3 Ways SAMs Can Protect Their IT Estates from Questionable Vendor Tactics

Software asset managers are on the front lines in the battle against unfair megavendor practices. Here are a few ways to safeguard your IBM estate and your company.

Working within the parameters of mandated, across-the-board budget cuts is making the job of software asset managers far more challenging as every organization is battling lingering global economic uncertainty.

Megavendors are no different. They operate under the same economic pressures every company is dealing with.

However, some of the tactics they are using to boost their bottom lines can do literally the exact opposite for yours.

Megavendors are notorious for coming back to existing clients with massive upcharges — and that’s just the beginning. Stories abound of abolishing cost-saving tier pricing, unfavorable bundling tactics, and unfair price hikes.

Here are three tactics megavendors are currently using and ways to protect yourself from them.

Pricing changes

Megavendors are creating their latest releases with new products and bundling them in a way that allows them to charge more and make the whole purchasing process more complex. Under the guise of discounts, these bundles actually cost more — not less — than what you paid with older contracts.

It’s human nature to love a good discount. But more often than not, discounts promote waste and consumption, encouraging customers to buy more than they actually need and contributing to the already large volume of e-waste.

“The more discounts out there, the more people buy,” says Michael Swanson, a pioneer in the software asset management field and founder of Information Systems Asset Management (ISAM). “The more you buy, the more you scratch your head and say, ‘Why did I need that?’”

Instead, software asset managers need to be experts at cost reduction. Analyze your estate’s capacity and figure out what you can get rid of. We all know there’s a lot of waste in IT. Included in those bundles, for example, could be a few products that do the same thing.

“Sometimes you need to discard a product, but not the general technology,” Swanson notes. “It’s not just knowing what the best price is for that product, but what is the best price for the technology for that particular solution. You need to know what the cost is, what the market rate is, and what you should be paying.”

ELA segmentation

Enterprise License Agreements (ELAs) are designed to replace individual license agreements that must be separately purchased, activated, and maintained. With an ELA, an organization can rapidly deploy solutions and have immediate access to all products and services at an agreed upon price. Usually, this price is a bulk purchase of the vendor’s service for a fixed period at a lower overall cost.

But to increase their revenue, megavendors want to sell more licenses at a higher price.

This is done by splitting up ELAs and turning one service into multiple services, for which they can then charge individual fees. The licensing rules change with every split, which can create noncompliance and the very real possibility of a costly audit.

One way to combat this is to renegotiate your ELAs.

“If there is an ELA out there for five years, at four and a half years, you need to go back to the vendor and look at renegotiating,” Swanson says.

Another best practice is to evaluate your entire estate and ensure you have the most recent, up-to-date information available to you. Start by asking yourself the following questions:

• Do you know what you have and where you are using it?
• How much does it cost?
• What does it do?
• What’s the full technology history?
• Why do I need this technology?
• When did it change?
• Who are the users and the contract history?
• Did you really need those products for all five years?

The ever-changing nature of software asset management makes tracking and keeping abreast of changes crucial. If you don’t know what you have, then you don’t know what you need.

Aggressive audit triggers

Unfortunately, attempting to renegotiate your ELAs can increase the potential for an audit. Of course, that’s not the only thing that will raise the audit red flag. Whenever a rep is pressured to meet a quota or to raise revenue with your organization, that boosts the chances of an audit, too. And the fact that licensing rules and metrics keep changing to purposely create noncompliance doesn’t help either.

License metrics can be tricky, and it is imperative to be hypervigilant of what parameters your software licenses contain. If you have an organization of 100,000 people scattered across 1000 different locations across the globe, all those users need to know what is in the contract. Otherwise, they could be doing things they don’t even know they’re not allowed to do.

“Oracle, IBM, and Microsoft and their auditors have been doing [audits] 24/7 with multiple accounts every day for months, years some of them,” Swanson says.

It might be your first audit, but it’s definitely not theirs.

To help their customers in this area, some third-party software maintenance companies offer audit protection and risk mitigation services from experienced licensing specialists who analyze customer license inventory to assist software asset managers and offer insight into the tactics used during an audit to avoid being pushed into a commercial settlement.

Another way to limit your audit potential is having a thorough understanding of who your users are and what they require.

• Is your user count static or growing?
• Are there any unused licenses?
• What do I need down the road? In three years from now?
• What is the project demand for that asset right now or in the future?
• How can I adjust that capacity to meet the demand?

Between economic challenges and megavendor tactics, sometimes it seems like software asset managers are fighting an uphill battle. But if you stay vigilant, you can stay a step ahead of the megavendors and safeguard your company at the same time.

Want more advice from a seasoned SAM professional? Watch our webinar, “Navigating the Storm: Managing Software Assets in an Unpredictable Economic Situation.”