Gartner forecasts worldwide IT spending will grow by 6.2% in 2021, projected to total $3.9 trillion (€3.30 trillion). One of the biggest contributors to this figure is software and cloud spend especially over the past 12 months.
Businesses had to adopt new tools almost overnight to facilitate remote working, with this urgency now becoming a potential risk, says Antony Attfield, services manager at SoftwareONE . Many companies hastily procured software without being fully informed on their needs, resulting in rigid multi-year contracts, or scenarios where the wrong amount, or level of, licensing was purchased, having implications for future budgets.
Software requirements will change again as businesses begin welcoming employees back to the office. Some on-premises applications that are licensed by location will be back in use and may need additional licenses.
Similarly, many businesses will be allowing staff to work flexibly between the office and their home, which has additional software implications as use will constantly fluctuate. It is crucial for organisations to get their software ducks in a row, to avoid sizeable non-compliance fines, ensure tech spend is effective, and guarantee new ways of working are adequately supported.
Knowledge is power
A good place to start is by looking at vendor contracts. Many organisations take an attitude of “if it ain’t broke don’t fix it” towards vendor negotiations and yearly renewal agreements, for fear of disrupting business operations.
However, what businesses don’t realise is that the agreements are often what needs fixing. Companies that sign them without visibility into their license entitlements, who is using the software, and how it is being used in the business could end up paying millions more than they need to, especially as that use changes over time.
Equally, this can leave them at the mercy of the vendor if non-compliance is claimed following an audit. COVID-19 has hit revenues for almost everyone and it is expected that software vendors will use audits to recover losses. Receiving an audit letter is a heart-in-the-mouth moment for organisations, but in our experience, non-compliance bills can be considerably reduced with the right data to hand.
For example, one of our customers in the energy sector recently reduced a £17m (€19.86m) compliance bill around SAP HANA to just £400,000 (€467,351.84), as they were able to gain visibility into suspected non-compliance, deliver the right information, apply the fixes needed, and importantly have a partner they could trust to negotiate with the software vendor.
This shows how important is it to have deep insight into the software estate, especially as we move into the time of year when contract renewals and software audits take place. However, it’s also important not to view renewal negotiations as a one-time event. Organisations need to make sure they understand their unique business requirements year-round and how that aligns with standardised terms in their contract. From there, they can look at whether renewing earlier in the quarter can offer better pricing and discounts, which can be true of Microsoft.
Better understanding your software position
To fully understand their current software position post-COVID-19, companies can carry out their own internal audits. There’s a real incentive to this, with organisations able to cut software costs by 30% by implementing IT asset management. This entails an initial assessment to take inventory of software assets both on-premises and in the cloud, and the number and type of licensing you have purchased.
Businesses can benchmark usage against this baseline and track for any changes in behaviour. It is also important to take accurate measure of any new software or applications that have been deployed and compare against what the business is entitled to in the contract to validate compliance. This provides companies a clear picture of their software estate, and from here, they can start looking at ways to reduce cost either through removing shelfware (unused software) or moving onto consumption-based contracts.
Carrying out these internal audits and tracking the software in use within the business can be difficult for organisations without specialist in-house skills or tools. Some opt to invest in an external partner to help them navigate this process and who can continue to monitor their software situation on an ongoing basis.
This entails interpreting the complex Terms & Conditions of contracts that organisations may have in place, reviewing their purchase records and license entitlements, and combining this information with effective remedial action. This helps to reduce the risk of non-compliance and its associated costs, as well as find areas to improve ROI on tech spend.
Making smart software decisions isn’t simply about getting the best price and ensuring contract agreements are based on your specific business need. As companies continue to accelerate their digital transformation, it will become more important for them to make the most of their IT investment. This involves staying abreast of IT assets year-round, to reduce tech waste, avoid any nasty surprises when audit season comes around, and ensure your organisation can keep pace with evolving working practices.
The author is Antony Attfield, services manager at SoftwareONE.
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