The Seven Wastes of License Management

Manufacturers are extremely aware of inefficiencies in their production processes and assembly line and apply principles and techniques such as Lean to optimize throughput and quality. However, in our interactions with manufacturing customers, we often find that these same principles are not applied in a critical aspect of the business, namely management of the software assets that support the flow of production. While organizations purchase software licenses and strive to comply with their license agreements, there is often a great deal of waste in software license management, which contributes to overall costs. This is due to a number of factors:-

• There was a time when software had a physical attribute, it was delivered on a packaged CD and had a printed license number, so it was pretty easy to keep control of software assets. Now software is generally downloaded and the license number, too is intangible (dongle-based licenses are easier to account for, but losing the dongle is another pain-point – you need insurance for that). 
• The license management software that usually accompanies your application was written for the vendor to keep track of how their software was being used, not for your benefit, and generally does not give a clear view of how licenses are actually being used.
• Most companies have a software policy, but the policy does not explore the depths of how applications are procured and how they are used once acquired, nor how the purchasing decision is made and by whom.
• Mergers and acquisitions bring two or more software portfolios together and the audit and rationalizing of the software is often overlooked while attention is focused on merging the companies. This applies to the software policies too. Internal company reorganizations can have a similar outcome, because the software needs are not reviewed at the time.
• When specialized software, such as that used in engineering or life sciences is acquired, general management, and even IT management in some cases, do not understand the complexity of the many different license models and how injudicious purchase and usage can drastically affect the software budget. The role of license management and its importance is greatly underestimated when trying to control these costs.
• The misapprehension that renting software in the cloud is cheap, controlled and not subject to software audits is currently a big issue on most CIO’s desks. In 2018, Rightscale, which was later acquired by Flexera, estimated wasted spend of 35% on cloud technology, above the 30% waste estimated by respondents. For 2020, not much has changed, except that respondents believe their overspend is about 12%, while research places the figure at about 30%.

The Perfect Software Portfolio

Unfortunately, there is no such thing as the perfect software portfolio, but one can work towards it by eliminating waste. We have listed the main factors that can create waste; below is a list of “7 wastes” we have drawn up for you to start working on today. There may be other unwanted contributors to costs, but a focus on what is listed here will considerably reduce the licensing component in your IT budget.

• Lack of Control
• Lack of Visibility
• Wasted Effort
• Inventory

– shelfware
– outdated versions
– named licenses

• Too many Features
• Idle Licenses- waiting
• Pay per use – chargebacks

1. Lack of Control 

Centralized command and control may be old-fashioned, but in the case of license management it works well. It is not always possible, especially for multinationals; a global license can be very costly, and some vendors require you to get licenses from their local office or partner for foreign branches. Most organizations tend to accumulate software and licenses over the years, especially in project-driven environments, where it is often expedient to buy a whole set of new licenses for Autodesk to fire up the project. Finding all the software agreements in force can be a very tough exercise, but is the start to weeding out surplus licenses.

A watertight software policy

Is your software policy explicit about matters such as public and private cloud, virtual machines, BYOS (bring your own software), idle licenses (checked out, but not being used), who is entitled to procure new and additional licenses and who qualifies for a named license? Are the roles and responsibilities for license management and administration explicitly defined? Are there documented processes and procedures? If you can answer “yes” to all of these questions, you are in a minority of 18% of organizations. Having the right framework within which you can operate is a prerequisite to starting waste elimination.

2. Lack of Visibility

You may be confident that your asset register ties back to the sum of licenses across all your license agreements, but you are frustrated by your inability to see the true usage of these licenses. Relying on the license manager (LM) software provided by the vendor does not give you visibility into your usage; that is not what it was designed for; it is there to ensure you do not infringe your license agreement in any way. What is more, every vendor provides an LM that monitors only their products. You do not have an overall view of your software licenses. This is why you need your own license manager; to gain transparency.

3. Wasted Effort

Working without an independent license manager creates further waste in the amount of effort required to monitor and manage licenses, extract usage data and provide meaningful reports to management on why the software license budget is so high and what you plan to do about it. Onboarding new recruits and transfers from one department to another are painful tasks when it comes to granting entitlements and access for all the software tools they will need, while HR may have forgotten to inform you of employees who are leaving, where access must be removed (time to revisit your process flows). A license manager that is vendor-agnostic reduces and removes much of this effort by providing visibility and automating tedious activities. This is what we at OpenLM have spent years refining, based on your needs, not those of your vendor.

4. Inventory

It may seem that this waste should be at the top of the list. The problem is that without proper controls and processes, transparency and minimizing manual effort, tailoring your inventory to what you really need is a lost cause. Once you have put these in place, you can focus on removing the bloat from your software asset inventory. This is not an overnight job – you will first have to identify redundant licenses and then see if you need to wait till renewal time to discontinue them or can negotiate with the vendor in the interim. Here are the prime suspects in license redundancy:-

• Shelfware. Licenses that were purchased for an initiative that has now completed or moved past the stage where the licenses can be put to good use. The licenses should have moved back into the general pool, but are just sitting there and if you don’t take care, they will be renewed.
• Outdated Versions. Legacy software and older versions often still co-exist alongside the current version. You can now trace these, as well as software that is due to be retired
• Named Licenses. There is nothing wrong with having named licenses as part of your software mix; for very specialized software, this may be the cheapest and most effective solution. Problems crop up where named licenses are hardly used, and the user could rather be checking out a license from the pool when needed.

With comprehensive usage reports, you can quickly weed out software that is surplus to requirements and trim down your inventory. Once that is completed, you can ensure that the licenses available are fit for purpose.

5. Overkill – too many features

The tendency of vendors to bundle a whole set of applications together under a single license, or to provide additional features that are rarely, if ever, used, can pad license costs considerably. Again, usage reports drilling down to feature level can highlight unnecessary features. There may be a few users who do need these special features; this is where the costs and benefits of a named license for those users can be evaluated.

6. Idle Licenses – Waiting

The last two wastes relate to human behaviour. The first is common in concurrent user environments; the user checks out the software he wants to use before he actually needs it, for instance, when he goes home, so that it is available in the morning. He could also book out the software, work on it, and then go to a meeting without checking it back into the pool. The ability to identify these “idle” licenses and check them back into the pool is a powerful aid in ensuring that the minimum of licenses need to be purchased to satisfy the maximum number of users. The time lapse when a license is determined to be idle (e.g. 15 minutes) should be clearly indicated in the software policy.

7. Pay per Use – Chargebacks

It is ironic that licensing costs of software, such as Solidworks or ArcGIS are often placed squarely in the IT budget, when the main users are not in IT. Without a software tool that can identify actual usage by an individual, group or business unit, it is virtually impossible to extract accurate chargebacks. The ability to charge back usage costs to a business units with documented proof is a powerful tool in reducing software costs, because it is now part of that manager’s budget, and he will take care to ensure there is no abuse of license usage.

OpenLM for a Lean Organization

All of the wastes (or muda, in Japanese) identified above can be mitigated or removed by implementing OpenLM. Even in organizations that use basic software, such as Microsoft Office, license overspend per head is calculated to be $295 on average. In industries that use specialized engineering and software, that per capita excess is much higher, if you consider the cost of a single Catia or Siemens NX license. OpenLM is specifically designed to manage licenses across most of the engineering landscape, which is why we have customers in every field from upstream oil and gas to medical devices using our products to optimize their software usage. Our license managers and administrators are confident that they are getting the best mileage out of their license portfolios, with reports and extracts that prove both economy and efficiency.