Every year, the software industry loses billions of dollars in revenue through the illegal use of pirated software or the (often unintentional) violation of licensing agreements.
According to the Fourth Annual Business Software Association (BSA) and IDC Global Piracy Study, 34 per cent of all software in Canada is pirated, while the global piracy rate is 35 per cent. Even when the misuse is not intentional, the net result – lost revenue from software sales – is the same. In Canada, it’s estimated that reducing the software piracy rate by 10 per cent would yield $2.7 billion in economic growth over four years.
With economic losses of that magnitude, it’s no wonder that both software vendors and industry groups such as the BSA and SIIA are stepping up their efforts to crack down on the use of unlicensed software. The targets of license audits span across the spectrum of businesses – from enterprises down to local, small businesses with fewer than 100 employees. And once a company has been found to be using unlicensed software, the costs can be staggering, as the offending entity is exposed to not only the costs of acquiring additional licenses, but also to fines and penalties.
The industry isn’t just addressing this problem with a stick, however. More and more vendors are pouring resources into educating the market on the value of implementing Software Asset Management (SAM) best practices, which identify processes and tools to manage the entire lifecycle of a software application – from procurement through to disposal. Documented benefits to approaching this in a systematic way include decreased costs – from more efficient use of existing licenses, better management of support and maintenance contracts, increased use of volume licensing agreements, etc. – and reduced legal and security risks. Standards, such as ISO 19770-1 and ITIL provide guidance on SAM practices and are seeing increased adoption as organizations realize the need to better manage their software assets.
All of these factors point to a burgeoning opportunity for the channel, as resellers are in an ideal position to provide the guidance, service and technology needed to assess a customer’s software position, acquire the necessary hardware and software licenses and implement the appropriate SAM processes to manage the estate into the future. And there are additional revenue opportunities for resellers who offer IT Asset management services.
Typically, the most common cause of unauthorized software proliferation is employees acting on their own initiative, without the approval of those responsible for licensing. This can range from one-off duplication to large scale copying to potentially hundreds of machines. The main culprits are ignorance, laziness and a disregard for what can be very serious consequences.
For those actually responsible for tracking software licensing, the fact is, tracking hundreds of applications on potentially thousands of machines is virtually impossible using traditional manual audit methods. What’s more, this still needs to be married to the company’s various licensing agreements with different vendors.
It is the perceived difficulty of auditing the network, plus the additional burden of license reconciliation, that leads many organizations to bury their heads in the sand and hope the software police do not come knocking. This is obviously, far from a sustainable strategy however, and knocking they will come, sooner or later. And this is where resellers with a SAM practice can drive significant business growth.
In order to effectively sell and support SAM solutions, it’s important to understand the different types of solutions available and their varying degrees of sophistication and functionality. In just the last couple of years, software to audit and monitor IT assets has evolved significantly, with many vendors offering ‘modularized” add-ons to deliver new features and enhanced value.
It’s also important for resellers to understand the process associated with software asset management, which should not be viewed as a one-time or periodic project – it is an ongoing process of continually monitoring software on the network and how it is being used. Effective SAM involves the following steps:
1. Carry out a complete audit of the software installed across the network using a software discovery tool to list all installed software
2. Track the usage levels of installed applications to ensure that the software installed is actually still being used
3. Determine the extent of valid licenses – this provides a list to compare against the actual software assets installed
4. Highlight the old applications no longer used and remove copies to avoid paying for licenses that are not in use
5. Purchase needed copies of software that are determined to be under-licensed and renegotiate support contacts where there is over-licensing
Contrary to popular belief, not all organizations find themselves under-licensed after conducting a self-audit. In some cases, companies find they’re paying for licenses and support for software simply not utilized. In these cases, an investment in a SAM solution can turn from a pure cost, into an exercise in cost saving, with a genuine return on investment (ROI).
Implementing a SAM solution can also deliver a number of benefits beyond better license management, creating an additional value proposition from the reseller perspective. Chief among these are better security (through elimination of “rogue” applications and improved patch management) and better regulatory or standards compliance.
Given that software asset management is not a one-off activity, but an ongoing process, the opportunity exists for resellers to build a robust practice around selling, implementing and servicing clients’ software asset management needs.
Professional SAM experts, who understand the nuances between different vendors’ licensing schemes, will be in high demand. Not only can they provide clear guidance on over and under-licensing, these consultants can potentially save the customer significant sums of money by identifying opportunities for license reallocation or advising which licensing schemes will be most advantageous in the future.
There are also clear opportunities for revenue generation in the elements of SAM that go beyond license management, such as improved security or better regulatory and standards compliance. Most organizations are risk-averse, making this improved IT visibility, detailed asset reporting and better organizational governance a strong selling point for a SAM practice.
In addition, experts who understand how to specify, implement and manage an effective SAM practice can also advise organizations on how to extend the functionality of their software with add-on modules. This in turn creates further sales and revenue opportunities.
Moreover, resellers are in a strong position when it comes to advising clients on SAM deployment and implementation, because it is now possible for them to offer customers SAM as a hosted service rather than a software platform. This gives the reseller community a unique selling proposition and an opportunity for recurring revenue, delivering all of the benefits of SAM without the need to install and manage the software. It even creates the ability to remotely manage software assets, allowing resellers to offer SAM as a complete outsourced service.
Software resellers wanting to get into the SAM business may find willing and accommodating partners in the software vendors themselves, who are eager to minimize piracy in the business sector. As the efforts of these vendors and associated industry bodies such as the BSA increasingly bear fruit, more and more channel revenue will flow as a result, with SAM being a key slice of the overall pie.
Bill Piwonka is the General Manager and Vice President Marketing, Americas for Centennial Software, a vendor of Software Asset Management solutions.
