Failure to keep an eye on software licences can deal organisations a double whammy. Having inadequate licences can make firms liable for huge fines. But having too many licences can result in businesses pouring money down the drain.
The latter often occurs when a company has purchased a volume licence agreement or site licence allowing a number of users to run software but then buys additional licences separately.
According to Julia Giera, an analyst at Giga Information Group, the most effective way a company can avoid over-purchasing software licences is by installing and using a good asset management software tool. These can keep track of software licences, providing users with a means of licensing usage.
In addition to using asset management tools she advises companies to form a specific group, or at least nominate one individual, to be responsible for IT service provider relationships.
"This group would oversee relationships with vendors, assist with contract negotiation and understand the entire corporate environment in order to leverage buying power with software vendors." The group should also draw on the knowledge and resources that software suppliers provide to assist with licensing and tracking the licences it has purchased.
One of the problems Giga has noticed is that businesses tend to rely on their purchasing departments to buy software licences. Given the complexity of software licensing, "many companies make the mistake of using purchasing department personnel without experience in IT for this task".
One company that has undergone a software audit programme is M&G, the investment management group. The company runs a mixed IT environment comprising Windows NT, Unix, AS/400 and mainframe systems.
It recently introduced a number of new processes, developing a structured approach to auditing its IT. This involved establishing a continuous audit covering all aspects of software inventory, including inventory control, a review of all the software it uses and policies for disposal of IT.
M&G also established pro-active management of software licences. This involved using automated control over the Internet and issuing software authorisation keys to users as e-mail attachments.
While these procedures have helped M&G remain compliant in terms of the software it is licensed to use, there has also been a cost-saving benefit, according to David Russell, information risk consultant at M&G. "It will provide the driver to reduce costs through effective control of software, regular reconciliation and general inventory management."
Russell's experience is reflected in findings from analyst firm, Gartner. In a study of cost savings from September 2001, Gartner estimated that a company with $1bn revenue and $39m in IT assets could save as much as $7m a year based on an annual IT budget of $60m.
Ultimately users have to pay for the software they run. But when IT procurement is decentralised, businesses can find they have acquired software licences more than once. Worse, some products they use may be unlicensed. The best way to minimise this exposure is to establish tight software management policies. To this end industry experts recommend businesses set up dedicated teams to track IT assets.
Keeping track of licensed software
To make big savings Gartner advises users to set up an IT asset management (ITAM) team comprising:
ITAM manager/team leader: Major process involvement - acquisition and procurement, deployment and management, retirement and reallocation, and ITAM tool selection and implementation. Minor involvement - technology and business planning.
Business unit representatives: Major process involvement - technology and business planning, deployment and management, and retirement and reallocation. Minor involvement - acquisition and procurement, and ITAM tool selection and implementation.
Purchasing manager: Major process involvement - acquisition and procurement; and retirement and reallocation.
Finance representative: Major process involvement - acquisition and procurement.
Legal representative: Major process involvement - acquisition and procurement (contract terms and conditions).
Facilities representative: Major process involvement - acquisition and procurement, deployment and management, and retirement and reallocation.
IT support services managers: Major process involvement - technology and business planning, deployment and management, and ITAM tool selection and implementation.
IT operations: Major process involvement - ITAM tool selection and implementation, and deployment and management.
Contracts administration: Major process involvement - acquisition and procurement. Minor involvement - deployment and management (external resources only).
This was first published in February 2002