Mitigating software subscription challenges in the networking industry is crucial for cost savings and optimal utilization. Learn how to overcome the complexities of hybrid networking IT and achieve positive business outcomes through effective IT Asset Management practices.
Over the past few decades, the IT Asset Management (ITAM) landscape has undergone a remarkable transformation. With the shift from hardware-based IT infrastructure to hybrid environments featuring a significant software component, value-added resellers (VARs) and service providers (SPs) have had to adapt their management systems to keep up with the evolving IT landscape.
In the past, IT infrastructure largely comprised hardware-based assets that were managed locally. During that time, software accounted for only about 5-10% of the cost of an average telecommunications device. However, the industry's movement towards public and private cloud environments, software-only virtual appliances, and Software Defined Networks (SDN) has changed how solution providers monetize their products.
Revenue from software-licensed components has consequently ballooned — software now constitutes around 40-50% of total product cost, and it can even reach a full 100% in some cases.
The growing prominence of software infrastructure has been accompanied by the increasing popularity of software subscriptions. Under this model, users are granted the right to utilize the software for a specific period of time based on the terms of their subscription. As the networking industry progresses, managing software subscriptions has become a crucial requirement, presenting new challenges in terms of software utilization and consumption. Unfortunately, in today's IT environment, approximately 30% of all IT software is not fully utilized, resulting in wasted spending and underutilized assets. However, the good news is that information about software usage patterns is now more accessible than ever, providing both enterprises and value-added resellers (VARs) and service providers (SPs) with valuable insights. By implementing effective IT Asset Management (ITAM) practices, enterprises can transform an unexpected and burdensome operational challenge into a lucrative opportunity for cost savings.
Managing software consumption in a hybrid IT landscape involves a highly complex migration process that can consume huge amounts of time, energy and resources. A typical migration usually requires replacing products and network infrastructure, identifying which assets will be virtualized, and developing a new set of tools to understand how to manage new costs.
For IT infrastructure relying on the subscription model, organizations must learn how to accurately track their subscription usage so that they know when licenses need to be purchased, renewed or terminated.
Enterprises must also decide which parts of their legacy infrastructure will remain in place. Not everything can be migrated to the cloud; often a large portion of
physical hardware must remain after a full migration has occurred. This means that even within a software defined network (SDN), organizations will have a mix of hardware and associated software, as well as virtualized hardware. This hybrid landscape may contain a variety of different asset types, many of which may have similar functions but different Software License Management (SLM) requirements.
The timing of the migration is critical and can play a significant factor in the success and seamlessness of the transition. Enterprises must decide how long they will continue to use their legacy infrastructure and whether there will be costs associated with using this
hardware for an interim period.
After completing the migration, there must be a system of governance and accountability in place to ensure that licenses are properly analyzed and the correct decisions are made regarding their purchase and renewal. Enterprises that complete this migration process must then be able to accurately identify what software they have purchased, what they are using, and any discrepancies between the two. If this is not done properly, it can lead to a chaotic situation in which an organization’s license estate has a significant over and underconsumption of software subscriptions. This could cause a variety of negative business outcomes and wasted IT spending.
As enterprises oversee the digital migration of their IT infrastructure, there are a host of potential pitfalls that could lead to both over- and underconsumption of subscriptions.
Organizations that did not previously have to track, manage or analyze their software subscription utilization now find themselves in need of automated tools, operational staff and well-defined business processes. This is to ensure that they are receiving the full value and outcomes from their IT spend. Each of these three functional areas — people, process and tools — is an integral part of enabling proper software consumption.
Many organizations have not accounted for the staff needed to properly manage their software consumption. If there are no personnel responsible for the deployment and usage of software licensing, it leads to situations where local needs are solved with no regards to the overall license health of the entire organization.
Organizations can then end up with a huge disconnect between their procurement and IT departments. Without a clear plan, IT staff may pull licenses from incorrect sources,
purchase new licenses when reusable licenses are available, set up unauthorized subscriptions and use Enterprise License Agreements inefficiently. At the same time, management may request new purchases from procurement even though
there are licenses that are available and unused (and now underconsumed). As a result, the volume of software being purchased is completely unaligned with the software usage of the organization.
To resolve this disconnect, an organization not only needs people — it needs people with the appropriate ITAM expertise and skills to deliver the positive business outcomes it wants.
Effective procedures and processes must be defined, developed and put into practice to enable the appropriate personnel to execute. The actual process of managing software consumption is often an afterthought, but it is a necessary part of achieving the desired business outcomes associated with reducing wasted IT spend.
The disconnect between the business outcomes and the processes needed to reach those outcomes is one of the primary challenges organizations face in instituting a solution that meets their business goals.
Appropriate processes will involve the relevant departments, personnel, third-party vendors and solutions, all working in tandem with high degrees of accountability to ensure ease and efficiency. It is important to remember that all of this will be compounded by the internal needs and complexity of the specific organization — there is no “one-size fits-all” process that will solve everyone’s challenges.
Each organization will need to take stock of their internal procedures, personnel and governance and evaluate if they have what they need to achieve their business objectives. This is a crucial step that is often overlooked. An effective ITAM process usually also involves a well-defined collaboration process with procurement. If the incoming funnel of software procurement is not aligned with the management of
software consumption, the process will ultimately fail to achieve business goals.
Without the right tools to help staff execute procedures, the entire system will become so
convoluted, manual and resource-intensive that the cost savings from an SLM practice will be consumed by the practice itself.
What is the point of saving on IT spend if capital expenditure is going to simply be shifted to operational costs?
However, tools alone are not a “cure-all” for any organization. One of the common mistakes many organizations make is overvaluing the importance of their platforms and toolset. They assume that if they buy and are trained on how to use a tool, it will automatically solve all of their problems. In reality, it is the investment in personnel, processes and platforms, and the orchestration between these distinct functions, that is needed to actualize cost savings and proper license consumption.
Depending on the maturity of an organization’s SLM practices, software consumption can have a variety of impacts on both enterprise organizations and VARs and SPs.
For enterprise organizations, incorrect software license consumption can have clear downsides, including:
The challenges VARs and SPs face when it comes to their enterprise customers’ business needs tend to relate to their overall recurring revenue streams. As the organizations reselling and renewing software subscriptions, they need to have an accurate picture
of their end-customers’ software usage and waste otherwise it complicates and extends the renewal cycle. In many cases, VARs and SPs that do not have a mature ITAM practice are not fully capturing the needs of their customers, which impacts the overall customer
experience and can drive customers to competitors.
When VARs and SPs provide their customers with incorrect subscription consumption details, it can lead to such negative effects as:
There are always both challenges and benefits that come with any large industry shift or evolution. The networking industry has been undergoing a large digital migration for many years, and the reality is that there is no turning back. Hybrid IT is here; it is no longer a future concept. The organizations that can rapidly adapt and adopt a mature ITAM practice will be best positioned to thrive in the future.
The good news is that the challenges accompanying software consumption in the IT
networking industry are solvable with an effective ITAM solution. Organizations must decide whether to purchase or build an SLM practice that works for their hybrid IT reality to realize the benefits and business outcomes of such a solution.
Although the optimization of software consumption is well within the grasp of many organizations, understanding how to make it happen is a critical first step.
As previously mentioned, a mature software lifecycle solution consists of three main components: people, processes and tools. Whether an organization decides to take the steps in-house to build out a practice from the ground up, purchase a platform they will use with internal teams, or outsource their practice to a managed service, the three key
components that drive success – people, processes and tools – remain the same.
Once a mature practice is designed and executed, an organization can begin to realize the benefits.
"Clients who successfully execute ITAM [including SAM] as a discipline have typically achieved 30% cost savings in the first year, and at least 5% cost savings in each of the subsequent 5 years."
By adopting a robust software management platform that tracks and displays accurate subscription consumption data and is backed by proper processes and personnel, organizations can start to answer the following consumption questions:
When designed and executed properly, a mature SLM practice will lead to a variety of positive business outcomes:
Using a mature SLM practice effectively nets the organization a positive return on, and confidence in, their investment. If implemented correctly, the return on investment for a mature solution should be far greater than the operational or capital expense of instituting the practice.
Enterprises need to take the following initial steps to establish an effective SLM practice and successfully manage their software environment:
Enterprises need to inventory their software license and subscription estate. What licenses do they have the rights to use? What are their entitlements?
They cannot measure consumption without first knowing what their estate “should be.”
Enterprises must identify an executive sponsor who will own the investment and institute
processes that hold people within their organization accountable for software misuse.
They should set up policies and procedures that do not allow human error to be the deciding factor in their IT budget.
They must obtain knowledge on the nuance of software within the networking industry. What are entitlements? How do they differ from contracts? Why can an organization purchase support on licenses they do not even own?
Enterprises need to assess and analyze the risks of not having a mature SLM practice in their organization. What happens to their Enterpris License Agreement true-forward bill if they do not manage it properly? What happens if the manufacturer targets their organization for an audit and they are not prepared for it?
Finally, they need to find the correct ITAM solution for their organization. ITAM is a rapidly growing industry with a variety of vendors that can deliver effective solutions. Enterprises must find the right automation, develop the proper processes and hire or contract the correct personnel to properly manage their networking software estate and achieve their desired business outcomes.
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