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Excess Software Expenditure is Draining Budgets – Choice or Challenge?

By Stephen White | October 28, 2020 | 0 Comments

licensingIT Cost Optimizationcloudasset management

Earlier this month I had the pleasure of presenting to an external forum of ITAM practitioners reference future challenges. Within this discussion we looked at impacts of cloud computing growth, AI, RPA and IoT expansion as key demand drivers, alongside an increased focus on consumption management.

Events of 2020 have led many organizations to dramatically cut costs, with the unfortunate primary target being human capital, resources and salaries with a bi-product impact on will.

In parallel, software expenditure overall is largely steady. Whilst elements of the software market are negatively impacted, others continue to grow such as Microsoft‘s productivity and business process 11% growth announced last night .

Software (including SaaS) expenditure per employee represents on average 25% of IT spend at over $3,800 per year, include public cloud and that grows to almost $4,800 per year. Much of this expenditure delivers value, but what proportion is unproductive?

The average 4,000 person enterprise will spend over $15M on software annually. Yet how many organizations have absolute clarity on where within that spend shelfware exists and the potential to strip out that waste? How many have invested sufficiently in the discipline necessary to reliably identify, interpret, analyse and act on this management? Reality – far too few!

Granted, software is intangible and it’s more challenging to understand the resources, than the physical assets we can see and touch. Moreover, we have invested in HR departments that have absolute clarity on the human capital resources, by quantity, cost and distribution, at the disposal of the organization and can readily analyse and act on that information.

Realization that shelfware (including increasing volumes of shelfware as a service) may represent more than 20% of our software expenditure – over $3M annually for our average enterprise – is reasonable grounds to invest in discipline required to effectively manage expenditure and consumption more diligently. How much would an organization be prepared to invest and spend to address and minimize unproductive software? If 50% of shelfware is successfully trimmed, consider the equivalent reinvestment of that saving in digital initiatives or retaining human capital.

Desired ROI equations for each organization may vary, but against those ROI standards the existing investment in asset management will often be insufficient to make a meaningful impact, and thus address excess software expenditure.

This activity won’t be a one-time exercise, it’s not merely a project! Shelfware is insidious and will return if not managed properly. We must be prepared to sustain the effort.

A combination of resources are required; people, technology, assigned responsibility and process – in a similar fashion as our HR function exists. We may identify that retaining all this capability internally won’t be a core function of our operation. Expertise will be challenging to grow and recruit, whilst trustworthy data representing all software used by our organization across a multiple of environments and platforms will be difficult to create and maintain.

We may choose to utilize external expertise to tackle much of the issue and drive more rapid return, reducing costs accordingly, than may be achievable internally. Providers will need to have appropriate scale and capability to take custodianship of the vast volumes of data, whilst owning necessary discipline.

Whether we tackle the issue internally or choose to augment internal management with external resources, we must acknowledge the extent of expenditure and the need for aligned discipline in order to deliver appropriate return from such a significant business asset. In effect choosing to spend less on software.

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