Software License Management (SLM) Explained
Overall IT spending is on the rise and much of that is due to the #1 spending growth category: Software. IT spending on software grew by 8.6% in 2017 and is expected to continue leading IT spend growth in 2018 per recent Gartner reports. Researchers have found that the average cost of unused software within companies comes to about $259 per desktop. Over the course of a year, that average accounts for a 37 percent waste per company, whether due to a lack of communication or a poor asset management program.
No matter if your business is a small startup or a global enterprise, throwing that much money out of the window on unused resources is enough to make anyone weary of software. Add on the additional costs of hardware, software maintenance, security audit costs, and any potential fines you may see should you not be in compliance and it might make you want to run for the hills. However, this does not have to be the case.
One of the best ways for any-sized organization to avoid the costs of unused software and crippling legal fines is to have a strong software license management capability.
Software license management, or SLM, is part of overall software asset management (SAM) capability and involves the process of reducing, documenting, and controlling total IT costs. In short, SLM is a plan to help you monitor and maintain all your organization's various software licenses.
Virtually all software has some type of license attached, whether the program is installed directly on the desktop or digital device, is part of an expensive enterprise license suite, or part of the complex data center eco-system. One of the first steps you must take in license management is to understand your contractual terms related to the type of software licenses your company is using.
License types vary by platform and are somewhat standardized, though vary by an organization’s and vendors’ negotiated contracts. Typical types include:
A huge advantage for your company to have all software licenses under control is to save money. As mentioned earlier, the average cost of unused software is $259 per desktop, quickly sucking up your IT budget and wasting precious resources. By tracking and monitoring all purchases, you are ensuring that each license is accounted for and is being used.
The biggest benefit of SLM, however, is that it is a critical part in ensuring all software products are following compliance with software licenses (also known as an End-User License Agreement, or EULA). If you even have one device that is using unlicensed software, or is not following specific guidelines set by the EULA, you could be in for some hefty fines or even legal trouble.
The Business Software Alliance is a global industry organization whose mission is to advocate for legal software use and enforce compliance among businesses. To fulfill this duty, the BSA regularly conducts court-ordered audits at organizations to ensure they are compliant with all software licenses, no matter if they are small mom-and-pop shops, massive enterprises, academic institutions, or government agencies.
When you purchase software, it is necessary to remember that you only have the right to use it under the terms of the EULA, you don’t directly own it. Should the BSA, or any other auditor, find that you have disregarded the terms of the agreement, you are potentially exposing your company to thousands, or millions, of dollars in penalties. In fact, the average fine for noncompliance is around $100,000 per noncompliant license.
Many license contracts are written today to avoid the legal implications of non-compliance and diminish the concerns regarding BSA, while allowing vendor audits to adjust your licensing position through a “true-up” process. While these types of contractual agreements help avoid legal implications and penalties, these true-ups often result in a significant and surprising expense not accounted for in annual budgets. In a recent study, IDC noted that 56% of customers with true-up contracts were handed true-up bills (21% for a million dollars or more)1. Additionally, customers are also often required to dedicate significant time and resources simply to prepare for these types of audits.
It is highly recommended to have regular internal audits to cover all of your bases before someone like the BSA comes in. By properly managing all software usage and licenses, you are eliminating the risk of negative audit results, unexpected penalties, and other possible damage.
There are many things you can do to ensure that your company does not take unnecessary risks when it comes to managing all your software licenses.
Here are some software license management best practices:
Forrester estimates roughly 10 – 20% of IT software costs result from lack of effective software controls being in place. If you are a CIO or other leader in IT you might ask yourself: “If I could conservatively save 10% of my annual software costs, what implication does that have on my ability to impact the company’s bottom line?”
Whether you are a small start-up or a global enterprise, strong asset management is vital to your business and company budget. By following proper software license management practices, you can adapt quickly to market needs, maximize your company revenues, and most importantly, maintain compliance, ensuring protection of both your assets and your company reputation.
While the importance of proper software license management can be easy to see, the journey to getting there may seem overwhelming. Let the experts from BMC Software help identify the capabilities you need and help you establish the right program to achieve your necessary outcomes.
1 “CFO's Beware -- Companies Often Pay Unbudgeted Software License True-up Fees in Excess of $1 Million According to Flexera Software/IDC Survey.” Flexera, 29 Apr. 2014, www.flexera.com↩