Software licensing management: a topic for the boardroom in 2016
Three quarters of companies still don’t have their software licenses in order. That is one of the main conclusions of the annual State of the (Software) Estate report. In addition, the study mentions other interesting insights, results and trends in software licensing management. The most positive development: it is increasingly a theme being decided at the highest level in organizations.
The research, conducted by Flexera Software, was done among 489 companies from 37 countries. More than half of the surveyed companies are based in the United States. The research focused on enterprises: a third of respondents had revenues above $1 billion and a fifth had turnover exceeding $3 billion. These are the three main results:
Result 1: The frequency of audits has increased
Seventy-five percent of the surveyed companies are out of compliance and haven’t got their software licenses in order. This brings significant financial risks because the number of software audits is increasing. Two-thirds of the companies surveyed have been inspected at least once in the past two years. This is a slight increase over last year. The number of companies that have been inspected more than once (from 38% to 46%) or more than three times (from 19% to 23%) has increased steeply. The inspections are generally conducted by software vendors and Microsoft is the absolute leader in this with 61% of all audits carried out by the Redmond-based company. Following at a distance are Adobe, Oracle, IBM and VMware (all around 30%).
Result 2: The fines are higher
Not only have the number of software audits increased, but also the fines that are associated with them have gotten higher. Nearly half of the organizations surveyed (44% versus 25% last year) has had to pay more than $100,000 to software vendors to compensate for the non-compliance. One fifth of the organizations even had more than $1 million in claims to pay. That is double compared to last year.
Result 3: Companies are paying a lot more for unused software
Organizations not only spend a large part of their budget on fines, they also add unnecessary money on software that goes unused. Only 7% of companies actually use all purchased software. A third thinks that 10% of all their software is merely “shelfware”, and for a third this percentage is between 10% and 20%, and another third has a definite 20% of the software sitting unused on the shelf. Companies also don’t benefit enough from the additional usage of software, such as rights to upgrade the software to be used by another employee or to use in a virtual environment, etc.
Software licensing management is a topic for the boardroom
The results clearly show that companies are increasingly faced with both under- and over licensing of software and the associated financial implications that come with it. The positive thing is that companies are also increasingly aware of the complexities of software licensing and seeing more and more, the importance of software license management (75% of all surveyed organizations name it an important theme). Departments can no longer ignore license management and dismiss it as the responsibility of the IT department. The financial risks are indeed so great that it must be an issue for CFOs. We are therefore happy to see license management is increasingly becoming a topic for the boardroom and thereby approached in an increasingly professional manner.
This professional version is completed in two ways. The first, more defensive variant is preparing a strategy for audits. Knowing that there is going to be an audit anyway and that the amount of the fines is getting higher, it is important, as a company, to prepare for it. A defense strategy will save you not only money, but also time and effort when the time comes. How do you organize the process-oriented? Do you have the correct license experts ready for you who can help per software publisher (each with their own terms and agreements)? And often an audit doesn’t come alone: Perhaps for you can respond at once to multiple audits by different software vendors for more efficiency. What is interesting is that research shows the number of organizations preparing themselves by performing an internal audit has increased – 86% of organizations do that once a year. This approach provides tangible results, so it is not surprising that the survey shows that organizations are increasingly satisfied with the operation of their licenses.
The defense strategy is important, but even better is the proactive way: continuous monitoring and optimization of proprietary software use — which is the step that companies are increasingly going to make more often. Allows you to kill two birds with one stone and to attack both under – and over licensing. The probability of a fine to an audit is in fact even smaller, while it also directly contributes to cost reduction. These organizations pay every year — in addition to a one-time investment in the purchase of software — a considerable amount on support and updates. For medium-sized organizations this runs up quickly to $10 million per year, of which $1 to 2 million is spent on items that are not used. Everyone can see that these are unnecessary expenditures. Furthermore, it is possible you can redeem this software for other software that is used and thereby prevents new investment. Also, sometimes things can be sold, depending on the arrangements with the supplier. One thing is clear, however: it (a good strategy) always delivers significant savings.
This article has been published on https://www.computable.nl/
Mark co-founded B-lay in 2008 and is the company’s managing director since then. Additionally, to his managerial role, Mark is using the extensive software compliance knowledge he gathered since 1997 to help organizations worldwide get insight into the risks associated with using and managing their software licenses, as well as preventing compliance issues and save costs. This is also strongly visible in the Zyncc product line of B-lay. Prior to founding B-lay, he was responsible for all compliance activities in Europe, Middle East and Africa at Oracle. This included building the foundation for what now is the global Oracle License Management Services (LMS) team and onboarding the many acquisitions Oracle made over the years into the compliance program of Oracle.
Mark holds a bachelor’s degree in Company Economics and IT from Hogeschool Enschede in the Netherlands.