OPINION: Licence to overspend

1 Oct 2010

Andy Ellwood explains why knowing what software you have and what it’s running on is vital for any organisation faced with cutting its IT budget.

With every part of every organisation now expected to make efficiency gains and cost savings, IT departments are being faced with the dilemma of how to maintain services and support rapidly evolving corporate objectives, while attempting to reduce budgets – how to do more with less.

Key to this dilemma is to answer these two fundamental questions: “Are we paying for what we use?” and “Are we using what we paid for?”

Are we paying for what we use?

Despite management will and good intentions, it can be difficult to ensure that licences purchased match software deployed. If you get this wrong, then you could be faced with significant unbudgeted expenditure, potential legal consequences and disruption to every day activity.

There are several reasons for not being fully compliant:

Lack of deployment controls – Most enterprise-level software does not require licence keys to deploy (eg, software from Oracle and IBM, among others). This means there is no mechanism in place to prevent uncontrolled installation and no connection between software deployed and licences purchased.

Getting you hooked – Many software companies openly encourage developers to use their software free of charge for development purposes.  As soon as it is deployed in a live application however, licences need to be purchased. It is easy to overlook this in the rush to go live. 

The download culture – There is so much free software available for legitimate download that developers are used to searching for and downloading software to complete a task. If a developer needs some software, they just go looking for it. With this mindset, when software is found on the corporate network, it is easy to mistakenly assume it has been paid for.

General distribution media – Enterprise software vendors now tend to distribute standard installation disks that may contain entire catalogues of software and not just the ones you have paid for. It is therefore common that software which has not been licensed gets deployed on the network.

Hardware is complex – Advances such as multi-core processors, partitioning and virtualisation deliver many cost and performance advantages to large networks. Unfortunately, they also provide additional layers of complexity to the already complex world of software licensing. The type and number of processors used in a server can have a direct and significant impact on cost, so it is imperative that they are accurately accounted for.  

Virtualisation and partitioning further complicate the scene, with some vendors (such as Oracle) requiring that licences be purchased (under certain circumstances) for the underlying physical hardware rather than the virtualised server’s configuration. Therefore, it’s critical that you understand your physical architecture and how it can impact your software licences. 

Are we using what we have paid for?

While most organisations are focused on ensuring that they are properly licensed for what they are using, many overspend or fail to get full value from the budget they have spent by ensuring that they are actually using the software licences they have paid for to the full.

Guesstimation can cost you money

In order to avoid the risk of licence audits, unexpected bills and falling foul of legal and regulatory compliance regimes, many IT managers over estimate their software requirement. This over estimation may be intentional, as a form of caution in the expectation of a vendor audit, or it may be unintentional – the result of a “ball-park” figure being used. In recent years, multi-year licence deals have become common; these have compounded the inclination to build in redundancy to cater for expected future requirements. This caution and reliance on rough estimates leads to significant overspend.

Are you paying for software you’re no longer using?

Vendors have different names for organisation-wide licensing all with different terms and conditions. Whether it is an ELA, ULA, site licence, unlimited user licence or any other name, it will be restricted to a certain set of products. 

Over time, vendors will often use these agreements as a springboard for sales of additional or replacement products during the lifetime of an agreement. As a result, the organisation may purchase and implement replacement software – without cancelling the original multi-year agreement.

Support – the real cost of unnecessary licences

Most enterprise-level software attracts an annual support cost. For every year that the software is licensed, a support fee (typically a percentage of the original cost) is due. If you do not know that the software is no longer required or in use, then you cannot cancel the licences. If you do not cancel the licences then you will still be paying support – for software you are no longer using.

Andy Ellwood is marketing manager with iQuate