• August 23, 2016

Waste Not: Software Waste is Costly and Risky

Poor software asset management exposes the enterprise to vulnerabilities.

In 2011, web pioneer Marc Andreessen famously quipped, “software is eating the world.” His logic: more and more major businesses and industries are run on software and have products delivered as online services driven by data. You can see it in everything from Amazon and Netflix to Airbnb and GE jet engines.

Yet software is becoming a critical enterprise vulnerability, both in terms of asset waste and enterprise security. In the report, The Real Cost of Unused Software, 1E pegs software waste at $30 billion—or $259 per desktop—in the U.S. alone over a four-year period. The authors reached their conclusions after examining 3.6 million users and 1,800 applications in 129 organizations across 14 industries. The average rate of software waste on a global basis is 37 percent per organization. “CIOs are no longer concerned with driving down costs, but have instead turned their gaze toward adding value,” the authors state. “Because of this, eliminating software waste, which is often seen as a cost-cutting exercise, has slipped to a far lower place in their priorities.” This is both good and bad.

Waste Drivers

Global industries with the highest levels of software waste include education (47 percent), energy (46 percent), and technology (41 percent). Those with the least waste were pharmaceuticals (18 percent), government (28 percent), and insurance (29 percent). The primary drivers of software waste are underused or unused applications (shelfware), underutilization of software entitlements (product use rights), and “true-up” costs. True-up costs are payments to vendors for noncompliant software use.

A report by the software firm Flexera revealed that underused software among organizations is rampant, with 93 percent reporting that they spend money on at least some software that is underused. Thirty percent of respondents in the survey admitted that more than a fifth of their total software spend is consumed by underused or unused applications.

The 1E report notes that audits by software vendors are on the rise. Gartner reports that 66 percent of the companies it surveyed received audit requests in 2014. And audits are costly. Software license costs increase an average of 30 percent following an audit—nearly as much as the amount of software being wasted. The Flexera report pegs Microsoft, Adobe, and Oracle as the audit leaders.

Waste Threatens Security

Software asset management is looming as a critical enterprise issue because it has a direct impact on security. Applications are often the key entry point to the most valuable enterprise asset: data. Cybercriminals continuously scan organizations for vulnerable software versions that can be attacked remotely.

But establishing an effective software asset management strategy is tricky. Software licensing is fraught with complexity due to the sheer volume of contracts and the great variance in licensing rules and terms among vendors. Compounding this challenge is that most organizations track their licensing information manually.

Enterprises can begin to tackle waste by beefing up their software management processes. Exploring automated software asset management tools, cloud-based software services, and open source software is a good start. The key is to assess and determine which strategy aligns best with your enterprise transformation objectives. By improving software management, you can cut both costs and risk.

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