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License recycling is the process of reclaiming licenses from retired hardware. Many organizations have
a three or four year hardware refresh cycle, so one quarter to one third of the machines are retired
each year. Frequently, software licenses that could be reused instead go out the door with the retired
hardware. If only 10% of the software licenses on retired hardware could be reclaimed, then 2.5 to
3% of the software spend could be saved by recycling.
Reharvesting and recycling are important elements of an optimized software asset management
program. Software purchase and renewal costs can be reduced by 5 to 10% or more in the first year
of implementation of a program that includes these strategies.
Example software cost savings scenario
Let s take the case of a hypothetical mid-sized insurance company that has the following IT hardware
and software profile: 10,000 PC s (desktops, laptops), 500 servers, and total software spend per year
of 7.75 million ( 23.25M over the three year term of their volume agreements). The annual software
costs are allocated as shown in the table below, with 350 per PC and 1500 per server spent under
MS EA, on average, 160 per PC and 200 per server under an MS Select Agreement, 50 per PC for
Adobe applications, and so on.
Insurance Company IT Profile Showing Annual & 3 Year Software Spend
Now consider the cost savings that can be attained in year 1 by proper allocation of licenses based on
PUR for PC licenses purchased under MS and Adobe volume agreements. Under MS Select agreements,
as noted above, second use rights may be applied to all those users who have both a desktop and a
laptop let s say only about 10% of the users fall into this category. Since MS Select PC spend is about
25% of the total, the potential savings is 2.5% (10% x 25%). If Adobe and other vendors account
for another 14% of the PC spend for licenses that include second use rights, then an additional 1.4%
(10% x 14%) savings is possible. This means that 3.9% of the PC software cost can be saved by
correctly applying second use rights.