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| 5 minutes read

A Software Asset Management Model That Mitigates Third-Party Risks and Saves Costs

Over the past year, companies had to transform their IT infrastructure to embrace digital transformation and to induct more remote users than planned. These events stretched IT budgets as well as the flexibilities companies had in their software license contracts. Incidentally, software license audits have increased in frequency. Major software vendors have become more and more aggressive in their approach of auditing their customers, finding noncompliance, and being rigid with pricing. According to a survey conducted by Gartner on software license audits, 65 percent of respondents claimed that their organization had experienced a software license audit in past 12 months. [1]

An audit request does not necessarily mean that your organization is suspected of noncompliance. Software license audits are triggered due to multiple reasons. Some vendors audit their customers on a regular basis to ensure compliance with licensing restrictions or with an intent to get additional purchase orders from customers. It is well known that a major generic software publisher audits their volume licensing customers at least once every three years and other large vendors that provide database, middleware and creative tools are following suit. There are also some global organizations that monitor instances of software piracy and illegal software downloads. When information on such illegal usage gets passed on to the software vendor, that could also trigger an audit. Another reason why software vendors may reappear at your doorstep would be if your organization faced major software compliance gaps or other compliance related issues in the past.

An average organization has anywhere between 5,000 to an upward of 20,000 software records comprising of commercial, freeware, components, utilities, open-source software etc. While managing software is an uphill task; the problem gets further compounded with accelerating digital technologies such as cloud instances, IoT devices, Dockers and containers, etc. 

Due to such challenges, most of the efforts of an organization goes towards procurement, vendor management and managing software deployments with little to no focus on compliance and optimization.

Proactively managing software licenses not only effectively helps in maintaining audit compliance but also assists in reducing IT budgets along with reducing exposure to cyber-attacks and reducing legal risks. As per the BSA Global software survey, organizations can achieve as much as 30% savings in annual software costs by implementing a robust Software Asset Management / Compliance and Software License Optimization Program. However, companies often find it difficult to manage software compliance as software licensing rules are complex and their contracts have ambiguous license metering interpretations. Managing multiple software with varied rules and limitations can get overwhelming. Hence, a strategic investment in Software Asset Management (SAM) practice can help organizations in long run ensuring flexibility to accommodate changes in the dynamic environment rather than doing point in time fixes in case of cost exposures as a result of audits.

With the challenges around SAM in mind, following are some SAM best practices, as a guidance for preparing an efficient SAM practice:

  1. Maintain detailed and accurate records of purchase history: It is important to maintain detailed and accurate record of license entitlements. Such records should contain information like name of the product, version and edition, quantity of licenses purchased, date of purchase and expiration if any, the product activation key, license / part number or any other license identifier. Small organization can get away with maintaining such records in a spreadsheet. However, it is recommended for mid to large organizations to use a SAM tool or some other inventory management software for record keeping.

  2. Monitor software license usage and reconcile purchase vs deployment regularly: Keep a track of what software is deployed and/or used. For this, organizations can use specialized SAM tools or basic inventory tools that can help in discovering software deployment. Calculate correct deployment according to the software metrics and licensing policies. Identify license misuse if any or any unauthorized software and remediate issues. Conduct regular internal audits to ensure compliance.

  3. Invest in a robust SAM tool: A good SAM tool should have the ability to discover assets, measure usage, recognize software product families, the ability to manage and maintain accurate entitlement records and reconcile deployment and entitlements. It should also have reporting and visual dashboard capabilities.

  4. Have a SAM team: The role of the SAM team is to ensure correct management of software assets and maintain license compliance according to product use rights. SAM team is responsible for software right from the time it is requested, through procurement, deployment, recycling and finally retirement. It is very important that the SAM team include licensing specialists to help in making informed decisions regarding license purchase.

  5. Seek specialist help where required: Companies may sometimes need to bring in specialists to assist in purchase decisions or negotiations with software vendors. Legal experts can help in understanding contracts and products usage rights. Licensing experts can assist with optimization of deployment and reduce cost of licensing. Independent SAM consultants who have experience in implementing SAM at various clients can bring in their knowledge of industry standards and help improve overall SAM process. 

For example, the purchase decision for Oracle software would mean choosing between licensing options such as: 

  1. Renew existing Unlimited License Agreement (ULA); 
  2. Exit Unlimited License Agreement (ULA); or 
  3. Buy Perpetual Unlimited License Agreement (PULA). 

There is no fixed rule on choosing one licensing option over the other and such decision would depend on multiple factors.  

In one example, we assisted a large financial institution in purchasing PULA with favorable clauses and cost reduction by almost 80% of the initial budgeted cost.   

In another example, when a large Indian bank was due for renewal of its Unlimited License Agreement (ULA) with Oracle, we helped them optimize their deployment and advised them to tweak their license model thus saving them more than $150 million of proposed costs

Ankura’s team of experts assists clients in managing their Software Asset Management (SAM) process that helps them mitigate risks due to unlicensed software and save money by optimizing contracts and software usage. We also assist our clients with audit defense and front-end discussions with software publishers.

Learn more about how we can assist you: https://ankura.com/expertise/software-license-compliance-optimization/

For further information, write to us at sam@ankura.com

© Copyright 2022. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.

Major software vendors have become more and more aggressive in their approach of auditing their customers, finding noncompliance, and being rigid with pricing.

Tags

data & technology, software license, f-performance, f-risk, compliance, article, technology advisory

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