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Shelfware – The CIO’s Missing Key Metric and Cost Cutting Imperative

by Stephen White  |  May 11, 2020  |  1 Comment

How many CIOs have shelfware as a target for improvement on scorecards, identified as a cost and leakage from their operations? Or indeed the reciprocal – software consumption, potentially phrased as utilization?

At any point in time IT operations may be running with 25% plus of software going unused.

Source 3 Best Practices to Avoid Costly Shelfware in Your SaaS Deal published by Gartner January 2020

Gartner coined the phrase Shelfware as a Service in 2008. Transformation of software from on premises models to the cloud has done little if anything to enable greater consumption or value alignment between applications licensed and utilized.

Consider the degree to which publishers require commitments to volumes, but allow no credit for volumes, capabilities or components unused. Bundles remain widely used as a means of completing sales, whilst consumption billing whilst present in cases remains a minority approach. Add, also, the higher comparative cost of subscriptions than their prior software maintenance fees, thus unit costs of shelfware have also increased.

Cost Cutting Economic Imperative

Within ordinary business activity there’s cause to be concerned about shelfware or under consumption. Factor in now extensive reduction in software user numbers as unfortunately through COVID-19 impacts roles are being made redundant in significant volumes. Whilst vast numbers of organizations have taken dramatic steps to reduce staffing costs, to what degree can CIOs expect their functions to eliminate aligned software costs?

Without Software Asset Management (SAM) discipline, telemetry and transparency of usage, steps to manage out costs will be challenged to execute upon. Leavers management processes, data archiving and license harvesting are foundational to managing out a dramatic degree of arising shelfware and realising software application cost saving. See Software Asset Management for the Cloud: Consumption Management and Optimization Take Center Stage

Quality data, roles and responsibilities are core to the equation of addressing shelfware. Organizations that have invested in SAM will be rewarded with clarity.

The means to realize cost saving are a subject of contract terms and timing.

Across the range of software contracts in any enterprise there may be a variation in the capability to eliminate shelfware from contract costs mid-term or even at renewal. Some of these variables are a factor of cost caps and relativity, whereby the opposing clauses to price caps are a limitation on the capacity to true down – typical examples include ERP and CRM contracts.

In other scenarios the capacity to reduce may be realizable annually. Last week we published new research which focused on this mechanism within Microsoft EAs. Organizations with an in flight Microsoft EA may have an anniversary imminent and aligned with the fiscal year end. If so a window of opportunity to true down may exist, but, will close 30 days ahead of the anniversary date!

The Microsoft EA example is one which provides a cost reduction realization opportunity from minimizing shelfware. Other examples may exist and warrant investigation to establish targets for prioritization.

Gartner resources addressing shelfware

Additional Resources

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Stephen White
Research Director
4 years at Gartner
16 years IT Industry

Stephen White is a Research Director in Gartner's IT Asset Management, Vendor Management and Procurement team, focusing on strategic licensing and negotiation strategies, asset management, and reseller engagement. Mr. White leverages his experience in software sales and consulting to assist IT leaders through his coverage of best practices in license life cycle strategy and trends, license metric and pricing practices, contract negotiations, optimizing terms and conditions, sourcing, and relationship management. Read Full Bio

Thoughts on Shelfware – The CIO’s Missing Key Metric and Cost Cutting Imperative

  1. John Tomeny says:

    From my experience, the numbers that Stephen White cites here are pretty accurate if not conservative. I completed a SaaS optimization engagement for a client company in Q1 this year that supports Stephen’s findings. The top five SaaS product subscriptions that we analyzed represented a total annual spend of just below $1.5M. We measured two gaps: Purchased vs. Provisioned and Purchased vs. Unused over the most recent 90 days. The Provisioned gap averaged at ~25% and, the 90-day usage gap averaged at 33% for an unnecessary “Shelfware Spend” of $485,594.
    I plan to write a blog about the engagement this month and, if it is safe to travel in September, I will do a presentation of our findings at the IAITAM ACE in Nashville.

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