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6 Steps to Reduce Your Software Spending

Enterprise Software | Posted on May 4, 2020 by Softchoice Advisor

In the initial response to COVID-19 most organizations focused on enabling and stabilizing remote access, collaboration, security and network capabilities. As new financial pressures present themselves, leaders in every vertical are now looking for immediate steps they can take to reduce spending.

The Spiceworks State of IT Report 2020 finds that software and cloud-based services represent 51% of IT budgets, making these some of the most impactful areas to look for cost savings.[1]

But a confluence of competing IT priorities, growing complexity around vendor licensing vehicles and limited access to relevant data stalls progress. All this makes it much harder for technology leaders to move ahead with efforts to reduce cost.

To make a strong short-term budget impact, organizations need to seek out redundant and unnecessary software spend and convert those opportunities into savings through the following steps:

  • Discover: take an inventory of all the traditional and cloud software in your environment and measure its actual utilization against licensed consumption.
  • Categorize: sort your software by function, identify redundant spending and prioritize the areas for greatest potential cost savings.
  • Select: develop selection criteria based on your specific needs and select applications you can eliminate and keep based on an informed evaluation.
  • Restructure: find the most cost-effective licensing options for the applications and services that remain and restructure licensing agreements.
  • Maintain: take a proactive approach to reviewing and re-evaluating your overall software licensing strategy on an ongoing basis.
  • Monitor: as an additional step, always be aware of quick win opportunities to reduce costs and take full advantage licensing options and entitlements.

Below, we go deeper into the ways you can find short- and long-term savings on your software and cloud application spending.

Discover and evaluate current software and cloud usage

Determining whether cost matches utilization is a critical first step to optimizing your licensing spend. But having little or no visibility into software or cloud services usage and associated costs makes it difficult to move ahead on efficiency.

Where data does exist, it’s often diluted with false positives, duplicates or questionable installs. In many cases cleansing that raw data into actionable information takes specialized expertise in asset management engineering – a competency not all organizations will have on staff.

Under a cost management mandate, it may be important to isolate unnecessary seats or products, but without clear and accessible usage and cost data, these decisions are made on a best guess basis.

Enterprise-grade discovery tools can help you capture all the software installed in your environment and measure it against usage. Many of these can be accessed at no cost, allowing you to get started on license optimization without using internal resources or budgets.

Categorize the software in your environment by function

With accurate data available, the next step is to categorize your software by function and determine which products aren’t being used or that duplicate functionality.

For instance, organizations may have technologies installed for desktop anti-virus, cloud file sharing or collaboration tools. Many have several examples of each. In some cases, this is intentional, in others it’s not.

In recent years, more line-of-business (LOB) departments have gained some control over the software they purchase and use. Shadow IT has emerged when non-IT departments or individuals have sourced and purchased their own alternatives to approved applications.

By grouping installed software into specific functions, you can very quickly identify areas of redundant spending. Then, you are in a much better position to estimate the cost of unnecessary applications.

Select the applications that are essential to your business

The next step is to build out appropriate selection criteria for your specific needs and decide which software is core to your operations and which is not. Here, it is important to take a logical approach to paring down your software to those products absolutely necessary to the business.

Next, evaluate the cost/benefit of the available licensing options for core services you have identified and execute. In this case, a software vendor licensing specialist may be equipped to help.

It’s also important to ensure the people in your organization use the tools you already have by designing and implementing an appropriate adoption program.

Restructure licenses and contracts to reduce cost and risk

Determining whether you are over- or under-licensed today isn’t enough. Among the software you still need to run the business, there will be many licensing options and vehicles available to help drive further savings.

For example, even after the decision to standardize on one collaboration tool like Microsoft Teams or Cisco WebEx, there may be hundreds of ways to acquire it. To get the most savings, you will need to identify and adopt the ones right for your specific technology and budget needs.

Restructuring contracts to ensure your licensing across all relevant vendors and products can scale up or down as necessary is critical to driving efficiency while you work toward recovery.

There is no one-size-fits-all solution for enterprise software licensing. Where subscription models might work for some, others are better served by a perpetual agreement. For example, some organizations can offset costs by shifting to a subscription or operating expenditure (OPEX) for some software or cloud services. But for those organizations with cash flow or debt covenant issues or those required to assign technology spending to capital budgets, this isn’t an option.

Maintain cost efficiency long-term with a proactive approach

Streamlining your software licensing is not a “one and done” proposition – you may need an ongoing approach to manage licenses over their lifecycle from deployment to End of Support/End of Life.

Meanwhile, as vendors increase the pace of innovation, unexpected product and program changes could disrupt technology planning and introduce unanticipated costs. Without specialized knowledge of licensing programs and vehicles, you may be exposed to compliance risks or even audit failure. Building an effective strategy for negotiating license agreements and renewals is a complex but necessary step.

Keeping your right-sized licensing strategy current and optimized to take advantage of new opportunities to avoid costs takes a programmatic, data-driven approach. A structured program for enterprise lifecycle management that includes programmatic support and expert guidance in licensing across the major software vendors will help you translate short-term wins into long-term efficiency.

Monitor for short-term opportunities to reduce costs

In response to COVID-19, you may have introduced new software to enable remote work, such as modern collaboration, virtual desktop infrastructure (VDI) and security products. At the same time, you may have adopted or shifted some infrastructure or application workloads into the public cloud.

Without knowing the licensing options available, you may end up spending more than necessary. Many organizations fail to take full advantage of licensing benefits and free services vouchers they are already entitled to or didn’t know were available.

It’s important to stay ahead of new options or creative alternatives to adjust your licensing models or access financing options could net savings in the short term. A structured enterprise lifecycle management program will help you identify these opportunities as your business needs evolve.

Next Steps to Reducing Your Software Spending

Reducing your software and cloud services costs for the long term may require the help of an experienced and specialized solutions provider like Softchoice.

Making changes or adjustments to contracts and licensing without the right knowledge or insight into vendor-specific licensing programs and vehicles could create compliance issues and audit risks.

Our team of licensing and technology vendor experts are ready to help you find efficiencies wherever you are in your journey from response to recovery.

Looking for more insight on reducing your software spending?

Watch our virtual workshop, “Creating Efficiency through Software Rationalization and Contract Restructuring” on-demand.

 

[1] State of IT Report 2020, Spiceworks, 2020.

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