Thanks in no small part to the confusion between Software Asset Management and compliance, SAM programs are often seen by some less-enlightened stakeholders as a necessary evil. A program that increases operational costs without driving tangible business benefits. A grudge spend, if you like.
As many other posts on this blog have shown, where the SAM program is well implemented and managed, this couldn’t be further from the truth. But in some cases, perception rules. And there’s no denying that effective SAM does require ongoing investment. You can’t treat it as a project with a fixed start and end date.
Perhaps because it is perceived primarily as a cost, the SAM program is also often an early casualty of cost-cutting exercises – ironically at exactly the time when it can prove its real value. Not only will it come as no surprise that shrinking IT investments often lead to increased audit activity from the same vendors that were relying on selling you software licenses; but a good SAM program will help you identify the easiest and most effective ways to achieve budget targets without affecting productivity or business advantage.
So how then can you build a SAM program that is both able to demonstrate value as well as resistant to fluctuations in available budgets and technology ‘fashions’?
Why not make Software Asset Management self-funding?
THE ‘TRANSACTION FEE’ CONCEPT
As organizations balance the desire to empower users to be productive across multiple devices (e.g. laptops, smart phones, tablets) against the need to exercise some level of control over what software is deployed (and thus cost of use incurred), many are leveraging the combined power of service desk and SAM technologies to roll-out self-service application stores and service catalogues.
Many app store platforms, like those from Snow, offer the ability for the organization to make the software available to users at a ‘price’. Often this cost is a way of communicating the financial value of the software to the employee requesting it, guarding against employees requesting anything and everything, then never using it.
Some organizations will give individuals or departments a ‘virtual budget’. Every time an application is requested, the appropriate sum of money is deducted from the appropriate budget. The same methodology can be used for virtual cross-charging, whether or not actual money changes hands or moves from one virtual budget to another.
Take this a stage further, and exchange virtual budgets for cold, hard cash, and you arrive at the Transaction Fee concept.
In essence, the transaction fee is as an additional cost levied on top of the list price of software or service being requested (we suggest list price as the discount you negotiate with the vendor is part of your value add to the organization).
To the user, this surcharge can be either explicit (“We are charging you 15% as the cost of provisioning this software to you”) or hidden in the basic price (an application with a list price of $100 per license is published at $115 on the app store or portal).
Process 100 software requests (automatically, through the app store) and you’ve ‘earned’ $1500 towards funding your SAM program.
The transaction fee should be relative to the cost of the software and the agreement or license type. For example, the transaction fee for a subscription license should cover the three years of the agreement with a renewal notice for users/budget holders after the three years to renew if the license is still needed.
HOW TO IMPLEMENT A TRANSACTION FEE
In order to actually implement money moving from one budget (whether that’s an individual’s allowance, department allocation or corporate budget) into the SAM fund, you need to create a cost center for the SAM Team. Finance will be able to create one for you and assign you with a cost center number, much like each department has (depending on the size of your organization, IT may have several cost centers to cover different areas).
For example, a user in marketing requests a copy of Microsoft Project Standard which has been listed in the company App Store at $230. The cost center for Marketing IT is 00123. The full $230 will be removed from cost center 00123.
The IT cost center budget is 00122, so the cost for the application (based on the Microsoft agreement, the list price is $200) is allocated to the IT cost center.The Transaction Fee of $30 is then allocated to the SAM cost center budget which is 00150.
Over time, the SAM budget will increase based on the amount of software requests from end users.
Using Snow Automation Platform for your app store you can set whatever price your organization sees fit for the software provided. For the purposes of the Transaction Fee concept, the prices listed includes the corporate price that the SAM and procurement teams have negotiated, and then the transaction fee percentage or actual figure. When a user requests a piece of software through the company App Store, they will only be charged the discounted figure with the transaction fee on top.
HOW TO USE THE MONEY
There are a number of ways you can use the ‘profits’ made by the SAM team through the transaction fee concept.
- Audit blanket
One option is for the organization to use the transaction fee money as part of audit defense strategy. It is not uncommon for an organization’s C-Level execs or Finance Management teams to dedicate part of their software budget for audit readiness and/or non-compliance fines, and this method allows an organization to further protect themselves against unexpected/unbudgeted costs.
Our own research has found that 70% of organizations were audited at least once within the past year – so building an audit budget makes logical sense in reducing the potential impact an audit may have on your bottom line.
Making SAM a self-funded function elevates the SAM function to enable them to purchase additional technology modules through money generated by the Transaction Fee. Logistically, departments need to get budget approval to spend additional funds, but with SAM being self-funded the SAM team should have greater responsibility and say when determining what the money will be used for.
Cycling money back into the SAM team will only see improvements, with additional technology modules being used to manage specific vendors or environments.
Savings can also be used to pay for annual maintenance or additional SAM solution licenses that may be required as your organization expands. Again, this reduces the reliance on your software budget which can be used elsewhere or carried over into the next financial year.
- Services fees
Another positive option is to use the money for additional services. For example, you may be managing a difficult IBM audit and feel as though additional resources are required. Your SAM team could choose to use some of the money generated by transaction fees in order to pay for such a resource, minimizing the cost and disruption of the audit.
This could also relate to additional training or relevant courses for your SAM professionals, to help them expand their knowledge base for the good of the organization and the SAM team.
- Software costs
By accumulating additional funds for the Software Asset Management team means that you can assign the transactional fees to contribute towards the procurement of new software licenses in addition to those provided as standard. Standardized software will already be part of the overall software budget, but projects or new activities may require new licenses for software that isn’t currently installed within the organization.
- Give back to the business
The final option is to give the ‘profits’ made by SAM back to the business. By approaching the CIO or CEO and saying “SAM has made (for example) $300,000 this year. We will give you 50% of this for the business, and we’ll have 50% for SAM-related matters”.
This also shows that the SAM team is a good corporate citizen. This will prove to senior management the value SAM brings to the organization, and the SAM share of the money can be reinvested back into IT.
MAKING SELF-FUNDED SAM SUCCESSFUL
A fundamental building block of Software Asset Management is transparency. Highlighting the list price against the negotiated price will help any reluctant users understand that even with the transaction fee they are still getting the license at a much better price than going out and procuring it independently.
Along with Change Management, in order for SAM to become a successful self-funded function, you need the support and guidance of senior management. Senior Managers will help define the logistics as to how the transaction fee will work within the organization (to ensure SAM has an internal account or budget) and their vocal support will help enforce the transaction fee across the organization.
PAINTING SAM IN A POSITIVE LIGHT
Software with Gartner predicting that “By 2020, large enterprises with a strong digital business focus or aspiration will see business unit IT increase to 50% of enterprise IT spending,” Asset Managers need to prepare to satisfy an increased set of stakeholders that the SAM function is delivering value to the organization.
To this end, solutions like the Snow SAM platform provide a comprehensive suite of self-service reports that can help department and business unit managers track both the costs and savings relevant to them. This will save SAM managers days and weeks that would otherwise be spent preparing management reports for various management meetings and budget reviews.
It releases SAM and enables the team to add even more value not only to the business but to their own department. The reliance on having to ask the business for extra money for additional services or technologies becomes a thing of the past – the task of proving the value it brings becomes easier, and the maturity and reliance on SAM within the business becomes even more prevalent.
Making SAM self-funded also shows a level of SAM maturity that is rarely seen within organizations. Even in the present day organizations range from those just starting their SAM journey to those that are striving to achieve more.
Please join Snow Software and myself for a webinar where I discuss new and innovative ways in which you can ensure your SAM function gets the financial funding it needs.
 Gartner Inc.: Metrics and Planning Assumptions Required to Drive Business Unit IT Strategies. Published: 21 April 2016. Analyst(s): Kurt Potter | Stewart Buchanan