How Businesses Can Save Money by Optimizing Their Software Usage

Is your business wasting over 10 percent of its software budget on unused products? If you aren’t reconciling your software usage with your Software Licensingagreements, then you could be losing a significant chunk of money.

A study by the International Data Corporation (IDC) recently found that half of enterprises admit that they waste 11 percent or more of their application budget on “shelfware,” or underused software products. IDC also found that 30 percent of respondents did not reconcile their software usage data with their product use rights. In fact, only 17 percent practice software licensing optimization.

What if Your Company Was Audited Tomorrow?

According to a King Research Report, 73 percent of IT managers report that they are not prepared for a software audit. Gartner predicts that every client can expect at least one software license audit within the next 12 months. As virtualization and cloud adoption make licensing even more complex, businesses are at greater risk for non-compliance than ever before.

These audits happen because large software vendors make a lot of money from non-compliance fees. Just like your business, your software vendor is working to maximize profits. Software piracy costs the industry about $15 billion per year. When shareholders are clamoring for higher profit margins, audits are a great way to get them. Fines from non-compliance can rake in as much as $150,000 for each illegally installed copy of software. Non-compliance includes the installation of software that you purchased but failed to properly license.


Many organizations have good intentions for implementing a process called software asset management (SAM); however, they base their SAM objectives solely on licensing compliance without optimizing usage and licensing to lower costs. Certainly, being compliant with your vendor can eliminate hefty fines and potential imprisonment, but if the process isn’t tied to your business objectives, then it’s going to be a low priority for the IT department.

Your company may know how many software licenses it has, but that number doesn’t reveal the entire story about your licensing efficiency. You need to know what your licenses say about how licenses can be used, who can use them and what devices are authorized for the products. Additionally, you need to know whether the way your employees use software matches the product usage rights that you’ve established in your licensing agreement. Conducting software license optimization (SLO) instead of conducting manual SAM assessments provides six distinct advantages for your business:

  1. Cuts license consumption as well as ongoing software maintenance spending
  2. Eliminates time and effort spent on manually auditing licenses for compliance
  3. Allows you to predict and budget for future needs
  4. Minimizes non-compliance risks
  5. Prevents downtime and delays caused by licensed denials
  6. Gives you continuous control of your software license estate

When you’re evaluating how your business wants to conduct SLO, you can choose a turnkey usage auditing solution that will reconcile employee usage with your current licenses. You can also hire a consulting company to conduct the optimization for you.

How to Survive the Audit

Many IT managers hesitate to negotiate their licensing agreements because they are fearful of triggering the dreaded vendor audit. However, if your company has been conducting SLO, then you’re going to have a much better idea of where you stand when your vendor conducts an audit. Also, since your vendor is probably going to audit you anyway, you may as well start the process on your own terms.

Your vendor is going to ask for the following information, and you’ll only have a short time to gather it if you aren’t keeping up with it already:

  • Proofs of purchase
  • Sales receipts and invoices
  • Manuals and certificates of authenticity
  • Purchase records for all software and licenses requested in the audit report
  • Analysis of how your licenses compare to the installations that the vendor has recorded

If you’re using SLO solutions or conducting SLO with a consultant, then you’re going to have the information that you need when your vendor comes knocking. You’re also going to have something significantly more valuable: the cost savings that will come both from eliminating shelfware and optimizing product usage rights. Go beyond just knowing how many licenses you have. Make sure that your license estate is optimized and working to make money for your company.

About the Author: Craig Farley has worked as a software licensing compliance auditor for a number of different vendors. He now works in product development for SafeNet.

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