Slash software renewal costs by reducing software waste

cost-reduction

1E recently produced a very interesting study (see The Real Cost of Software Waste) which analyzed data from over 3.6m desktops across 150 companies and took over four years to compile. According to the IT Financial Analyst team which put the study together, on average in the US, 37% of software is wasted – going unused on the machines it is installed on. That’s 37% of software which your company has paid for, which isn’t being used on the machines it is deployed to. That adds up to a LOT of waste – as much as $7 billion for the top 35 titles.

The question here is – what is the real value of software reclaim, the process of removing the under-used software?

Buffi Neal, a 20+ year veteran of the IT industry, and a key member of the 1E IT Financial Analyst team puts it like this: “If you remove a $300 piece of software, the vendor isn’t going to come out and write you a check for $300 – unfortunately the saving doesn’t work like that.” She should know, as she and her fellow analysts have helped hundreds of companies quantify the impact of implementing Software Reclaim. Before AppClarity (the 1E tool which enables analysis of software usage and which automates reclaim) is deployed to a company, Buffi helps that company determine which titles to target and what savings to expect. After AppClarity has been run, she works with the customer to quantify realized savings. She led the analysis for the 1E Software Waste Benchmark study and has seen the real life implication of reclaim.

According to Buffi there are three main areas where software, once reclaimed, provides savings:

  1. Cost avoidance by reducing the volume of new license purchases
  2. Maintenance reduction and avoidance
  3. Reduction of Audit risk, Power in EA/Suite negotiations

Just taking into account the top 35 titles, the average value of unused software is $224 per employee in the US and £154 in the UK. How much of that money can be actually saved?

Cost Avoidance By Reducing the Volume of New License Purchases

The 1E IT Financial Analyst team have identified that depending on factors like company growth (or reduction), industry sector and hardware refresh rates, software purchasing normally increases by 10 to 12% per annum. “It seems odd, but the data shows that even in companies where employee numbers drop, software purchases still increase,” says Neal. Even at a conservative reclamation rate of 75% of unused and minimal purchase rate of 10% annually, purchase avoidance due to reuse of harvested software is estimated to be greater than $182 per user.

Maintenance Reduction and Avoidance

20% is the typical rate for software maintenance costs. As such, companies are paying $45 or so per user in maintenance on software that isn’t being used. Reclaim can eliminate a portion of that cost. Additional maintenance will be avoided on purchase reduction, realizing an additional estimated $37 per user over 3 years.

Audit Risk

A number of the titles which have the highest rates of “un-use” are commonly audited. For example, the data shows that over 51% of Attachmate Reflection X installations are not actively used. In the event of an audit by a vendor, you are typically liable to pay for under-licensed software on the basis of installation, not use. If you are actively Reclaiming software, you are less likely to be over deployed or over licensed. The value of improved compliance or reduced audit risk is hard to quantify, but it certainly has a value. Neal points out that “Just looking at the letter A, Autodesk, Adobe and Attachmate all perform audits frequently, those vendors all show up in the top 10 list for under-used software, and their applications can be quite expensive. Customers gain significant benefit in terms of reducing audit risk by ensuring Reclaim and associated reduced installation counts is a business as usual activity.”

Unused software will lead to waste – and about a third of software is unused. The good news is that if you implement an active Software Reclaim policy, combined purchased and maintenance avoid is estimated to average $73 per user per year. Spanning 3 years, $182/user can be recouped. Those numbers quickly add up to something which IT Asset Managers and their colleagues in Endpoint Computing and IT Operations should be collaborating on to improve the software waste situation in their organizations.

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