IT Sourcing: Forget What You Know About Software Licensing

Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom and transportation.

Software licensing has been turned on its head. Remember when licenses simply equaled the number of users or desktops? Those days are gone. Vendors like Oracle, SAP and Microsoft are scrambling to capture revenues associated with powerful market trends like BYOD, mobile and cloud computing. In response, they're coming up with complex formulas and product strategies to make sure that every device in the enterprise and every application accessed requires a license.

For example, SAP and Oracle have been asking clients to purchase additional licenses for third-party application access. You can read more about that here. Microsoft has also made several changes to its client access license policies, including requiring device CAL customers to purchase a license for every device that accesses Microsoft applications – whether a smartphone, tablet, laptop or desktop (learn more about these complex changes here and here).

Microsoft, SAP, and Oracle are just a few of the vendors who are trying to monetize the consumerization of IT. For some vendors, the changes have been explicit; for others, the adjustments to terminology and interpretation of contract terms have been subtle (or, as some may argue, a bit sneaky). But, regardless of how these changes have come about, their impact on enterprise IT costs will be big in 2013.

It's never been more important to understand your licensing options. There are a bevy of new licensing models and programs, and IT buyers need to be intimately familiar with each of them. Even the options you think you're familiar with have most likely changed (or will soon). These days, I find myself telling even the most experienced IT sourcing professionals to forget what they know about software licensing and go back to square one. In this environment, outdated information leads to overspending.

Assume that your vendors will make more changes in 2013. That means taking a close look at your IT roadmap, understanding which products and services you will source from each vendor in the coming year, and timing your contract renewals and negotiations optimally.

Also, conduct a mid-term health check on your largest vendor agreements. Does the licensing model you chose 18 months ago still fit your needs? Do you need fewer or more licenses? It is fully possible to re-structure your contract mid-term - even if you have contractual spend commitments, you may be able to recoup over-supply through additional discounts and credits.

- Jeff Muscarella, EVP of IT, NPI

First Voice

  1. Krista:

    Dealing with SLAs is no easy task. As there are numerous monetary, practical and legal issues involved. This is why any company that decides on adapting into a new business technology, should carefully identify software needs first before signing an SLA. Know exactly what the company needs and steer a well-defined purpose of every particular software package alongside a close estimate of the number of licenses that is actually needed.

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