Off the Shelf: The Retail & CPG Blog:Optimizing the license costs for an enterprise…..

Cost-optimization is currently one of the high priorities for companies. It is very important to make sure focus does not shift from this during good times. According to a 2007 KPMG survey of more than 400 companies worldwide, 9 out of 10 cost reduction programs fail to achieve their targets, and the gains that are achieved appear to be short lived.

Some points that helps companies not to lose their focus on cost-optimization:

· Instead of looking for immediate, one-time savings, need to plan for a long term strategic approach, which results in ongoing cost reduction.
· Focus on right areas to based on cost structure, where high cost is spent and where the opportunity to reduce costs.
· Inculcating the culture of cost optimization in employees is very critical, as many companies fail in this aspect.

Recently stakeholders of a large packaged Food and Beverage Company, a customer I work with, raised concerns over the increased Information Systems (IS) spending, which triggered a strategic approach to reduce their ongoing IS cost. By implementing some of the measures listed below, this customer was able to reduce license costs of USD 750K per year.
I intend to cover ‘Optimization of License costs for an enterprise’ in detail in this blog.

In many companies, software licenses are procured as and when needed by various departments without reviewing the existing licenses for their needs. Inorganic growth of the companies makes it worse by increasing redundant licenses.

Some of below measures would help in reducing license costs:

· It is very important to use a tool for life cycle management of licenses. This tool which will act as central repository of licenses gives visibility to management in terms of total cost, cost by technology, cost by department etc. Repository also gives visibility of available licenses to everyone in the company.
· A central team can be used for license management, instead of providing distributed authority.
· One time activity of review existing licenses and consolidate any multiple redundant licenses to bulk deals.
· Governance on renewal of licenses is essential. Review the future need well before renewal time and assess the importance, cost benefit before approving the renewal.
· Sometimes procuring license at local or regional level would be cheaper compared to a global deal. Evaluate if procuring licenses is cheaper within the region or country or globally.
· Upgrade software to latest versions to reduce support cost, avoid risk of losing support.
· Plan the usage of licenses in a way that each region/project can use them in phased manner. For example, developer licenses for implementation of tool/product can be used in phased manner in each region of a company one after other, rather acquiring multiple licenses to implement tool/product at the same time, provided it is viable for business and saves cost to company.
· Required license quantity need to be reviewed periodically to assess current needs.
· Some of the common licenses like database licenses, which will be used for many years can be negotiated for long term contracts
· Some companies offer elite level deals, enterprise level deals base on volume, partnership status, relationship level etc. Negotiate the contracts for better service and lesser costs.