Most US enterprises today have well organized, highly-skilled IT departments that are laser-focused on supporting and enabling wider business objectives. As part of this, the department typically has a dedicated software asset management (SAM) team, whose job it is to ensure that the company has the software licenses it needs to function optimally, as well as to make sure that inventory and usage match entitlement.
To gain this level of visibility, the SAM team will likely use a dedicated tool that can capture where exactly software has been deployed, who is using it and whether this usage complies with the terms of the company’s licensing agreement.
This is textbook SAM, and highly valuable. But it does have some limitations, which I’ll get on to in a moment.
To complement the work of SAM teams, we’ve seen organizations make increasing use of IT sourcing advisers, particularly in my market – the US – where third-party consultants are often brought in to assist with the procurement process and contract negotiations.
When it comes to agreeing terms for a new contract, even the largest of blue chips can be at a distinct disadvantage when they go toe-to-toe with a mega vendor, especially if that vendor’s technology stack underpins their entire business operations. Independent sourcing experts bring vital skills to the table: they will know how to push the right buttons with the vendor, placing the organization in a far better position to strike favorable commercial terms.
Again, this work in invaluable, but only up to a point.
Limitations to these approaches
There is a fundamental limitation with both these traditional approaches to SAM and IT sourcing. Neither were devised to deal with cloud deployments, which is quite the problem in 2020.
Cloud adoption has been particularly rapid in the US, and the market is expected to remain the world’s largest consumer of cloud-based solutions well into the future. Indeed Gartner (1) predicts that some 14 percent of all US IT spend will be funnelled into the public cloud in 2022, and that doesn’t take into consideration private and hybrid cloud investments.
It’s worth noting that Gartner’s prediction was made before the Covid pandemic. Over recent months, the migration to cloud-based services has accelerated at breakneck speed, as workplaces closed their doors and employees were required to work from home. Research from Flexera (2) backs this up: it found that some 59 percent of enterprises have exceeded their pre-pandemic cloud consumption plans.
SAM tools were originally conceived to provide a snapshot of on-premise deployments, purchased via one off payments with time-bound contracts. They simply haven’t been agile enough to deal with the ‘organized chaos’ of subscription-based cloud deployments, where different lines of business and individual employees are signing up for a huge variety of services on the fly.
All of these services will come with highly nuanced – and often complex – contract terms, which, more often than not, leave their customers facing escalating costs as more of their users sign up and introductory offers expire. While heralded as a way for organizations to keep a handle of their IT costs, the irony is that, for far too many companies, cloud-based services have become a faucet that they can’t turn off, with costs mounting all the time.
To put this into some context, in its 2018 report, entitled ‘Software Asset Management for the Cloud: Consumption Management and Optimization Take Center Stage,’ (3) Gartner estimated that, unless organizations take remedial action, by 2022, more than 30 percent of expenditure on software and cloud will be unused.
In a similar vein, sourcing advisers typically come from one of two backgrounds. They are either procurement professionals with a deep understanding of how contacts work, but less knowledge of the technology industry – particularly the new generation of cloud service providers. Or they worked at one of the big vendors, so have their roots in on-premise software deployments, with little or no first-hand experience in the peculiarities of cloud licensing.
In short, these approaches need a complete re-boot if they are to meet the needs of today’s cloud-dependent organizations.
Achieving a state of permanent optimization
With cloud usage on the rise, it’s imperative than organizations – and their SAM or ITAM teams – keep pace and find a new and more effective way to track the subscription-based cloud services they’ve signed up for. This means scrutinizing their usage levels, their exposure to medium- to long-term cost increases, plus any other contractual obligations.
It’s no longer about proving compliance and defending an audit, as cloud service providers know exactly what your employees and divisions have signed up to. Instead, ITAM professionals need to focus on achieving a permanent state of optimisation, where they are only paying for the services that they need and that deliver value to their business.
Chances are that, right now, employees will have multiple collaboration and conferencing tools on their laptops. Do they use them all? Do they even need them? What happens when the free offer periods expire? What happens if the number of users for one of these tools passes a benchmark so additional costs kick in?
Always having up-to-the-minute answers to these types of question will ensure your portfolio of services is cost optimized. It will also enable ITAM teams to prove their worth, as they can illustrate the ROI associated with ongoing optimization programs, in terms of savings made. Furthermore, this intelligence can be used as leverage in future contract negotiations.
Perpetual optimization doesn’t only help with cost containment, if also reduces the organization’s exposure to risks. These could be commercial risks (for example, an increase in the cost of the service when the number of users exceeds a threshold) or security risks (for example, but identifying vulnerable services or the deployment of a service from an unauthorized or out-of-territory provider).
Putting an ROI figure on risk avoidance is less exact, but it’s clear that the advantages of a continual and comprehensive optimization program are far-reaching, especially for companies with a growing reliance on the cloud.
For more information of how we can help reboot your ITAM strategy for the cloud era, please visit our dedicated webpages.
About the Author
Author: Frank Bitoun, General Manager for North America
Frank joined the Livingstone Group as our General Manager for North America, in early 2020. He is an IT veteran with 20+ years spent in the software licensing business, Frank is an entrepreneur and an accomplished tech business operator, with a solid background in global solutions and services sales, sales operations, business development, marketing and general management.
Frank was Crayon’s Group SVP of Sales then relocated to California to launch the Crayon US activities. He also handled several global leadership positions at SoftwareOne, Insight, Asap Software, Dell Technologies and Borland.