By John Smith
In my dealings with customers that are using Engineering and ERP applications I find that the most frequent cause of oversupply is due to local and uncoordinated software procurement activity. Because there is no oversight at the enterprise level, licenses are obtained for new staff or projects without checking existing license inventory or application usage levels.
Furthermore, the software is deployed without having any tracking mechanisms in place, often on an unshared basis—meaning that only one department or group of users has access to the applications and licenses. These applications are also frequently purchased with sub-optimal contract terms attached.
By establishing central purchasing and control of software licensing, full visibility of your software assets can be achieved. Processes can be designed to reclaim and reallocate unused and under-used licenses (also known as license reharvesting), allowing your organization to only buying more software when absolutely necessary.
Another major benefit of this central control is that negotiations with each vendor can be carried out by IT procurement specialists who are knowledgeable of software purchase agreements and licensing terms and conditions. They are in a position to use more than just price as a lever to obtain the best deal. They can use incentives that influence vendors (revenue recognition, for instance) to extract concessions that are significant to the corporate customer. Professional procurement officers will end up with contracts that are flexible from the customer’s perspective and relevant to a modern, dynamic organization, covering possible eventualities like mergers, acquisitions and divestitures.
For example, the software may be leased for several years, instead of having the larger initial investment associated with perpetual licenses for software that may be superseded or become irrelevant due to technology advances. Another example is to negotiate a clause that allows global access to the pool of (concurrent) licenses, to ensure the maximum utilization of the software assets.
Clauses may also be added that limit increases of maintenance costs or that provide access to emerging products at guaranteed prices. And buy-back options may be negotiated so that legacy products and features may be exchanged or re-mixed for newly- released products. In some cases, such as for electronic design automation (EDA) software used by semiconductor design teams, remix can allow the organization to change the number of concurrent licenses available for each application in a set of design and verification tools depending on where they are in the design cycle.
To summarize, there are three major reasons to centralize software procurement and software license management:
- To gain oversight of your software assets (know what is owned, deploy what was bought and use what was deployed)
- To implement best practice processes that allow effective management of licenses throughout the entire software lifecycle, control costs and increase utilization of existing software assets
- To negotiate better software contracts that are allow flexibility and cover the needs of a dynamic organization
To learn more about setting up a software asset management (SAM) program for managing concurrent licenses (e.g. for engineering and technical applications), please view our on-demand webinar: Creating a Mature SAM Process for Concurrent License Management