As part of our ongoing review of our content to ensure it is up-to-date, this blog has been updated on 10/18/2016.
There are a number of interesting forecasts that further highlight the importance of software asset management and effectively managing software licenses. I will analyze the findings from Gartner’s report and explain how this is an important document for software asset management professionals.
OVERALL SOFTWARE SPEND
Gartner has predicted that the overall spend on software will increase 5.3% to $326 billion in 2016, an increase from $310 billion in 2015. Tight budgetary conditions saw organizations being more cautious with software spend in 2015 as the figures were down 1.4% on 2014. With the global economic climate improving, Gartner’s figures suggest that 2016 will be the year that organizations will once again invest in software to help meet strategic goals.
The pickup in software spend can be attributed to a number of factors, including new licensing models, an increase in audits and the advancements of software as a whole. The move to subscription licensing metrics means that in the long-term organizations are actually paying more for software than the older perpetual model. In many cases, software publishers are aggressively pushing customers to the new subscription licensing models to fulfill promises to investors, so having the right technology in place to manage subscription licensing schemes is now a ‘must have’.
The increase in predicted spend could also be related to a change in strategic positioning by organizations; they may have put off the investment in certain software technologies until now due to compatibility issues or a lack of internal readiness.
Microsoft Office 365, Adobe Creative Cloud and cloud storage offerings such as Microsoft Azure and Amazon Web Services pose a big change and challenge for organizations. There needs to be adequate plans and processes in place in order to manage these types of applications married with a strong understanding in both technology and licensing.
There may be challenges and changes with the adoption of cloud-based technologies, but such technology opens the door of opportunity. Cloud technologies promote agility, mobility and an increase in productivity for the IT function. The standard perpetual licensing environment is loudly being retired by most vendors, enabling cloud technologies to make a real impact in the software industry.
The Gartner report emphasizes not only the relatively large percentage of investment each organization makes in software but that the decisions around software acquisitions are often made without full understanding of the costs, licensing models and implications.
Finding the right licenses is often not given the consideration it deserves by the organization’s most senior managers. This, in turn, must lead to a significant portion of the $326 billion forecasted to be spent on software in the coming year to be wasted. More on that below.
DATACENTER INVESTMENTS EQUATE TO 54% OF OVERALL SPEND
The datacenter is usually the environment in which the most expensive software can be found. The likes of IBM, Oracle, SAP, and Microsoft software can be hugely expensive and a licensing minefield. Although the increase in datacenter spending looks relatively modest at 3%, Gartner estimates that this environment will account for 54% of all overall software spend, making it a prime target for efficiency and cost-saving programs which can be delivered through effective Software Asset Management (SAM).
Put simply, there are far more ‘gotchas’ in the datacenter environment; Oracle may provide a new feature for their database software that really benefits the Oracle environment. However, the customer might not be aware that the component actually costs an additional $20,000 per instance. Well, at least they might not be aware until they are audited! We certainly expect to see a portion of the increase in datacenter spend coming from further increased vendor audit activity.
The understanding and management of virtualization will be a massive challenge for organizations in the year ahead, as the relationship between virtual and physical machines playing a prevalent role within SAM. Virtualization software can pose a significant license risk depending on the license structure the organization has negotiated. There needs to be a clear map of how different servers and virtual servers relate to each other – and then the relationship between the virtual machines and their physical host.
It might also be the case that organizations may not need as many licenses as they think; thanks to rights such as Microsoft’s extended coverage – which allows for an extra ‘passive’ server to be licensed off the back of an active server. But, without an advanced SAM platform to interpret these usage entitlements in relation to the organization’s actual network infrastructure, it is likely this will result in over-spend.
In my experience, organizations often believe the desktop environment to be the area of ‘low hanging fruit’. I would disagree with that. While the desktop environment is seen as the ‘easier option for quick wins’, the overall cost of software within the desktop environment is a fraction of their datacenter counterparts. For example:
The removal of 1,000 desktop software x = £45,000 worth of cost avoidance
The removal or reassignment of licenses of 10 datacenter software y = £250,000 worth of cost avoidance
The licensing metrics may be more complex, and the environment (some argue) harder to inventory, but the datacenter is where both the biggest risks and costs are (as highlighted by Gartner’s report). Understanding and having the visibility on the amount of cores, processors, and number of users that have access to a server and the understanding of the relationship between hosts and virtual machines should be top of the list when choosing a SAM platform.
DECREASED SPENDING ON DEVICES
Last year already saw a decrease of 5.8% on device spend from 2014 and Gartner is predicting a further decline of 1.9% in 2016 to $641 billion. Organizations may have already seen a large investment in devices in previous years, and the decline is down to the hardware refresh cycle.
Bring Your Own Device (BYOD) may be another contributing factor. Through BYOD organizations will be spending less on physical hardware devices; however the management complexity increases. BYOD still needs to be managed by the SAM function, as they still pose a security and compliance risk.Technologies like Snow Device Manager are pivotal in managing such scenarios as it helps organization identify corporate owned devices and BYOD, and also manage the related SAM risks.
The term ‘device’ has evolved over the past few years. It has gone from a simple laptop or desktop to include mobile devices such as tablets and phones. While the results and predictions suggest that there will be a further decline in device spend, this does not mean to suggest that the importance of devices to the organization is on the decline. Licensing models reflect that; often cloud-based licensing allows for the use of the software on five instances, which shows the vendor is aware of the increase in ‘device per-person’.
Organizations should consider devices as prevalent, business devices that enable their users to be productive and proactive. The gap between Hardware Asset Management (HAM) and Software Asset Management is rapidly shrinking thanks to the importance of hardware specifications in terms of license requirements. Gone are the days when HAM and SAM only spoke to each other intermittently; they are now engrained as both functions provide valuable datasets. In order to completely understand license requirements, the SAM function needs to know hardware information such as the number of processors and cores for key licensing models.
With such a high importance on the hardware datasets, it is vitally important that organizations have the right technology in place that can manage both SAM and HAM. For example, Snow License Manager provides sophisticated hardware information and license management capabilities. Put the two together and you have all the information you need in order to manage the software and hardware investments made by the organization.
2016 in summary
In short, 2016 looks to be a year when more money will be spent (overall) on new software with complex licensing requirements. As such, the need for an effective Software Asset Management program has never been higher. Whether it is to ensure that the organization gets the best value for money, or protects itself against increasingly vigilant software publisher audits, 2016 will see the SAM program on the front line of ensuring the $326 billion invested in software is money well spent.
More information on Gartner’s predictions can be found here.
Or learn more about optimizing software spend in the datacenter.
* Forecast Alert: IT Spending, Worldwide, 4Q15 Update. 14 January 2016. Analyst(s): John-David Lovelock | Kathryn Hale | Wm. L. Hahn | Ranjit Atwal | Colleen Graham | Michael Dornan | Bryan Lewis | Neha Gupta | Adrian O’Connell