IT departments are constantly being forced to do more with less. Companies today are putting significant pressure on IT to be more efficient, more productive, and deliver more business value while simultaneously cutting costs. Nowhere is this paradox more evident than with software license purchasing and management, where IT is forced to find ways to reduce software expenses while ensuring end users can always access the applications they need to be productive.
Despite the prevalence of this problem, most IT departments still fail to adequately track and manage software license usage. While most IT managers have squeezed every penny out of their physical assets—such as desktops and servers— many are still struggling to properly manage the complexity of their software licenses as business assets, despite the fact that they may be responsible for tracking millions of dollars worth of software products.
A Flexera Software/SIIA study regarding software pricing and licensing trends conducted last fall showed that 72% of enterprises are manually tracking software usage or not tracking it at all. Clearly, companies simply do not know when, how, or even if the software they buy is being used. This lack of visibility into internal license usage often leads to expensive problems, including:
Excess licenses (“shelfware”).
To ensure that users have access to all of the software they need, IT routinely buys more licenses than their organization actually requires. They do so to eliminate denial-of-service problems, such as end users trying to access an application, but being denied because other users have already checked out all available licenses.
To contain software costs, IT may purchase too few licenses and run the risk of end users being denied access to applications at critical times.
Poor license allocation.
Sometimes one department over-licenses a software application, while another department under-licenses it in the same organization. So, the company ends up overspending while still denying some end users access to the application. Without accurate usage data, IT cannot take the necessary steps to remedy the discrepancy.
Unnecessary update and support fees.
Many organizations automatically purchase new software updates and renew annual support contracts, even though their needs have changed. Without visibility into how software is actually used, they may waste a significant part of their budget renewing licenses and support plans no one is using.
Organizations that don’t properly track license usage leave themselves vulnerable to software audits and the multi-milliondollar fines and damaging publicity that come with them.
For most enterprises, projecting the number of copies of Microsoft Office and other standard desktop applications is relatively straightforward. The real challenge for IT lies in predicting how many copies of other types of applications are required, including expensive enterprise programs with shared license models—such as EDA and CAD applications. If IT guesses too high, enterprises overspend their budget; if they guess too low, end users are unable to access critical software and risk disastrous business results. This frequently leads to procurement groups having to scramble to quickly purchase additional licenses.
The key to intelligent license purchasing and effective negotiations with software vendors over these types of applications is having a complete understanding of your organization’s licensing needs. Once you get a firm grasp of your software requirements, you can approach your vendors and discuss ways to get the most value from the software you purchase.
Step 1: Centralize Your License Tracking and Management
Decentralized licensing is a common problem in today’s IT landscape. When different groups across an organization purchase and manage software locally, it becomes extremely difficult for IT to get an accurate global view of software license usage. Without that global view and the data it provides, you cannot get the ammunition needed to negotiate favorably with software vendors.
Centralizing the tracking and management of licenses enables IT to inventory current software assets to see the availability and expiration dates for those licenses. Underutilized licenses can then be redeployed or shared among departments, eliminating shelfware and unnecessary purchases, while ensuring that end users have access to the software needed to do their jobs. Centralized software licensing means that headquarters and satellite facilities can pool licenses so that enough are available at all times— particularly during periods of peak activity—without buying more licenses than are actually needed.
Centralization also makes much better use of valuable IT staff resources. Instead of managing licenses locally with multiple licensing experts, IT departments can now designate one administrator to manage all servers and licenses globally. This frees senior IT staff to focus on more mission-critical tasks.
Step 2: Obtain and Analyze Accurate Global License Usage Statistics
Getting accurate usage statistics is essential. Relying on license usage data that is inaccurate by as little as 4% to 5% can result in costly mistakes. Consider an organization with 4,000 licenses, each costing $5,000. Overestimating usage needs by 5% can translate to $1 million in unnecessary software costs. Therefore, once licensing operations are centralized, the next step is gathering accurate license usage data.
Armed with granular, global insight into how licenses are currently used and how many licenses you will need in the future, you can make intelligent decisions that can deliver profound value to your organization, including:
Reducing spending on unnecessary software renewals.
Many organizations routinely pay periodic software update and support fees without reviewing how many users are still using the associated products. Eliminating or reducing update and support costs for unnecessary, unused or underutilized software is a painless way to reduce software costs. Value can also be recovered from shelfware and other software that is no longer needed. Vendors often sell software licenses at significant discounts if the licenses are purchased as part of a “competitive upgrade.” There is no better software to trade in than software your organization isn’t using.
Managing peak license demand.
The best way to determine how many and what kinds of software licenses to purchase is to define their peak demand periods. A good operational definition of peak demand is any time 90% of available software licenses for a given product are being used. By understanding the usage patterns that emerge relative to time of day, week or month, you can determine average duration of usage and decide whether to allow some end users to be denied service, and, if so, for how long. For example, a denial-of-service that lasts only a few minutes may be acceptable because it significantly reduces licensing costs. A denial-of-service that lasts more than an hour, however, may be unacceptable because of its adverse impact on users or customers. You now have the data to do it.
Optimizing software remixes.
Accurate data on actual usage over time can help verify whether shifts in usage trends are permanent or not. This allows you to optimally redistribute the mix of software a vendor offers. For example, a product design project may require one set of software tools to build a conceptual model, another set to build a prototype, and a third set to test the prototype. By analyzing usage data, you can determine how best to weigh the percentage of each software product and module within the remix, thus ensuring users have the right number of tools available when they need them—and providing more value from existing software contracts.
Sharing licenses between departments.
Sharing software licenses with other departments enables organizations as a whole to save money by purchasing fewer licenses. You can establish shared license pools with prioritized resource allocation, allowing departments or users with high-priority needs to “reserve” a fixed number of shared licenses, thus ensuring software availability.
Aligning software costs with departmental usage.
With accurate data, IT has a firm understanding of which departments are using certain licenses and can bill costs back to specific groups or projects accordingly.
Step 3: Negotiating with Software Vendors
Once you understand your organization’s licensing needs, you can use the data to more confidently negotiate licensing terms with your software vendors. Most companies buying enterprise applications do not understand the many licensing model possibilities available to them. Here are a few examples of actual pricing models software vendors use today:
High watermark model.
This model gathers usage information for a billing period and determines the maximum concurrent usage during that period. It then calculates the price for that usage level accordingly. High watermark models are attractive to enterprises already familiar with the concept of concurrent software licenses, but don’t want to have to pre-buy “spare” licenses to ensure they are covered during periods of peak usage. These models are also extremely useful in new customer situations, when it is difficult to accurately predict the number of licenses required.
Unique user model.
This model determines the number of unique end users who have used the relevant software during the specified billing period. You are charged for the resultant number of users, with appropriate volume discounts. This type of model is appropriate for suites of software development tools or other applications where the real value lies in the productivity boost the overall suite provides, rather than the amount of time each end user spends running individual applications. An attractive variant of this model enables enterprises to commit to a minimum number of users during the contract period, and then uses the tallied count of unique users to ensure you have not exceeded that commitment. If you have exceeded the presubscribed level, you are simply invoiced for the difference between the new, higher level and their original commitment.
This model establishes a pre-purchased inventory of singleuse licenses, or tokens, similar to prepaid phone cards. Each token is valid for a specified period of time (typically 8 to 12 hours). The token is automatically “consumed” when an end user makes first use of the application. Subsequent use of that application by the same user results in no additional charge (until the token period expires). If the user accesses the application again after the token has expired, another token is consumed. A common variant of this model is to apply it to suites of applications, allocating a specific “weight” to each application or capability within the suite. When each application is run, the corresponding number of tokens is consumed. In this manner, a common pool of tokens can be used across a broad suite of applications.
While some models are based on relatively straightforward concepts of usage, some enterprises benefit from applicationspecific variants, or “number of reports run,” or “number of gigabytes of storage managed.” This application-specific concept of usage can be combined with the above models to suit any business situation.
Enterprise can often derive the most value from their software purchases when these licensing models are used in combination with more traditional software pricing models. Vendors can create hybrid models, in which traditional concurrent or subscription licenses can be purchased, and a layer of one of the pricing models can be added on top of it. As such, the bulk of the purchase is along traditional lines, but provides the added flexibility of having easy access to critical software when the need arises.
These are just a few examples of the types of licensing models that can be requested from a software vendor. The key is to obtain a complete understanding of your licensing needs for each application, and then share those needs with the vendor.
Tools to Help You Do It
So how do you get the data you need? In today’s corporate environments, centralizing licensing operations and obtaining accurate, granular usage data is nearly impossible without effective software tools. Using the right tools is essential to properly tracking and reporting on license usage, and also significantly reduces the management burden on IT.
Flexera Software develops software usage management solutions that provide a single console view of their software licenses and license servers across the entire enterprise. From this management console, you can see which licenses are in use, who is using them, and how many are still available. These management solutions monitor the activity of every license server, catalog comprehensive data on application usage, and generate detailed, custom reports to be used to identify unused licenses, verify whether shifts in usage trends are permanent, and negotiate more favorable licensing terms with your vendors.
You Can’t Afford to Ignore License Usage
The day is long past when IT can leave the vagaries of software licensing to chance. The stakes are too high, the issues too complex, and the downside too severe. With companies of all sizes struggling to squeeze every penny of value out of their assets, properly tracking and managing license usage can be an easy way to optimize software costs, achieve more favorable vendor relations, and improve service to end users.
You can learn more about Flexera Software's solutions here.
About Flexera Software
Flexera Software is the leading provider of strategic solutions for Application Usage Management; solutions delivering continuous compliance, optimized usage and maximized value to application producers and their customers. Flexera Software is trusted by more than 80,000 customers that depend on our comprehensive solutions — from installation and licensing, entitlement and compliance management to application readiness and software license optimization — to strategically manage application usage and achieve breakthrough results realized only through the systems-level approach we provide. For more information, please go to: www.flexerasoftware.com.