Our latest report reveals that organisations are inadvertently frittering away significant portions of their enterprise software budget due to software license non-compliance and audit related costs as well as software under-use.

75% of enterprises are out of compliance with regards to at least some percentage of their software; and 44% of enterprises (compared to only 25% the prior year) paid $100,000 or more in true-up costs to their software vendors as a result of noncompliant use of software. Interestingly, for 20% (up from only 9% in the prior year) the software audit true-up costs were $1,000,000 or more! Furthermore, 93% of organisations are spending money on at least some software that is under-used – i.e. shelfware.

Managing software licenses a problem

The very software that facilities the efficient functioning of enterprises on a daily basis happens also to be among the most difficult types of assets to track, manage and optimise – creating hidden wastes and complexity. Several causes contribute to the problem.

First, each of the license agreements governing the thousands of applications run within the enterprise contains dense and complex terms – Product Use Rights – pertaining to what organisations are entitled to do with the software. These Product Use rights must be tracked, managed and understood to ensure compliance. If usage exceeds those terms, an organisation is out of compliance. When the software vendor audits their customer and discovers this non-compliance, an enterprise is often subject to “true-up” penalties that can and often do run into six- and seven-figures per application.

On the other hand, if those licenses aren’t being utilised, or if all of an organisation’s Product Use Rights aren’t being fully utilised – then it has purchased “shelfware” that is sitting idle. Most organisations experience these issues simultaneously – they are out of compliance with some of their software titles, while other titles are being under-utilised.

Additional factors further complicate the scenario, such as new technologies like the cloud, virtualisation and Bring Your Own Device (BYOD) policies that allow device-based access to applications. These technologies have software licensing consequences that can seriously impact whether a company stays in, or falls out of compliance. Other factors such as employee turnover, mergers and acquisition, retirement of hardware further muddy the waters, rendering software license management more difficult.

Top 10 Software Asset Management mistakes commonly made

There are a number of mistakes that organisations commonly make, which result in shelfware and non-compliant software use:

  1. Ad hoc purchases – Lack of controls over purchases is common, even for when made under a Volume Agreement.
  2. No tracking of software installation and its use – By tracking installations of software and its usage, organisations may be able to substantially reduce ongoing maintenance payments
  3. Absence of a central repository – A central repository holds proof of software licences, making them more easily accessible for review. It also allows organisations to quickly comply with vendor audit requests, saving time and money.
  4. Lapses in tracking software renewal dates – Failing to keep track of software licence agreements and renewal dates makes organisations vulnerable to lapses in maintenance or loss of use rights, which can prove costly.
  5. Not keeping up with changes in licensing rules – Licencing rules change frequently and failure to stay on top of these changes can result in being out of compliance.
  6. Not establishing ascertaining strategic requirements – Ordering licences without determining what the organisation is currently using and truly requires over the longer term could be an expensive mistake.
  7. Not leveraging Product Use Rights – Accurately applying Product Use Rights can drastically reduce licence consumption and hence reduce the need to buy more licences.
  8. Lack of communication between departments – IT operations must work with procurement to ensure that software is installed and used in accordance with the respective licence agreements to avoid compliance issues.
  9. Not purchasing maintenance at the right time – The right time to purchase maintenance is when organisations are looking to upgrade. If organisations buy maintenance before a release is announced, the price often is significantly lower and they will become automatically eligible for that product upgrade.
  10. Not automating Software Licence Optimisation – An optimised licence environment cannot be achieved without people, processes and automation. Software Asset Management/Software Licence Optimisation solutions enable organisations to collect all the necessary data and apply licence entitlement rules to help ensure continual compliance and optimisation.
Our above mentioned research reveals that organisations of all sizes are bearing the brunt of software licence audits, and suffering from the ensuing true-up fees from vendors. Software Asset Management is challenging due to the complexity of the licensing landscape, the different rules adopted by the various vendors and the difficulty of manually tracking licensing information. Automating Software Asset Management is a business imperative – to stay on top of compliance of course, but to also optimise the software spend. Tangible savings can be made from adopting such an approach.

By Vincent Smyth, Senior Vice President EMEA, Flexera Software