Cloud apps force shift from compliance to proactive cost prevention

“Heterogeneity on this scale creates both technical and licensing challenges for enterprises to overcome.”

Analysts have predicted that in the next two years, over half of a company’s IT applications will be located in the ‘cloud’.

This has significant implications for asset management professionals, because it means the level of complexity and array of software assets needing to be monitored and controlled will increase sharply. Many of the anticipated changes have occurred already and traditional ‘WINTEL’ environments of the past have been replaced by heterogeneous platforms combining Linux, Mac, Windows, virtualization and now, software as a service (SaaS) applications.

Heterogeneity on this scale creates both technical and licensing challenges for enterprises to overcome. As new platforms continue to emerge, they bring with them new licensing schemes. Some of these new schemes do not easily align with the traditional direction of many Software Asset Management (SAM) programmes – to provide one-to-one device or user licensing verification.

Complexity makes identifying value difficult

For example, organisations using IBM’s enterprise applications are now required to navigate the complexity of its PVU (processor value unit) licensing model. Here, licensing obligations and costs are dependent on the hardware processing power accessed by the application(s) and therefore the total value derived to the organisation from hardware units rather than simply counting the number of users requiring access.

Oracle is another vendor with notoriously complex licensing models, especially when it comes to virtualized environments, in which processing power and level of integration with other applications is taken into account, as well as the numbers of users requiring access.

This complexity has created something of a perceived win-win for vendors, with users struggling to make sense of their compliance obligations, let alone identify whether they are getting value for money.

A chance for IT to demonstrate ROI

The fast-paced move to the cloud for business applications has further complicated the situation for SAM managers globally. However, there is an argument that the disruption caused by the rise of cloud-based applications is a good thing generally, as it will force a shift away from SAM being primarily a compliance function towards a more proactive optimization and cost prevention activity. And this means IT asset managers have a new opportunity to make a more significant contribution to organisational effectiveness and demonstrate a tangible return on investment from software assets.

With the majority of cloud-based applications – whether the software itself is located in the cloud or whether access to the software is simply controlled through the cloud (think Salesforce.com versus Adobe’s Creative Cloud) – it is arguably more difficult to fall into non-compliance than with traditional device-based licensing.

Why? Put simply, organisations typically pay for a number of licenses to access a cloud-based application.  Under that model, it then becomes the application provider’s responsibility to ensure that the customer organisation does not over-use the licenses.

That’s not to say that these applications are not subject to SAM oversight. While the focus may not be compliance in the traditional sense, with cloud-based applications accounting for a greater proportion of an organisation’s software spend, there is a growing need to manage this expenditure closely.

With cloud-based applications, the emphasis switches to license optimization and cost avoidance. Is the customer organisation getting value for money from their investment in the software? Is it being well used? Is there potential to review licensing agreements and reduce the numbers of seats purchased? This is the direction SAM solutions will be heading into in the future, by actively supporting organisations with the intelligence they need to become more cost efficient; after all, it’s not in the interest of the software vendor to expose instances of over-purchasing.

New opportunities for SAM

For the enterprise, the shift away from software asset compliance creates new opportunities to precisely measure the value software investments are bringing and to minimize wastage. Users that have historically been hit by a compliance failure or software audit will find this particularly useful because they are more likely to err on the side of caution and over-buy licenses. When software is accessed via the cloud, this tendency can be reversed because intelligence is automatically gathered to enable precise utilization patterns to be identified.

Linked to this development will be a natural response amongst software vendors to increasingly offer transaction based licensing. Here the user organisation might purchase an entitlement to utilize a set number of licenses over a time period and will be looking for the intelligence to identify whether they have correctly predicted their requirements.  This will, once again, shift both the focus of SAM programmes and the requirements placed on the SAM solutions deployed.

An evolution of tools for ‘what if’ analysis

The licensing changes described above demand an evolution in SAM tools that is perhaps more radical than anything the industry has seen in the last five years or so.  Where once upon a time having Windows discovery was sufficient to claim to be active in ‘Software Asset Management’, moving forward, the mechanics of an effective SAM tool will be very different.

For example, it will no longer be enough for agents to simply discover the applications physically installed on a desktop, they will also need to monitor the use of cloud-based applications by individual users (some solutions offer this already) and perhaps even start to track individual transactions rather than overall activity levels.

In addition to this, licensing logic built into the next generation of SAM solutions will help users become aware of their entitlements to ensure they get maximum value from negotiated contracts. For instance, Microsoft users will have the intelligence to know whether specific users are entitled to free software upgrades e.g. for Office 2013 as part of their original licensing agreement. Alternatively they will have the potential to run simulations to calculate exactly what their licensing obligations and costs should be for specific vendors, to prevent over-purchasing.

Finally, we will see the more advanced SAM solutions become more like their Business Intelligence cousins, where planning, forecasting and ‘what if’ analysis becomes a larger part of the offering – again helping SAM managers to not only ensure compliance, but deliver real value back to the organisation in terms of cost-avoidance and asset optimization.

SAM to become a business requirement

Functionality like this will help to make software asset management a business requirement in its own right. As the shift away from policing and compliance towards proactive cost control and optimization continues to gather pace, SAM solutions will become the ultimate source of independent verification. Rather than helping to limit the financial impact of a software audit, they will be helping companies to predict future consumption levels and provide ongoing intelligence about actual usage levels, to ensure they are getting real value for money from their software purchases.

This article has been contributed by Peter Björkman, CTO of Snow Software. Catch Peter at the Gartner IT Financial, Procurement and Asset Management Summit where he will be presenting: “Transforming the SAM landscape with cloud capabilities.”

Photo Credit