The SHI Guide to Optimizing Your Software Spend

This guide will help you manage your software spend, identifying opportunities to cut costs, optimize spend and increase the value of your software investm

OPTIMIZING YOUR SOFTWARE SPEND FOR 2021 & BEYOND

Three approaches to cost management you need to know

This eGuide will help you on your journey to managing software costs and driving full value from your investments with both strategic and long-tail software vendors.

Managing the contradiction between rising spend & declining budgets >

The good, bad & ugly of software spending and the 3 cost management tools you need in your arsenal.

Your IT cost management journey starts with having the right data >

Make data-driven decisions by gaining visibility into your IT environment.

PHASE 1: Cost Cutting >

Find opportunities to rationalize and renegotiate.

PHASE 3: Value Optimization >

Realize full value from your investments with better software lifecycle management, training and digital agility.

Managing Strategic Vendors vs. Long Tail Vendors >

Why it’s not an either/or proposition.

Delivering cost management with SHI >

Seek out advice and expertise from a trusted partner.

Managing the contradiction between rising spend & declining budgets

This eGuide will help you on your journey to managing software costs and driving full value from your investments with both strategic and long-tail software vendors.

The good, bad & ugly of software spending

There is good news and bad news for IT and finance leaders when it comes to technology spend in 2021 and beyond. The good news is that analyst firms are predicting growth in spending as organizations continue their transformation to support a workforce that’s hybrid by design, rather than remote by necessity.

The bad news is that many of those same leaders are under instructions from the top to cut costs. If that sounds contradictory, it is. But, then again, it isn’t.

Technology spending is no longer the preserve of IT departments. Lines of business are increasingly self-selecting and self-funding the technologies they feel they need to be productive and innovative. This trend was already in motion well before 2020, but the last 12 months saw a marked increase in what used to be labelled ‘shadow IT’ but is now simply ‘technology spending’.

With software expected to account for around 30% of business technology spending in 2021, it’s an obvious area to prioritize in terms of managing costs.

Source: Spiceworks Ziff Davis, The 2021 State of IT

This eGuide will outline three key steps you can take to gain control of software spend by applying the right approaches to cost management: Cost Cutting, Cost Optimization and Value Optimization (it will also explain why these are not one and the same thing).

cost management tools you need in your arsenal

Understanding cost cutting, cost optimization and value optimization

COST
CUTTING

Rationalize and renegotiate

COST OPTIMIZATION

Right-size it

VALUE OPTIMIZATION

Realize full value from it

Each phase represents an iterative process, a gradual progression that starts with finding ways to cut waste and ends with identifying opportunities to drive full value from your investments.

In this guide, you’ll learn:

Where to start looking for cost savings
Strategies for exercising cost optimization and how to differentiate these from cost cutting
How to ensure your organization is fully benefiting from the investments you’ve made

Your IT cost management journey starts with having the right data

Why you need visibility into your environment

Good decisions require good data.

Before embarking on your cost management journey, you’ll need a baseline understanding of the software in use across your organization. This is something that can be provided by good Software Asset Management (SAM) data.

If you don’t currently have a SAM program in place, speak to one of the ridiculously helpful experts at SHI to understand the fastest and most effective way to start generating software insights you can act on.

And if you do have a SAM or ITAM program already, it’s worth asking yourself whether your processes and technologies were designed for a largely on-premises software estate. If so, these will likely come up short as more software usage is in the cloud, more devices are remote and new types of devices are being used to access expensive applications and services.

Having a good baseline of software data has never been more important or as challenging.

Next: Overcoming challenges in SAM data >>>

Conquer challenges in getting a holistic view of your estate.

Despite knowing how important good visibility is, most organizations struggle with managing multiple tools, each providing visibility into different subsets of their environments. For instance, MDM technologies for mobile devices, specialized tools for cloud, and often separate tools for ITAM, deployment and security … and the list goes on.

Collecting and aggregating data from multiple sources that then needs to be validated and cleansed requires expertise you may not have in house.

Help is at hand.

For years, the default position of internal teams has been to buy a SAM tool and run it in-house. That works well if you have the resources to run an effective tools management program and the skills to optimize your licensing and subscriptions.

Arguably, a smarter way to look at the challenge of managing software is to bring in the experts – and not just the technology – to provide the insights you need to make important decisions with confidence.

Thankfully, SHI has a skilled team of Software Asset Management professionals, equipped with an extensive portfolio of technologies, that mean no matter what software you’re running or in what environment, we can help you realize the cost management objectives outlined on the following pages.

PHASE 1: Getting started with cost cutting

Find areas where you can do without

PHASE
ONE

Put simply, cost cutting is where you can physically eliminate costs from the current IT spend. This might be through stopping spend completely, renegotiating with vendors or looking to rationalize duplicate or similar spends into one.

When it comes to cutting software costs, there are several areas that are worth investigating such as:

Stopping support & maintenance payments on unused, end-of-life or retired software
Identifying multiple applications that do the same thing – and consolidate to a single vendor
Highlighting ‘premium’ products that could be exchanged for cheaper or free versions
Searching for alternate suppliers for excessively expensive applications

There can be a temptation with cost cutting to prioritize the low-hanging fruit, such as retiring niche products or cancelling contracts with smaller vendors. While this approach has a place, it might not provide the scale of savings being sought.

Instead, we recommend focusing on your largest spends first and exhausting cost cutting measures there.

COST CUTTING IN ACTION

SHI’s 365 Insights helped a large
multi-national organization undergoing significant
M&A activity find an immediate savings of $380K from redundant 365 and on-premises licenses.

Leveraging usage data and insights from SHI’s SAM experts, they were able to further reduce their user counts and ultimately lower the price of their Microsoft EA by over $1.5M.

Explore 3 cost-cutting strategies you can implement today >>>

Evaluate options to eliminate software licenses and subscriptions

In a world where there is more shelfware than ever, accurately licensing your software according to actual usage is vital to controlling costs. Armed with good SAM data that not only reports the existence of apps, but also provides visibility of usage, you can start to identify where licenses and subscriptions can be retired.

For instance, if you have high staff turnover in your organization, significant cost savings can be achieved by proactively reclaiming leavers’ licenses and allocating them to new joiners.

RATIONALIZE YOUR APPLICATION PORTFOLIO

With the rush to support remote workers and increased freedoms afforded to lines of business to self-select applications, application rationalization is now a must-do for all.

Application rationalization can yield substantial cost savings as subscriptions can be cancelled on redundant or duplicate apps. There are also indirect cost savings in the form of lower support overheads and improved employee productivity using common apps and tools.

You might also use rationalization to move away from legacy apps that require expensive on-premises infrastructure towards cloud-hosted alternatives (beware, however, the opposite scenario can also be true!).

Scrutinize Support Contracts

All too often, support contract invoices are processed and paid with little or no scrutiny. It’s not even unusual to pay support and maintenance on software that’s no longer in use across the organization.

So, our third cost cutting measure is to really check what support bills are being paid and whether they should be cancelled outright or amended to reflect a lower level of usage than was originally intended. You might even consider whether the support contract has actively been used; if you’ve had a support agreement for many years yet never needed it, is the peace of mind worth the continued investment?

Read on for one note of caution >>>

Beware of cutting too deep

While cost cutting should be a major facet of your overall cost management plans, beware of making cuts that limit your organization’s ability to innovate or alter direction quickly to meet changing market demands.

It’s important that you cut costs having evaluated the risks and rewards.

A good Software Asset Management partner can help you make the right decisions based on a thorough understanding of both software usage rights and your business needs.

PHASE 2: Cost Optimization

What is it and how does it differ from cost cutting?

PHASE
TWO

The differences between cost cutting and cost optimization are subtle, but important. Contractual commitments may mean that cost can’t be cut, so cost optimization involves looking at other options.

If cost cutting is prioritized on removing cost entirely (eliminating a subscription) then cost optimization could mean exchanging the subscription for a cheaper one, entering into a new agreement that provides greater flexibility to accommodate different subscription levels for different user needs or renegotiating vendor agreements as you conduct exercises like application rationalization.

You can cut costs through optimization, but not always. Sometimes the benefits can be quantified in other ways. It may even mean spending more in one area to reduce costs in another (e.g. moving from on premises solutions to the cloud to reduce hardware and datacenter costs).

Cost optimization is often more a due diligence exercise proving you are getting the best deal possible, addressing any risks of over-spend and that you have proactively worked with a partner and/or vendor to reach the best deal for your organization.

See how you can start with cost optimization >>>

Identifying candidates for cost optimization

Candidates for cost optimization include areas of spend that can’t be entirely eliminated either because there is no scope to do so within current contracts (examples include minimum contractual commitments, perpetual licenses or where cancelling wouldn’t actually reduce costs because you’d still be paying for maintenance) or because there might be real a need for it.

Regardless, there are often opportunities to ensure the spend is right-sized and appropriate for your needs.

Read on for three cost optimization initiatives you can implement today >>

START BIG

Focus on your strategic software vendors first. Working with good data and licensing experts, you can look for opportunities to shift investments into areas with greater benefits. This might include changing the license model in use, releveling subscriptions, decommissioning unused accounts or moving your spend with the same vendor.

Three Cost Optimization Initiatives

Optimize licensing
for strategic vendors

Seeking expertise from a trusted partner is a good place to start. They know the ins and outs of different vendor licensing programs and can look at all the options across the platforms, apps and vendors in scope, providing you with a full range of options.

But what about all those smaller, niche vendors?

See why managing your long tail spend is an important, but often neglected cost optimization activity. >>>

Three Cost Optimization Initiatives

Manage long-tail spend (non-strategic vendors)

[ Continued ]

Tail Spend: 80% of suppliers accounting for 20% of overall spend across multiple categories in which purchasing is sporadic and, often times, goes unmanaged.

Source: Procurementfoundry.com

ADVANTAGES OF MANAGING THE TAIL

Even in the face of increasing spend and an extended supply chain, many sourcing and procurement organizations have tried to cut costs by running leaner. That means more work for in-house sourcing teams already fully occupied negotiating and managing enterprise-wide contracts with major vendors.

The benefits of managing your tail spend extend well beyond bottom-line financial savings and include:

Reducing risk
Driving innovation through more strategic engagement with suppliers
Uncovering and addressing rogue spend

All this leads to your being able to deliver better services to your end users, while also delivering cost optimization to your CIO or CPO.

Skip to Section 7 of this eGuide to explore best practices for managing strategic and long tail spend. >>>

Read our latest blogs for advice on preparing for software renewals and for
seven points to consider before renewing software contracts.

Three Cost Optimization Initiatives

[ Continued ]

Optimize support &
maintenance renewals

Many organizations neglect to treat renewals as an opportunity to optimize existing contracts focusing efforts instead on avoiding audit and other non-compliance penalties. If approached strategically, renewals can uncover opportunities to right size those contracts.

To the right, you will find a checklist with 7 points we recommend following before renewing software contracts.

PHASE 3: Value optimization

Maximizing the value of your existing investments

PHASE
THREE

MAXIMIZE YOUR INVESTMENTS

Where costs can’t be cut or optimized, a key aspect of cost management is ensuring they are fully justified – that every ounce of value is being squeezed out of the investment.

^{Source: SHI Data Insights}

As illustrated by our own customer data from our 365 Insights, Microsoft 365 subscriptions are often underutilized and even go unused:

Explore for three ways to optimize the value of your software >>>

Software Lifecycle Management

Although it is less common in the world of SaaS, how many times has your organization been entitled to use a new version of an application but stuck with its already-deployed version? While deploying new on-premises apps can be challenging, it is likely that the new version has capabilities that will help you enhance productivity and innovation.

Better management of the software lifecycle can be an important contributor to value optimization.

TRAINING

Your employees are perhaps the greatest and most valuable asset in your organization.

With technological advances continually redefining the modern workplace, enabling end users with the skills to fully leverage the technology at their disposal and upskilling your technical workforce to use software in innovative ways both affect your ability to meet your cost management objectives.

SHI has wide array of end user and technical training programs to help you drive successful adoption and enhance productivity.

DIGITAL AGILITY

Being digitally agile means being able to respond quickly to changing market opportunities or rapidly adopt new business models. Successfully doing so is a critical way to demonstrate the value optimization of software investments. But it takes a thorough understanding of the software, the environment, the licensing agreements and the business needs. That’s why SHI created Stratascale in 2020, a consult-first approach to helping SHI’s larger customers find the agility they need to never stand still.

Managing Strategic Vendors versus Long Tail Vendors

Why it’s not an either/or proposition

Strategic Vendors

Long-Tail Vendors

While there are often significant savings to be made on strategic vendor contracts, the fact that these are more proactively managed means that while the numbers are high, the savings are low as a percentage of overall spend. Conversely, while it may seem that there is not much margin for improvement on individual low value contracts, the fact that they have been neglected means that there may be significant scope for improvement, and that the aggregate savings across the sheer number of vendors results in significant benefits.

This isn’t an either/or proposition; it’s more a matter of where to begin.

Given the size and scale of your mega vendor contracts, it’s a given that most attention be paid to them. But optimizing them properly requires complex licensing expertise and negotiating experience to ensure you’re looking at the most efficient licensing options, the right contractual terms and conditions and the best possible price.

Managing the long-tail is no less important, but unfortunately too often neglected because of the sheer volume of vendors involved. Much of the work needed to manage tail spend is tedious and often complex, requiring specialized knowledge of smaller vendors’ contracts.

Explore tips on getting started >>>

Countless studies report a financial savings of 10 to 20 percent for organizations who can get their tail spend under control.

(Source: procurementfoundry.com)

Getting started

Leave long-tail vendor management to the experts.

An experienced partner will have knowledge of the niche, industry-specific and alternative products critical to your business and the time and resources to dedicate to ensuring you get the right contract terms and conditions at the right price.

With customer relationships dating back 30 years, SHI’s licensing experts do this day in and day out.

Work with experts to optimize strategic contracts.

SHI provides strategic license advisory for more than 40 partners, giving you dedicated subject matter expertise for each respective partners’ programs, products, policies, and processes. Further drawing on years of experience supporting some of the most complex environments in the industry, SHI can help you identify and select the Volume Licensing Programs for over 150 additional partners and many smaller, niche vendors.

Delivering Cost Management with SHI

Work with a
trusted partner to
realize your cost management goals

Cost optimization is built into every SHI solution. For over 30 years, SHI’s ridiculously helpful experts have helped organizations like yours leverage the full power of the latest technologies. Whether that be by advising you on the best contract terms and pricing, evaluating different licensing scenarios with our license advisory services, or by helping you weed out waste, improve utilization and governance with our range of IT Asset Management services, we are here to help you get maximum value from your technology investments.

ABOUT SHI

About SHI

With more than 30 years’ experience of supporting organizations like yours through all sorts of business and technology challenges, SHI is uniquely positioned to help you create infrastructure, digital workplace, security, and cost optimization strategies that will work for your company. Our unrivaled vendor relationships, international presence and five thousand ridiculously helpful experts will ensure that your organization is ready to face 2021 with confidence and with the right technologies in place to support your workforce, whether it’s in the office, at home or a hybrid model.