NAPERVILLE, Ill., Aug. 8 /PRNewswire/ -- Large organizations routinely spend 30 percent too much on data center software, Compass data shows, a figure that represents close to six percent of total data center cost.
NAPERVILLE, Ill., Aug. 8 /PRNewswire/ — Large organizations routinely spend 30 percent too much on data center software, Compass data shows, a figure that represents close to six percent of total data center cost.
"Data centers are perhaps the most mature and efficient operational tower within IT infrastructure," says Compass senior consultant Scott Feuless. "Areas such as personnel productivity and hardware acquisition, storage, and utilization are honed to a razor's edge. Nonetheless, significant performance gaps persist in the area of software spend."
Many organizations are unable to track software expenditures by platform, by product, or by functional use, whether in the data center or in another area of the organization. Duplicate or redundant software applications are common, and managing license compliance is becoming increasingly complex, due in part to the growth of server virtualization.
Software cost overruns are driven by three key factors: — Businesses undergoing mergers and acquisitions require time to rationalize portfolios and licensing deals. — Technology staffers and the finance department have different agendas and objectives: the former seek functionality, versatility, and as many tools as possible, while the latter focus on deal terms rather than operational requirements. — Software vendors effectively bundle products and license packages to make comparisons and cost-cutting initiatives difficult. Additionally, licensing options change over time, and the new options aren't always considered in a timely manner. For example, in response to the virtualization trend, software vendors are re-examining and altering licensing models that are currently priced on a per processor or per server basis, in order to protect revenue streams.
Compass data identifies specific factors that many companies often overlook, and that contribute significantly to higher costs. These include: maintenance fees for products no longer used; licenses for similar products offering redundant functionality; and licensing arrangements that don't fit the environment's needs or that don't specify the costs of individual products.
Compass recommends a software asset management (SAM) initiative to identify cost overruns and define process improvements to keep costs under control. The key element of a SAM review is the "demand challenge," which brings together technical and financial staff for a rigorous examination of required functionality in the context of pricing terms. By enabling the two sides to communicate more effectively, the process allows an organization to identify essential applications and jettison superfluous ones.
According to Feuless: "The key to a successful SAM initiative is to have the focused attention and support of senior management; a governance process of configuration and financial management to apply downward pressure on software costs; and the formation of cross-functional teams between IT and Finance to review software licensing on a regular, recurring basis."
Another factor contributing to the inefficiency of software licensing is the fact that no single individual is generally responsible for the process. Rigorous oversight is therefore essential. During the SAM process, each license should undergo a demand review, and duplicated or unnecessary licenses should be immediately dropped. Time should be allocated to analyze optimal licensing schemes for the remaining products. Organizations should also consider renegotiating licensing agreements and in some cases, re-bidding entire contracts.
Compass (http://www.compassamerica.com) is a global management consulting firm specializing in business and IT performance improvement for Fortune 1000 organizations. Since its founding in 1980, Compass has conducted more than 8000 engagements in 32 countries. Annually, Compass delivers over 600 engagements worldwide, typically delivering savings of over 17 percent of analyzed costs. Read the Compass Blog at blog.compassmc.com.