The hidden pitfalls of unmanaged software: How unused applications are costing companies millions

When it comes to managing software licenses and assets, most companies focus on compliance

October 17, 2012

By Tim James, director of sustainableIT

When it comes to managing software licenses and assets, most companies focus on compliance – rather than cost-cutting. Organisations are over-licensing, buying more and more software in order to err on the side of caution. This can be an extremely costly mistake.

On the face of it, very few organisations have software asset management strategies in place, exposing the company to considerable financial risk. As long as software is bought and licensed legally, it’s forgotten. Very few organisations stop to detect unused software or shelfware (that is never deployed to begin with) across the myriad of systems, locations, PCs and servers- never mind reclaiming or reusing them.

Bundled deals, license options and virtualisation have all contributed to the complexity of software asset management. Organisations are struggling to reconcile the software they have actually deployed with the software they have licensed. Very few seem to know how much money and waste is being tied up in their software and how much they could save by efficiently managing their software licenses. Add to that the fact that software vendors are becoming increasingly more vigilant, clamping down through regular vendor audits which result in heavy fines, substantial back-charges and the threat of legal action. (Virtually all agreements with software vendors stipulate that they will have the right to audit at least annually.)

Fearing being caught with unlicensed products, many organisations respond by buying even more software, ignoring the very real danger that it will never be deployed, used or add value. This results in unnecessary costs as companies are still paying maintenance fees for software they aren’t using or purchasing additional licenses rather reallocating existing ones. Analysis conducted on a number of local organisations showed that at least 20-40% of licenses deployed are not being used – and definitely not reclaimed. In USA alone, this represents $12.3 billion in preventable and ongoing costs, with a typical enterprise with 10 000 users using $4.1 million worth of unused software on PCS, costing $1.1 million annually on ongoing maintenance.

Disorganisation is another concern, particularly not having a handle on what software is deployed in your organisation and how many licenses of that particular piece of software are deployed. Typically organisations will purchase a number of licenses, known as their license entitlement. However, when more than the entitlement is deployed, they have to pay additional for the additional usage. This represents not only a financial risk but also a reputational risk – for all intents and purposes, this is construed as license theft if not disclosed and procured.

CIOs should be asking themselves, on a regular basis: What do we own? What are we using? And of course, What do we really need?

By deploying license metering and tools implemented like 1E’s AppClarity that provides the ability to reclaim unused applications both in an automated fashion, as well as a user centric approach, companies can curb their unnecessary costs dramatically.

Software asset management tools should also be deployed and maintained to ensure that license entitlement and deployment remain in synch. The software efficiency report of 2011, showed that 52% of enterprises used spreadsheets to record software licenses, 12% using paper-based filing systems and 12% – use nothing whatsoever. Keeping track of licenses is the key to remaining cost efficient.

In the end, there is no excuse for not having a software asset management strategy in place – there is technology that will do it for you. This is a quick and effective way of eliminating software waste in the company, while still safeguarding the organisation against a vendor audit.