Top 10 enterprise software licensing mistakes

Enterprises tend to actively manage their hardware assets, but don’t always apply the same principles to software, which diminishes its value to the business.


With software licences and maintenance almost one third of overall IT budgets, software is a key company asset.

Whilst there is increasing awareness of the risks associated with unmanaged software assets, there is a distinct lack of importance assigned to software licence management and optimisation.

By applying the same level of rigour and sophistication to software asset management processes as undertaken for hardware management, enterprises can make substantial savings through the optimal use of all their IT assets.

Enterprises commonly make the following mistakes when dealing with their software estates:

  1. Making ad hoc purchases – Allowing employees to make ad hoc purchases and not controlling authorised purchases is a common occurrence. Enterprises often buy licences as needed in a piecemeal fashion, rather than under a volume purchase agreement, which can be much more cost effective.
  2. Not tracking installation and use – By tracking installations of software and its usage, enterprises may be able to substantially reduce ongoing maintenance payments – either because the applications are not being used or because they are no longer supported by the vendor. A multinational retailer of technology and entertainment products, is a case in point. On evaluating its IT estate to determine its SAP production Enterprise Resource Planning system user licence assignment landscape, the company found that it could optimise its total user landscape for SAP down from 2600 to 1700 users and that only 540 users needed professional level software licences as opposed to the 630 software licences it had. As a result, the retailer saved over $1.2 million in up front expected software acquisition expenses and associated software maintenance costs.
  3. No central repository – A central repository for keeping proof of software licences so that they are easily accessible for review allows enterprises to quickly comply with vendor audit requests, saving time and money.
  4. Not tracking renewal dates – Not keeping track of software licence agreements and renewal dates, makes enterprises vulnerable to lapses in Software Assurance or other maintenance programmes, which can prove costly for enterprises. Some vendors may demand that enterprises just pay maintenance retrospectively to the renewal date, whilst others could make organisations re-purchase the licences.
  5. No communication between departments – IT operations must work with Procurement to ensure that software is installed and used in accordance with the respective licence agreements to avoid software compliance issues. This is often not the case. For example, a diversified technology and manufacturing company, had a complex IT estate including multiple locations, servers and administrators and suspected that it had under-utilised software licences for its high-value applications. On closer investigation, the company was able to rationalise its software licences, centralise the administration of its software estate and reduce the number of IT administrators managing its servers, leading to savings to the tune of $14 million.
  6. Not purchasing maintenance at the right time – The right time to purchase maintenance is when enterprises are looking to be part of an upgrade. For example, Adobe has a couple of new software releases planned this year. If enterprises buy maintenance before the release is announced, the price will be significantly lower and they will become automatically eligible for that product upgrade.
  7. Not ascertaining strategic requirements – Ordering licences without determining what the enterprise truly requires over the longer term could be an expensive mistake. For example, an enterprise might need just Microsoft Exchange & Windows Client Access Licences now, but in six to twelve months time decide that it actually needs to deploy SharePoint. In the context of this example, a Core Client Access Licence would be the better option – offering all three applications in a bundle – as it will save the enterprise money over the long run.
  8. Assuming licensing rules don’t change – Licensing rules change frequently and enterprises need to stay on top of all the vendor rules and regulations. Not doing so can result in enterprises being out of compliance, which could be a costly oversight if audited by software vendors. This situation is now being further exacerbated with the proliferation of virtualisation technologies and cloud computing. The virtual environment is more dynamic and there are new rights and restrictions that enterprises must continuously follow to ensure software licence compliance.
  9. Not applying the Product Use Rights – Product Use Rights define how software licences can be consumed. They include upgrade, downgrade, second use, virtual machine use and multiple version rights. They are typically specified in the licence agreements that accompany software, as in the case of Microsoft volume agreements such as Enterprise Agreement, Select and Select Plus. However, for some vendors such as Adobe, Product Use Rights can also vary from product to product and version to version. Accurately applying Product Use Rights can drastically reduce licence consumption and hence reduce the need to buy more licences.
  10. Not automating Enterprise Licence Optimisation – Enterprises often underestimate the complexity of tracking software licence compliance. However, an optimised licence environment cannot be achieved without an automated solution. Enterprise Licence Optimisation solutions, also known as next generation software asset management tools, enable enterprises to collect all the necessary data – from asset inventory to purchase orders and organisational data – and apply licence entitlement rules to generate the necessary reports to effectively manage software licences.

Enterprise Licence Optimisation is not just about an improved vendor licence compliance position, it is also about taking a strategic approach to understanding the software needs of enterprises so that the software deployed contributes to their efficiency and effectiveness whilst maximising the return on investment and reducing costs.

The fact is that enterprise licence optimisation requires a major cultural shift within organisations to take control of processes so that a more active approach to software asset management can be undertaken. Enterprises that do so better harness the power of this crucial business asset.

Interestingly, according to the InformationWeek Analytics Outlook 2010 survey, demand is on the rise for new IT projects to help automate and improve business processes. Some 51% of respondents reported that IT demand is expected to be higher this year than in 2009.

This trend is likely to be representative of Europe as well. Enterprise software licence management is one area where automation can potentially reduce overall IT costs by 5% – 10% annually.

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