High cost of ignorance

Over the past couple of months I have attended a series of roundtables with IT managers, talking about asset management. They revealed that one of the biggest barriers to them taking greater control over their software assets was a lack of board understanding and support.

Over the past couple of months I have attended a series of roundtables with IT managers, talking about asset management. They revealed that one of the biggest barriers to them taking greater control over their software assets was a lack of board understanding and support.

Given that this year companies in Western Europe are predicted to spend more than £395bn on IT, you would have thought company directors would want to understand the value of their assets and the return on investment they are getting. After all, directors have a duty to shareholders to provide a true and fair view of their firm's assets and ensure that systems are in place to monitor these regularly and rigorously.

So are board directors being given the whole picture as to the real state of their IT? Are they in a position to accurately assess the risks to their business from their IT systems?

Hands-off approach

Board directors are not receiving, or in many cases, even asking for the information they need to fulfil this role effectively. According to the Institute of Chartered Accountants in England and Wales, more than 50% of senior finance professionals in companies of 50 to 500 staff leave the monitoring, auditing and policing of software use to their IT departments, and only 20% include it in their financial review.

The institute also highlighted the informal approach to IT taken by these businesses, with 25% having no IT strategy and only 39% implementing formal measurement of ROI.

According to Ernst and Young, in companies that use independent teams to audit their technology, IT directors do not have confidence that the individuals doing the monitoring have the resources and skills to provide effective risk assessments.

Being able to pull together basic information about IT assets is often a challenge for IT departments, which are not given the time and resources to do the job comprehensively. I have come across firms that do not know how many PCs they have, so cannot even start quantifying what software they are using or how much they should be paying for maintenance and service charges.

Too often I meet companies, large and small, with no technology purchasing strategy, where individual departments have bought duplicate licences for software the company already owns. This has all sorts of implications, including security. Given that they do not know what is being purchased, how confident are the IT teams that their companies' assets and data are secure?

These companies are likely to be wasting money that could be used for other IT projects, if only they had greater control of their assets. More seriously, by not knowing what assets they have and are using, they could find that they are over- or under-licensed.

Persuading the directors

The challenge facing IT heads is how to persuade directors of the value of asset management. There are potential financial benefits - according to Gartner, companies could save as much as 25% on the costs of owning, maintaining and supporting their software assets. Centrica, parent company of the AA and British Gas, estimates it will save £10m on software licensing costs alone as a result of implementing software asset management.

Help is available for boards who want greater control of their software assets. As a result of the work by Investors in Software, a UK-based independent group of software asset management practitioners, there is now a draft ISO standard for software asset management. As part of the certification process, boards will receive an annual statement summarising their assets and licence liabilities.

I appreciate that there is a huge fear of the unknown in making the relationship between IT staff and directors more open and transparent. There are two ways to go: continue with the status quo and hope the problem goes away, or start to gain the board's engagement by identifying a potential issue for the business and working together to build a business case that addresses it.

Of course, software suppliers have a role to play. Microsoft for one wants to break down the barriers that exist between the company and its customers, to build a relationship that is long-term and mutually beneficial. A willingness to engage at both board and IT level will help us achieve this.

Vaughan Smith is head of software asset management at Microsoft

 

 

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