annual upgrade costs which require additional investment. Moreover, many suppliers are foregoing this nowadays, partly combining with cloud solutions with a fixed licence fee per month.

Insight into cost structure

Regardless of how complex SAM is, whoever implements it well and continues to run it continuously — it is not a one-time event — will quickly see its benefits. You get a full understanding of what software you have, what software you actually use, and the associated cost structure. Then you know exactly what you are spending. Moreover, it is clear that the software is actually used in your organisation. These insights are crucial for any organisation: they form the basis for business decisions and deliver tangible savings potential. With good content management software licenses you can reduce costs within three years by thirty to forty per cent, according to research from Gartner.

Optimisation of infrastructure and software packages

If you do not know what you have and what you pay for, you can not optimise. If you know it, you can use what you've bought in a better way. Understanding your own cost structure allows you to be continuously in the position of asking the question: does the software we use now fit our needs? This question is especially relevant at any time with enterprise software due to the long service life, which often amounts to more than ten years.

In those years, a lot can happen. The organisational model for the software or the purpose for which you bought it may be altered. Moreover, changes in infrastructure solutions (virtualisation, outsourcing, hosting, etc.) arise and the variety of vendors and sometimes outside consultants can create a kind of confetti infrastructure, which is already no longer in line with the past agreements. Optimising through re-licensing or redesigning such infrastructure is a process that takes time, but eventually yields big savings.

There are also opportunities at the software level. Thus, it often happens that an organisation has unnecessarily paid for support for an older version of the software, while it is actually entirely supported by the supplier. Or you make use of certain functionalities of the purchased software, and it was previously not evident that the functions required payment. Knowing that the package was likely purchased long ago, it is almost certain that cheaper alternatives have entered the market in the meantime. Technologies and systems are indeed always evolving.

Better negotiating position with suppliers

To achieve real cost savings, you have to negotiate with your software provider. The insights obtained from SAM are indispensable. They help you to make a deliberate and informed choice for the future: where do I want to go and what software do I need? With the right knowledge you'll be better prepared and you create a strong negotiating position for yourself. So optimise not only your existing software, but also your new purchases — with all the financial benefits. The decision on these purchases, which often involves different lines and departments, is usually much faster thanks to SAM. All necessary information is indeed within hand's reach, which can lead to direct decision making.

No more shelfware

Many organisations pay annual fees for software not used by anyone. Someone may, for instance, have three versions of the same product installed on their computer. Or a company takes 16,000 licences for a tool, while only 12,000 are needed. That there are savings to be made here is evident. Support costs for unused software can be frequently be stopped, though it varies by vendor. Other options include the reuse of software for new users and the exchange of non-used software for software that you need. And sometimes you can even sell the excess software to other organisations. Obviously, you need to take into account the agreed upon terms and not do it behind the back of the supplier.

Taxes charged

A final way to save SAM costs, is by taxing the right cost to departments or business units. Because you have a complete overview of all software you have and that is being used, you will charge each department for the software they actually use themselves. This will bring the department expenses as close as possible to the actual cost, rather than a rough estimate. Since each department will feel it right in its own budget, the urge to save will become bigger. So not only the SAM manager, but the whole organisation has the same incentive to reduce costs.

With the ever-growing importance of software, spending will only increase in the coming years. A good software asset management strategy prevents unnecessary expenditures and provides the necessary knowledge and understanding to make the right decisions about both the current software infrastructure as well as new purchases. You know what software you have in house, what software is used and how the fee structure works. This is critical knowledge with which you can save millions.

Mark van Wolferen at b.lay, the license management company