Cost Optimisation: A Two-Part Story (Part II)
As I covered in part I of this series, the economic prediction for the next few years is cause for concern and in these uncertain times, businesses will start to look at their spending profile for ways to reduce costs.
Our SAM Practice has been in the industry for 20 years and has seen this economic turbulence before. It’s our view that generally, businesses that rush into technology decisions, new contracts or headcount reduction to save money, can potentially (and unwittingly) create a tricky license compliance position that remains unknown until a vendor audit.
This post will cover the remaining six business challenges, programs and compelling events that require due diligence from an enterprise license perspective to avoid unbudgeted spending and potential punitive commercial measures from vendors.
You have received a letter from your vendor requesting an audit
Software vendors are perfectly within their rights to request an audit of your software. In times of crisis, when market confidence is low affecting vendor revenue streams, the behaviour of some enterprise vendors can change.
According to a survey carried out by the Federation Against Software Theft in 2009 (during the last global financial crisis), the number of companies being audited by their enterprise software vendor had increased by 50%.
First things first. Do not panic. Do not start cancelling, removing or deleting software as this will only make the entire situation worse. Take a look at our whitepaper for hints and tips on what to do when you receive an audit request letter.
Failing to plan is planning to fail — get ahead of the eventuality and be prepared for your vendor requesting an audit. Again our vendor audit whitepaper will offer advice and guidance on how to prepare.
There is a license contract or agreement that is about to renew or expire
There are always several options available at the end of an enterprise license agreement (such as the Microsoft Enterprise Agreement or Oracle ULAs). These are likely to have financial, contractual and technical dependencies and it can be a challenge to know where to start or what the best options are for your business.
Careful consideration must be given to upcoming technology and growth plans, appropriate commercial models, and contractual arrangements to obtain the best possible future license agreement to deliver optimum value for money.
Give yourself and your team enough time to establish your position (if not already known) consider future plans (this often takes longer than you would expect), plan your negotiation strategy then engage with your vendors. You might be surprised at how long planning for this could take.
You are about to embark on a large change, ERP or digital transformation project that requires the procurement of software
As part of your business transformation project (the business case of which is ultimately to create a reduced cost base and improved service), you need to procure software. It’s not unusual for this type of procurement exercise to run into the £millions and so due diligence around what you are buying goes without saying, to benefit from a return on your software investment.
So, do you fully understand what software you have, what you need and how much this should all cost? Again, being in a position of knowledge before entering into vendor negotiations will guide you towards only buying what you need at the right time and price, benefiting you longer term.
You have a large software asset estate and your in-house team is struggling to manage it due to a lack of specialist skills
You have either had to make the hard decision to reduce headcount to decrease overheads or you have underestimated the complexity of managing an enterprise license estate and do not have the skilled resource available internally.
As I mentioned in part I of this series, people are an important part of your SAM methodologies. If you lack the in-house skills to create/manage the process and interpret what your tools are telling you to do, your compliance situation could very quickly start to unravel, leading to unbudgeted costs and more disruption to the business.
Engaging with a SAM provider who has a tried and tested methodology would be the most cost and resource-effective way of managing your SAM process. For more information, take a look through our guide on our SAM Managed Services.
You are about to merge or be acquired by another company or divest
It is possible that we will see some businesses fail over the next few years raising the possibility of increased merger and acquisition (M&A) activity in the market.
M&A activity within a business can trigger the enterprise vendor to instigate a license audit. This is because vendors often tie software contracts to a specific company entity and during a busy acquisition, these contract changes may be unintentionally overlooked, leading to a large compliance breach by businesses using software they think they own.
Take a very careful review of the license contracts during any M&A planning stages to understand what ‘company entity’ the licenses are under and whether there are any restrictions applied to mergers, and acquisitions ordivestments. Take a look at our post for more information on license impacts from M&A activity.
You are using Java in your applications, and you wish to ensure the ongoing support costs are minimised
This is an area we have seen a few customers caught out on. Java has historically been considered ‘free’ by businesses, however, since January 2019, the changes made to the way Oracle Java is licensed and supported have impacted ongoing costs.
The changes now require that anyone who wishes to utilise an up-to-date Oracle Java Virtual Machine in any production capacity will require a subscription from Oracle. For this reason, we recommend that all organisations using Oracle Java should carry out an urgent survey of their Java usage, cataloguing the version number in use, its purpose, the infrastructure upon which it runs and the plan for their future usage.
Do not ignore this activity as Oracle has started to audit their Java customers.
Summary
It’s not all ‘doom and gloom’ as there is good news. Be proactive — get control of your estate, take account of license impacts as part of any technology transformation, don’t leave contract negotiations to the last minute and get ready for vendor license audits.
This does sound like a lot of work, and you are right, it is. However, engaging with Version 1’s SAM Team will deliver access to license and software asset management experts who can advise, guide and support you with any software license challenges, reducing cost, complexity and risk.
If you have any questions or require more information, visit our website or contact us for a confidential complimentary license health check.
About The Author
Jason Pepper is the Head of SAM Practice here at Version 1.
