Enterprise License Optimization

Centralizing Software Usage and Software License Management

by: Jeff Jones

Over the past few months, I have had many professionals in the supply chain and procurement space say they would be interested in finding a process that provides a way to depict their Oracle database deployments in a manner which they can easily understand and then use to communicate and negotiate their software license agreement with Oracle.  They have explained that they are frequently given information about their IT Departments’ use of Oracle that is not easily translated into Oracle licensing metrics.  They also complained that they frequently get this information in a variety of different formats from different divisions or groups within their own company, and some of the IT personnel put their own interpretation on what should be licensed, or how it should be licensed, before delivering the raw data to them.  (And after talking a little more, almost all individuals expressed a general un-easiness about the accuracy of the information they were getting… from CPU counts to database option usage). 

In a recent example, a procurement officer told me that he had two different divisions of his company delivering named user count minimums using a different interpretation of the Oracle licensing rules:  one enforcing named user minimums at the server level, the other providing a summarized count of named user minimums.    This results in inconsistent data and the inability of having a true understanding of what is actually being used, by whom, and how often.

…Another example of inconsistencies in data would be IT personnel not delivering the CPU count information in the same manner, and not completely understanding how Oracle calculates a “CPU” for license purposes (which is obviously different than just physically counting CPU’s).  In almost all cases, procurement and supply chain officials said they would like to see a solution that could deliver accurate and consistent information about Oracle software usage in an easy-to-use format.

To resolve these problems, IT and procurement need to identify a way that gives better insight into the true picture of what is actually deployed and used to better negotiate their software license agreements.

Focus Your SAM Efforts on Business Objectives and Not Software Discounts

by: Cris Wendt

Lately, a lot has been written about how ITAM and SAM usage measuring tools can help enterprises reduce software costs.   No one wants to pay more than they have to for their software, but simply looking at the cost of software is only part of what you need to consider.   No company is in business to buy software, so simply using usage management software to reduce software costs is not looking at the big picture nor asking the more important question, “How can I more effectively invest in software and infrastructure to support the objectives of the business”.

I recently heard about one CIO who benchmarked his software discounts against others in the industry as a way to measure the effectiveness of his group’s acumen.  However, what the usage information pointed to was that the company had a lot of shelf-ware – in essence software that was purchased but which was not being used to help the business achieve any goals.

I also had an experience several years ago which drove this point home.  An IT group in a large semiconductor buys design automation software (from their “EDA” tool supplier) that the engineers in the semiconductor company use to design their products, the next generation of computer chips.  The goal of the IT group was to create an initiative to have the EDA tool supplier provide a pay-per-use license model.  The goal of the semiconductor company was to find a way way reduce costs by ensuring that the software was being used more efficiently. Their rationale was that the semiconductor company only had to pay for software that was actually being used.

Guess what happened?  The usage of the electronic design software went through the roof and the cost of the software increased.  Was this a failure?  No, in fact it was a huge success.   With an abundance of electronic design software at their disposal, the engineers found new ways to do their design (as opposed to just designing “more efficiently”), which resulted in an increase in the usage of software.  But more importantly, the consumption of more software reduced the time it took for the engineers to go to market with their new computer chip.   This results in accelerated revenue for the semiconductor company.

So as you look to improve your SAM and ITAM efforts, or look for new license models from your ISVs, focus first on the business objectives, and then see how your effort can truly support the business.

Some examples include:

• Do you buy software for projects that require expense budget vs capital budget?  Consider asking for a subscription license model (which tend to fit expense budget processes better).

• Do you have enough storage management software to support your business continuity needs?

• Do you have enough Microsoft Word, but not enough MS-Project to help your project managers mange projects?

• Do you have a pricing module with your CRM package to ensure that your pricing goals are being met

•Do you have other stories that you would like to share about how your software SAM/ITAM efforts results in improvements to the business?

Flexera Software Attending Strategic Asset and License Management 2010; Berlin, Germany

by: Tom Canning

 Join me at The Marcus Evans 5th Annual Strategic Asset and License Management 2010 event in Berlin, Germany on February 23, 2010.  I have worked with many of the world’s largest companies to improve their visibility into their software usage and to ensure clear repeatable processes for optimal license management. 

This event centers on comprehensive software asset and license management (SAM) strategies, tools and techniques which are essential for avoiding over-spending, preventing risks, improving performance, being in-line with license agreements and lowering purchase costs.
At the event, I will focus on “Gaining insight into your high-value and high-liability applications including SAP and Oracle”.

Key questions that I will address:

• What’s the value of incorporating enterprise license optimization best practices to my software asset management program for SAP and Oracle?
• What best practices can I apply to ensure that I only purchase the software that I need and use?
• How can I conduct fact-based vendor discussions with SAP and Oracle?

You can find more information on the event at www.marcusevans.com and be sure to check out Flexera Software’s blog on industry topic and updates.

Understanding Software Compliance Risks

by: Randy Littleson

 

The topic of software compliance and software audits has gotten a lot more attention over the last year or so than it has probably in history.  Sarbanes-Oxley started companies down the path of greater transparency and the economy over the last year plus has placed even more emphasis on software compliance.  To many companies, insufficient software license understanding and control leads to risk.

 

Software compliance risk can take several forms:
• Operational risk – insufficient software license allocation and utilization which leads to uninformed business decision making
• Financial risk – undisclosed liabilities, inaccurate budgeting and over expenditure on software licenses
• Legal risk – contravention of software license agreements and an inability to meet corporate governance requirements

 

What’s missing in most companies today is a strategic solution to managing application usage.  At best companies have a solution to count the software they have, but an accurate software inventory, while a pre-requisite, is nowhere near sufficient to manage software compliance risk.  To do so, a company needs to understand the true usage of each application and be able to reconcile that usage with their entitlements.

 

While many companies focus on compliance to deal with a software audit, best-in-class companies are leveraging tools to build continuous compliance best practices to mitigate and eliminate their software compliance risks.

Dilbert on Software Audits

Came across this and thought it was funny!

http://www.dilbert.com/strips/comic/2009-07-12/

Can you be out of compliance with an Unlimited License Agreement?

by: Randy Littleson

Is it possible to be out of compliance with an all-you-can-eat software license agreement?
The answer to this question is a definitive “yes”, but I don’t think most people realize this.  Depending on which vendor you’re working with, such agreements are referred to as Enterprise License Agreements (ELA), Unlimited License Agreements (ULA) or any other number of terms.  They essentially work the same way, it’s a form of “all-you-can-eat” license for an enterprise.  So, if that’s the goal, how is it possible to be out of compliance if you have such an agreement with SAP, Oracle or your vendor of choice?

In many cases there are variants to these agreements.  For example, some have no cap (you specify which products are covered and then you can use them with no limit) and some are capped (you agree on the number of servers you will install, for example).  If you have a no cap agreement you can run afoul when the organization assumes that all products are covered under the agreement and starts to deploy broadly a product not included in the agreement.  If you have a capped agreement, it’s quite common for an organization to over-deploy beyond their agreed upon cap.

I’ve heard/seen statistics predicting that as many as 90% of all customers have software compliance issues (and the bigger you are, the more likely you have software compliance issues).  While the number of customers with enterprise or unlimited license agreements is a relative small percentage of the total market, my experience indicates that they too are in this 90% category.

How will utility based usage and pricing go from a talking point to reality?

by: Tom Canning

In our discussions of late, we asked ourselves how utility pricing for software licensing may take root – will the customers drive the software vendors for the solution or will the software producers begin to take the bold moves that will be necessary to adjust to utility based usage and pricing?  Amy Konary – Research Director, Software Pricing, Licensing, and Delivery at IDC recently published a paper on this very topic outlining how utility software pricing may impact the industry in the coming years.  (You can order her report at http://www.idc.com/getdoc.jsp?containerld=PRF00265.)  We believe that ultimately it will be a combination of both – and that there will be opportunities for new companies to enter the landscape with a software licensing solution that can be purchased by use and not just by seat or application.  Amy mentioned one such company last week in our Webinar about titled, “Key Trends in Software Licensing and Pricing”.  Salesforce.com started in 1999 and declared “The End of Software” revolution was beginning.  At that time, names like Siebel, Vantive, and Pivotal were being dropped as the leaders in CRM and SFA.  Salesforce.com began as purely a SaaS company – and today are one of the Top 10 software companies in subscription revenue.  They succeeded because they focused on one type of service and didn’t need to completely overhaul a perpetual software license model.  Very large, established perpetual license model vendors cannot easily abandon this model given the short-term impact it would have on their business.  But to that point, virtually every major vendor has announced the equivalent of a software + services strategy where new, complementary services would be sold via subscription that will add value to their existing on-premise software.

Could there be others like Salesforce.com in the wings developing a new strategy (out of a small garage somewhere) for a pay as you use software licensing model?

Time is of the Essence for Current SAP Customers

by:  Tom Canning

By March 15, current SAP customers will need to decide whether or not to stay on SAP Standard Support or move to SAP Enterprise Support.  What’s the difference?   At 18% SAP Standard Support provides basic support features including legal updates, problem resolution, knowledge transfer and quality management to keep SAP systems running; for 22% SAP Enterprise Support includes all of the Standard Support but also focuses on business continuity, business process improvement, protection of investment and accelerated innovation, and reducing total cost of operations of a customer’s IT landscape.  Simply put, with SAP Enterprise Support, you will receive the SAP upgrades at no cost.  If you elect SAP Standard Support, any future upgrades will cost you.

Before making this decision, it’s important to ask the following:
1. Do I really know what I own today and who is using what?
2. Do I have the proper mix of licenses?
3. What are the licenses that I actually need based on real consumption and real value?
  

Without having the answers above, you may find yourself saying 22% or 18% of “what”?   If you can get the insights into what you own and what you are using, you may find yourself reducing your overall SAP investments.  And if that is the case, it may change how you evaluate the two support options.

To determine whether to go with the SAP Standard vs SAP Enterprise support, you need to gain comprehensible and reliable insight into your SAP license usage and compare it with the terms of your organizations’ SAP contract.  Knowing this will provide you with greater control over your software license management and spending by creating a foundation for understanding your software license compliance, accurately planning for future purchases, and opening the door for fact-based discussions with SAP. 

Ray Wang recently raised some compelling questions in reference to what “level” of support an enterprise organization should consider:

1. Are you expanding your use of SAP in the next 3 to 5 years?
2. Do you have a CPI increase in your contract?
3. What’s your overall SAP apps strategy?
4. Can you make a decision on Enterprise Support by March 15, 2010?

Points #1 & 4 are tricky.  How can you truly look at expansion of SAP licenses unless you understand the historical trend of usage?  Are you tracking software license usage today?  Will you be able to make a confident decision based on what you really own?  Take this pending support decision as an opportunity to gain insights into your SAP implementation and to find out “what” you truly need first – and then the decision for 22% or 18% of “what” becomes clearer. 

2009 Year in Review: 10 Software License Management Observations

by Jeff Jones:

2009 was an interesting year for me.  Halfway through the year, I switched from selling software for Oracle, to working for Flexera Software, a software license management company that specializes in helping customers understand how to manage and optimize their enterprise software licenses, including Oracle Database and E-Business Suite. 

During this time, I have worked with over 50 customers, and noticed some trends.  So without further ado, I give you my 2009 Top 10 list of Software License Management Observations:

10)  The obvious - in this economy, more companies than ever revisited how they handle software license management and set higher expectations for results on these initiatives.

9)  No two companies really addressed software license management the same way. 

8)  ITIL v3 and ISO/IEC 19770 addressed software license management in some capacity, but none provided a full “Best Practices” approach.

7)  Traditional SAM technologies left gaps in knowledge that didn’t allow you to accurately assess software usage or apply a rigorous financial discipline to the management of those assets.

6)  Not many companies made software license management the full-time responsibility of a specific employee(s); instead it was left to a joint combination of employees who also focused on other tasks.

5)  The controversy over what license metric is best for software is not over. Per seat/ user, concurrent user, per server, per CPU, per processing power (however measured) were all still offered and used in the industry.

4)  Virtualization complicated enterprise and desktop software licensing and put enterprises at risk of violating their license agreements.

3)  SaaS offered promise, but organizations realized that there are many variables in most pricing models, including blended metrics, which are the most difficult to track or predict.

2)  Most organizations still didn’t understand the full picture of their installed software, not to mention the actual usage of that software - which is the more meaningful measure anyway.

1)  Organizations need to understand and take into consideration all of these items in order to negotiate the best terms with their software vendors, and build a successful software license management practice that delivers true business value. 

In summary, I have learned that the industry as a whole needs to continue to work on defining and adopting a more diligent, financially-focused, best practices approach to software license management.  We at Flexera Software have started to develop this in our license optimization software and services solutions, and have seen some excellent results so far.  2010 looks brighter than ever for more prudent software license management solutions!

Interested in learning more about these issues? Register for the upcoming webcast Key Trends in Software Licensing and Pricing Webcast, with Amy Konary from IDC.

SAP Offers its Customers a Choice, Challenging Companies to Gain a Greater Understanding of their SAP License Usage

By Jeff Greenwald:

The blogosphere is buzzing over SAP’s announcement to reintroduce its Standard Support model and offer its customers a choice between two tiers of support service.

Amy Konary, Research Director for Software Pricing and Licensing at IDC, and Ray Wang, a Partner for Enterprise Strategy at Altimeter Group and the author of the enterprise software blog A Software Insider’s Point of View, recently posted interesting analyses of these changes. 

Both applaud SAP for listening to their customers and recognize that this announcement represents a decisive shift of power in the software industry from vendors to customers.

Ray provides SAP customers a helpful decision matrix and points out that if an organization anticipates expanding their use of SAP, now is the time to renegotiate their contract and address shelfware issues. 

But in my experience, many organizations don’t really understand how their SAP applications are actually being used. Without insight into SAP license usage, how can anyone accurately identify shelfware or compliance risks?

I encourage those that are turning their attention to their SAP investments to take a closer look at how their organization is actually using their licenses and take that information into account when considering their support options.  Only by asking this question on a more ongoing basis can organizations guarantee that they’re only buying the software they really need and using all the applications they already have in 2010 and beyond.

What do you think of SAP’s support announcement?  How does this impact your software budget plans in the future?  How do you measure your SAP license usage today?