The hidden cost of licence management

The hidden cost of licence management

One of the biggest hidden IT costs to many large companies is due to managing licences. I don’t mean the costs of the licences themselves, which are all too clear, but the costs of understanding, administering, and otherwise dealing with commercial licences.

It’s such a problem that an industry is growing around this, known as “Software Asset Management” or “SAM”. Yes such tools also help with general update management, but the key focus on them is managing commercial licences and ensuring compliance. As Gartner describes it:

The increasing complexity of software license schemes requires specialized tools to establish compliance and optimize costs.

Managing software licences has, of course, been a problem (and, therefore, a significant business cost) for some time.

As this blog article is tagged “from the trenches”, an example is in order:

About 8 years ago, I implemented some remote access servers as part of a telecommunications management architecture. For various reasons, the only viable solution for this was a pair of Windows servers running Windows Terminal Server for about 40 users. Procuring and installing the servers was relatively straightforward. Understanding and scoping the licences was not. In the end the project paid a consultant for 3 days to capture the requirements, draft up a licencing plan, and deal with licence acquisition.

The cost of managing the licences, not including the licence costs themselves, ended up at nearly 20% the cost of this small project. And this was a project to install two bog-standard Windows servers with remote access and no additional software.

Unfortunately I don’t have industry figures for this, but this 20% premium seems to be a good average from the projects I have worked on.

Unfortunately this complexity is pretty much baked into commercial software, and any complex system that requires lots of components can very quickly cause the acquisition and ongoing costs of licence management to escalate.

It’s also unfortunate that many company’s IT policies also encourage licence proliferation by limiting the choice of IT solutions to commercially “licence heavy” architectures, which escalates the costs further. Many of these policies are driven by “strategic partnerships” and “Enterprise-wide licencing deals” which, ironically, are often naively entered into in an attempt to limit licencing problems.

Instead, such deals mostly tend to lock the company into a handful of vendors, which stifles innovation, limits the ability of the company to use more cost-effective or simply better solutions but also, because the companies offering such deals do so because their licencing is complex, it reinforces the proliferation of licences and the costs of managing them.

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