January 31, 2006

Today, there are many observers that believe IT Asset Management (ITAM) has fallen significantly short of expectations.

ITAM solutions, like those devised for its close cousin, IT Lifecycle Asset Management (ITLCAM) are usually very expensive and often prove difficult to implement, even in the best of scenarios. Also, most are usually inflexible for a large range of different needs.

More importantly, many ITAM programs have not delivered any real concrete business value. According to some industry pundits, most lifecycle asset management projects fail.

Organizations seeking a handle on managing IT asset moves, adds, changes, and updates, often overemphasize process, because most ITAM solutions on the market are focused in that direction.

Defining or re-engineering IT processes such as procurement and implementation is fine, particularly if necessary for Sarbanes-Oxley compliance or ISO certification.

But a process-centric approach will not help you to quickly understand the assets you have and how to use them better.

Fortunately, there is an alternative--at least regarding your all-important software assets. Unlike typical ITAM implementations, you can reduce costs and the risk of license non-compliance through a targeted quick-start methodology that does not require major business process changes or protracted initiatives.

Implementing a quicker-starting software asset management (SAM) project can deliver fast, credible results and should not have to cost you a million to save you a million.

A quick-start project can provide the actionable information necessary to bring your organization's license compliance into line, eliminate redundant software titles, consolidate enterprise software instances, and significantly reduce maintenance costs. And where major business process changes truly are necessary, a successful quick-start project can guide efforts in the right direction.

Enterprises have credible financial and legal reasons for gaining a clear understanding of their software assets. Not the least of them is the efforts of organizations like the Business Software Alliance (BSA) to promote audits of license compliance and whistle-blowing through monetary rewards.

What is ITAM and Why Has It Failed?

ITAM is a portfolio approach to measuring the technical, financial, and service condition of an IT infrastructure. ITAM encompasses the physical attributes of an asset with service and financial data that support it throughout its lifecycle. As originally conceived, the goal of ITAM was to reduce IT costs, improve customer satisfaction, and boost business performance.

At a more granular level, software asset management (SAM) is those processes and policies that maintain an accurate software portfolio inventory, reconcile it with purchasing and license data, and minimize the risk of non-compliance.

Fewer than 10 percent of organizations have addressed their SAM issues with any degree of efficacy. Given that revenues for the major software vendors continue to grow in excess of 10 percent each year, enterprises have a significant incentive to better understand and manage their software usage. As enterprises install millions of dollars worth of software, they need the tools to identify areas for optimization and real dollar savings.

Common reasons for the failure of ITAM projects--and these extend to SAM--include slow ROI, upper management indifference, complex software solutions that produce little strategic information, and the need to completely redesign business processes.

Quick Start: Quick Value

Most organizations recognize that they have opportunities to consolidate and rationalize enterprise software titles and even shelf-ware. For example, recent industry estimates indicated that CRM applications are over-licensed by nearly a third in most organizations.

While this represents wasted capital that cannot easily be recovered, it also accounts for maintenance fees that typically average 22 percent of the perpetual license cost but can rise as high as 30 percent.

For example, CRM software is often the subject of licensing studies, yet it represents only a small segment of the classes of enterprise software that are likely underutilized. This points to a much larger problem.

Major organizations such as Motorola, Kaiser Permanente, and the Department of the Navy have recently mounted successful quick-start software asset management initiatives designed to reduce software proliferation, eliminate redundant functionality, and reduce ongoing operating costs.

Four Steps that Capture the ITAM Vision

Reduced to its essentials, an effective quick-start software asset management project has two emphases: determine the software actually licensed and then analyze usage. This is typically accomplished over two to three months in four steps, as compared to the 6 to 24 months required for the traditional approach.

Executing each step will provide a foundation for reducing licensing and maintenance costs 25 percent through consolidation, while ensuring compliance.

We recommend initiating a quick-start project by focusing on your 20 top software titles, because they usually account for the bulk of software spending.

Compare License Data to Software Inventory

The attempt to reconcile licenses with purchase records usually demonstrates that there is no "single source of the truth." Physical software asset, purchasing, and license data exists in separate silos across distributed IT organizations. These include asset management repositories, fixed asset management systems, and spreadsheets.

This step reveals license inconsistencies, maintenance contracts that should be brought to a close, and redundant functionality.

Analyze software titles and cross-reference usage data

At the end of this step, you should see clear opportunities to consolidate instances of enterprise software, such as SAP or Oracle, and where it is possible to remove underutilized desktop titles. For example, by analyzing actual usage data, Motorola was able to reduce its Oracle instances by 70 percent.

Analyze individual installations of software titles and cross reference version and age.

If your enterprise is dispersed across geographies, has decentralized procurement, or has gone through a merger or acquisition, you will probably discover that many individual installations of major software titles are for versions that are no longer supported.

During a quick-start initiative, the Department of the Navy, for example, discovered it was unnecessarily running hundreds of instances of Microsoft servers and paying for extended support.

Like the Navy, many enterprises have discovered they are running outdated, unsupported software--resulting in higher support costs, security risks, and potential downtime.

Analyze Redundant Functionality

During this exercise, many companies find they have a large inventory of software titles that deliver very similar functionality. With this newly accurate knowledge base, they can create software acquisition standards and monitor acquisitions, reducing complexity and total cost of ownership.

In a traditional ITAM scenario, your company may never be able to move from analysis to effective action--the step in which you are able to identify and eliminate redundant titles.

The Business Value of a Smaller-Scale Approach

ITAM is an ambitious concept that has revealed its flaws in execution. IT departments, like other business units, are pressed to justify budget line items and are increasingly less inclined to embark on major initiatives that have questionable strategic value. They are also discovering that large-scale projects may simply be unnecessary.

The good news is that IT can get a better handle on actual assets by starting an asset management project with small, manageable steps that focus on the essentials.

When these steps are accomplished, it can renegotiate more advantageous agreements with software vendors, make more appropriate purchases, consolidate enterprise software instances, and significantly reduce support and maintenance costs.

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