By: John Emmitt
Here’s an actual email exchange with one of our prospects on the issue of funding for a Software Asset Management program. Of course, the names have been changed to protect the innocent.
Harry, Vice President, Fortune 500 Company:
“I thank you for checking in again. I did ask the team where we stood on potential implementation of a [software asset management and license optimization] solution, (yours and any other vendor’s for that matter). I was told that at present, with all the focus on other more urgent areas of operations coupled with the lack of any funding for any unbudgeted solution in 2010, there is no room to add this to the list. So basically the holding pattern I advised you of a few months ago remains.”
Bob, Major Account Manager, Flexera Software:
“Thank you for the email, I really appreciate you keeping me abreast of what is going on. If you would like, I would be happy to offer a day or two on my dime to help you or the team responsible for Software Management review your current software position and even put together a business case that will allow you to find some budget for such a project.
When I look at your annual report, here is what I see:
I estimated IT spend across XYZ Company Inc., based on total revenue of ~ $6 Billion, I was conservative with my 3.5% (Avg. IT spend as a percent of revenue). I came up with total IT spend of $208 Million per year; of that, it is estimated 30% is used for software. In your case that would be $62M. Historically, customers we have worked with have seen savings anywhere from 8% to as high as 28%. Just doing some quick calculations of a low - 2%, middle - 3% and high- 5% savings percentage based on license optimization, it was pretty interesting to see what the potential value to you could be.
- Low (2%) estimated savings - $1.2 Million
- Middle (3%) estimated saving – $1.8 Million
- High (5%) estimated savings – $3.1 Million
Harry, I have been very conservative in my estimates. Even if you believe my numbers are incorrect, I am happy to review this with you in more detail. A 1% savings would be $624,000 which would more than fund such a project and provide XYZ Company a platform for future savings.”
“As always, you present a compelling argument. And your synopsis of spend, percentages, etc. is admittedly quite accurate. Therefore, while my colleagues have advised they are simply just too busy at the moment to pursue this, I’m obliged to do so nevertheless. Let’s set up a meeting.”
I have a couple of observations—first, like Harry’s company, many organizations have other higher priority projects on their agenda. So, this leads to the second issue which is lack of funding for software asset and license management projects. As with the early days of server virtualization, its taking a little while for organizations to become convinced that there is a real return on investment here. It’s the classic 'hockey stick' situation—a few early adopters take the lead and show significant cost savings and ROI. Then everyone else starts to jump on the bandwagon and pretty soon, it’s the hottest trend—like virtualization is today.
Let us know how we can help your organization build a business case for Software License Optimization. There’s real ROI here!