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How To Save Your Organization Millions In Software Licence Costs

        posted by , October 06, 2011

How do you cut IT costs with zero architectural or operational impact?

One effective way is to push your vendors for cost reductions. The first step on this road is to figure out if you are paying too much to begin with.

Duplicate licences are a surprisingly common problem at large organizations. They are the low hanging fruit of IT cost management. If they exist at your organization — they represent a golden opportunity for a quick initiative with immediate and measurable results.

An Example

When times get bad enterprise architects often find themselves quickly realigning their programs to support cost cutting.

This is exactly what I found myself doing during the 2008 Financial crisis. I was an EA at the Japanese subsidiary of a large American investment bank. Our EA team needed to find a way to support an aggressive cost management strategy.

We knew that the parent company had inked a global licence deal with a (very) large software company a year earlier. We launched an initiative to investigate the impact to our company.

The project went something like this:

a month of meetings to obtain the licence agreement from the parent company.

a week to confirm with the vendor in the US that the global agreement applied to a subsidiary in Japan.

a week to identify the licences that were impacted.

three weeks of intense negotiation and escalations to get the vendor's Japanese sales organization to recognize the agreement.

The result was better than we had expected:

we immediately discontinued 40+ recurring (annual) maintenance fees to the vendor.

we had access to a library of 70+ enterprise software products with no licence or maintenance fees.

total cost savings were in the 10s of millions of dollars (annual recurring).

we began to pay modest fees to the parent company for use of the global licences.

Needless to say, given the uncertain, recessionary environment of late 2008 the project got the attention of executive management.

The Duplicate License Problem

There are two flavours of duplicate licenses:

1. When departments, divisions and organizations buy licences and then forget about them (or fail to share unused licences).
2. When teams fail to utilise the Global and Enterprise licences they are entitled too.

There are numerous reasons this happens:

lack of centralized software management tools

communication issues (license purchases not communicated)

complex licensing terms that are difficult to interpret

invalid assumptions: we're a subsidiary so that licence probably doesn't apply to us

vendor resistance to recognizing existing licences (especially those purchased in other regions)

office politics (departments may have little incentive to share licences with competing departments)

These problems can be addressed by strengthened purchasing processes. Software licences should never be purchased without a duplicate licence check.

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