Just Being License Compliant is Nearly as Bad as Failing a Software Vendor Audit

Being license compliant is not enough. If your only goal is to become compliant, you are missing the entire point of Software Asset Management (SAM). The goal of mature SAM programs should be to optimize and reduce software spend in addition to license compliance. In this article we’ll explore strategies to go beyond compliance and optimize. 

Why License Compliance is Not Enough 

If your only goal is to be license compliant, you may end up being over-compliant and purchasing more software than you need. This is often the case when companies attempt to avoid negative outcomes in a software license audit. They over-license and end up paying software vendors more than necessary.

Optimization as the Main Goal of SAM

When you have a robust license optimization program, compliance becomes a welcome byproduct. Instead of focusing on compliance alone, optimization encourages an analysis of whether applications are being used. This goes beyond answering the question “Are we paying for the right number of licenses?” and answers the question “Are we using the licenses that we’re paying for?” And not just the typical total usage provided by legacy vendors, but actual, down to the minute Active Usage Tracking. This can determine how much the product is being used, as well as the average usage of the application. Then, you can build processes to remove and uninstall all applications with low Active Usage, as well as totally unused software, and cost savings will increase. Compliance is a natural by-product of this optimization process. 

Therefore, when you perform an annual software vendor analysis, you should consider these 3 things:

Do we have the same functionality from other applications in our environment today? Is this product in our future roadmap?

Do we still need this vendor/application/function? (Based on recognition/normalization)

Can we reduce/optimize/negotiate the cost/spend? (Based on usage data)

Optimization Strategies

So, if you’re switching from a compliance mindset to an optimization mindset, how should you conduct license optimization to obtain cost savings? First you need reliable discovery and software normalization, at the heart of any robust SAM program. You can’t optimize or reduce the spend of apps you don’t see. With this data, you can divide optimization into 3 parts:

• The Installed Reality – What do you have installed? (Software discovery/normalization)
• The Purchased Reality – What agreements and licensed have you purchased?
• Usage – What is being used. This is a KEY difference in usage/metering. Just to open the application is not ACTIVE USAGE! Specially for webapps, we need to understand how much the user “actively” uses the application.

When you have all 3 components, you can perform ongoing optimization to reduce the number of unused licenses/installations and cut costs on software you don’t use.

How Much Can You Save with SAM?

If you are not optimizing based on Active Usage Tracking, you are probably not saving as much as you could. Through an effective SAM program, Gartner estimates that you can save 30% in the first year and that number is based on cutting redundant spend on unused applications. The Gartner report doesn’t take into consideration low Active Usage or web application optimization, because there’s no other tool on the market that offers these features. This makes the possible optimization and cost reduction opportunity much higher with Xensam.

But there is a big misconception that you only save 30% the first year of doing SAM. Let’s take a very simple example. You pay $1 million USD per year for your software and let’s say you save 35% = $350 000 USD in the first year. Year 2 your annual expenditure starts on $650 000, at this point we haven’t made any optimization or cost reductions yet! But if you didn’t do the first year’s optimization and cost reduction exercise, you would still be paying $1 million. Essentially, this means that you have saved another 35% in year 2. However, you can continue and to do even more cost savings and decrease that amount even more, but the first year’s cost reductions have laid the foundation to continue optimization of the yearly spend. In a 3-year period, even if you only do cost savings with the SAM tool in the first year, you would have saved $1, 050 000, which is an entire year’s software budget.