Software licensing presents issues, challenges for enterprises

Experts say better software licensing controls can help enterprises spend funds more efficiently and avoid issues and challenges for enterprises. One company shares how it did just that.

I have never found a company that was fully compliant in its software licensing.
Jason Allaway
Software asset management director, SAM Practice
Hand on heart, do you really know what software is running on your systems, and how much of it is paid for? Do you know how much software you've bought that never gets used?

Those who can answer 'yes' to both questions are a small minority. The fact is that most companies struggle to maintain control over their software licences. Some may use unlicensed software, leaving themselves open to fines and public ridicule at the hands of software vendors. Others may overcompensate and buy extra licences to be on the safe side. Most firms end up doing a combination of both: under-licensing on some products, and overpaying on others.

"I have never found a company that was fully compliant in its software licensing," said Jason Allaway, software asset management director of SAM Practice, a software asset management firm. Allaway said he has clocked up to £1 million in revenue in his first year of trading while saving his clients around £16 million by bringing their software licensing under control.

Having previously worked for software vendors, he has seen companies buy more licences than they needed and be confused by the terms and conditions of software licensing. Now he has crossed over to the other side to help customers get the most out of their software budgets.

"The vendors' salespeople obviously want to sell as many licences as they can," Allaway said. "And there is often a disjoin between IT and the purchasing department. IT wants to solve problems, but it doesn't understand the commercial implications, for instance, of everyone in the company having access to the new database. The purchasing departments are often only interested in finding what they think are the best prices."

The result, he said, is confusion and wasted money. From a security point of view, if companies are not sure what software they have, they risk having unmanaged and unpatched applications.

Andy Kellett, senior research analyst at the Butler Group Ltd., said the problem pervades most companies, is often compounded by mergers and acquisitions, and organisations end up inheriting a wide range of software.

"There is no clear route of ownership," Kellett said. "When you start asking who is responsible for IT purchasing, you can get a lot of different answers. One person may have chosen a CRM system, another chose the BI application. You can discover a lot of different fiefdoms where people make their own IT purchasing decisions."

The obvious step is to conduct a systems and software audit, but he said that can often get sidelined following a corporate merger because other priorities take over.
Allaway's company offers audit services -- using asset management software from LANDesk Group Ltd. -- to track all software across an enterprise. SAM also provides ongoing software purchasing advice to companies to help them licence in the most efficient way.

One of its early customers was the John Brown Group, a London-based magazine publishing company with around 350 staff. The company's IT director Richard Sacre said last year Microsoft enquired about the number of people that were using Microsoft Office.

"We have an environment that is constantly changing. We work with agencies and put together new teams on a weekly basis for new projects," said Sacre. "It is very hard to keep track."

He called in SAM Practice to help assess what they had, and indeed they were short of a few Office licences, which they rectified immediately. But having seen the ease with which SAM had been able to track down every instance of different applications, Sacre decided to keep them on as consultants.

The main benefits have come from what he calls 'software harvesting' -- recovering licences from users who no longer use an application. "With big programs like Photoshop, we can have up to £7,000 of software sitting on a user's machine. If we see someone's not been using Photoshop for a while, we'll pull it back silently over the network," said Sacre.

He now has a SAM person on the premises two days a week, helping his team of five to understand the intricacies of licensing, how to use LANDesk, and provide ongoing advice on how best to license new software.

The tighter control has helped John Brown cut its annual software expenditure by about 20%, according to Sacre, while also ensuring there are no unlicensed copies of applications.

LANDesk has also helped him tighten up on security by blocking the installation of prohibited peer-to-peer applications, such as Limewire. Sacre said that means the company can assure its board of directors that all its software is compliant.

"We have been misadvised in the past by vendors about the best or most economical way to license software," Sacre said. "The tendency to over-license and panic-buy is huge. It can be triggered by an innocent phone call from the likes of Microsoft or Adobe -- if you don't know whether you're covered, you may buy another 20 licences just to be sure."

For Allaway and SAM Practice, business is booming. Allaway now has 30 experts on his staff, and has opened a New York office to service U.S. clients.

Allaway said that based on the experience of his first year in business, most companies are overspending on software by between 30% and 60%. "This is where software can become very interesting for the CFO," he said. "It can be a lot of money."

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