Building The Business Case For It Asset Management – Part 3/4

In Parts 1 and 2 of this series we looked at aligning ITAM with business initiatives their associated IT projects, and identifying the specific benefits related to those projects. In this section we look at the additional benefits that may help support your business case.

In Parts 1 and 2 of this series we looked at aligning ITAM with business initiatives their associated IT projects, and identifying the specific benefits related to those projects. In this third part of the series we look at the additional benefits that may help support your business case.

While it is important that your business case is developed primarily around how it supports the project that will fund it, it is helpful to document the other benefits that will accrue to the organization as a whole as a result of this project. Bear in mind that these benefits should not be included if the mandatory elements of the project will not deliver them. If additional funding is needed to provide these, then a separate funding request should be submitted to secure budget for future investment.

Business-wide ITAM benefits

In this year’s ‘State of IT’ report, Spiceworks suggests that software spend will make up 26% of total IT spend while cloud and hosted services will account for a further 21%. Over the years we have frequently seen people quoting ‘industry data’ that promises savings of around 30% on both on premises software and SaaS. This is sometimes qualified to state that these savings apply when comparing organizations with reactive SAM to those who have achieved the level of maturity necessary for cost optimization.

While it is difficult to find the original source of this number, or details of the data used to support the 30% figure, anecdotal evidence suggests that this can be achieved over an average of 3-5 years. This figure includes savings from shelfware reduction (license recycling, reducing SaaS subscriptions), rightsizing of contracts, and reduction in maintenance and support spending. These are savings against budget, and do not take into account the costs incurred to achieve compliance where there are shortfalls, nor cost avoidance from reducing or eliminating audit settlements.

However, the IT department’s software budget is not the only justification for investing in ITAM, particularly as more IT is being purchased outside of IT budgets. The basis for these calculations is therefore difficult to ascertain. There is less information available about the impact on hardware costs of effective ITAM, but improving recovery rates from leavers and evaluating the impact of extended support vs. hardware refresh can generate significant cost benefits.

All these benefits are very operational and ITAM, or at least IT Finance, specific. As such, they don’t resonate with a wider audience, so it is important explain them in business terms. Many IT asset managers struggle to articulate the financial impact of ITAM benefits due to a lack of financial management experience. To overcome this, ask for support from a finance analyst or management accountant who can help with quantifying the benefits and present them in a way that will make sense to the people approving investments. The full benefits won’t be achieved immediately, so consider what incremental improvements you are likely to see in years 1, 2 & 3 post-implementation.

What to consider

When working out the impact of your benefits, you need to consider several points. We’ve made some suggestions below as to how you might come up with a realistic explanation of the impact (both financial and operational) of the broad benefits of ITAM:

Maintenance and Support – This area provides plenty of opportunities for quick wins. Most maintenance is paid annually and allows regular review of each support requirement in line with the payment schedule. When planning a review of maintenance and support, use the cancellation period to calculate the deadline by which a decision must be made. Cloud shift is reducing hardware support costs over time, but there is still scope for improvement. Software maintenance and support typically make up half of an organization’s software spending, with maintenance rates currently averaging around 22% of the license cost. Savings can be made by:

Shelfware Reduction – unused assets (whether hardware, software or cloud services) can be reassigned or retired to avoid costs associated with maintaining them unused. Research by RightScale shows that shelfware for SaaS is estimated by survey respondents to be 30%, while actual wastage figures as measured by RightScale are 35%.

Audit – software license compliance audits have several impacts on the organization including business disruption, direct and indirect costs.

Calculating costs:

Intangible benefits

These are the benefits that do not have a direct financial value but should still be considered when assessing the investment opportunity.  These may include improved process efficiency and productivity improvements, reduced business disruption, minimizing reputational damage and improved vendor relationships.

In our next (and final) blog post in this series we look at business case presentation and the importance of providing all the necessary information to secure your investment.

To learn more about how to articulate the benefits of implementing an ITAM function to the business and gain executive support, watch the recording of our recent webinar ‘Building The Business Case For SAM’. As part of our ITAM best practice webinar series, Victoria equips you with step-by-step advice on how to identify and engage critical stakeholders. Listen on-demand now.

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