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Forrester ROI Study I: How to save over $ 7 million in software licensing costs

Investing to save money and become more productive? Especially in times of crisis, it is important to use investments to create value - e.g. for efficient software license management. In a Total Economic Impact study, analysts from Forrester have examined the ROI potential that companies can achieve by using professional Software Asset Management (SAM). The field analysis evaluates the risk-adjusted return on investment and benefits using the case of a large US company. The license management software SmartTrack from the SAM specialist Aspera was used. Aspera also commissioned the study. The results of the analysts are presented below and are remarkable: The cost benefits amount to more than $7 million over 3 years compared to costs of approximately $3.2 million. This corresponds to a net present value of almost $4 million. The payback period is 7.9 months.

 

Summary of the Calculation of profitability over 3 years

Abb.1: Summary of the Calculation of profitability over 3 years

Total Economic Impact (TEI): Methodology

Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders. TEI consists of four components to evaluate investment value: benefits, costs, flexibility, and risks.

Benefits represent the value delivered to the user organization — IT and/or business units — by the proposed product or project. Costs represent the investment necessary to capture the value, or benefits, of the proposed project. Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can typically be the primary way to justify a project, Forrester believes that organizations should be able to measure the strategic value of an investment. Flexibility represents the value that can be obtained for some future additional investment building on top of the initial investment already made. Finally risks measure the uncertainty of benefit and cost estimates contained within the investment. In a multi-stage process, Forrester collected data on SmartTrack on the basis of interviews. In addition, detailed structured interviews were conducted with representatives of the company with regard to costs, benefits and risks. On the basis of this data, the experts created a risk-adjusted financial model.

Initial situation

The company is a multinational corporation headquartered in the United States with over 70,000 employees and contractors.

The organization used a few different tools prior to migrating to SmartTrack and experienced a number of challenges with these tools, including that: The previous systems were very manual. The organization manages all of the software in its environment, including freeware, so manual SAM processes could not keep software license data accurate and up to date throughout the year. At the end of each year, the organization would need to manually reconcile license data. This manual audit was extremely timeconsuming and therefore the organization could only apply the process to a few applications. Furthermore the tools were so difficult to use that the organization had to build an external reporting system to perform simple searches. This meant that a lot of software asset management time was spent on searching for data. Not least it was not possible to automate SAM processes with the previous systems.

SAM Solution & investment costs

The organization selected SmartTrack for its ability to consolidate data and provide up-to-date tracking. It found that the SmartTrack software is very user-friendly, has robust reporting and search functionality, and enables automation of some SAM processes.

The interviewed organization experienced a number of costs associated with the SmartTrack investment. These represent the mix of internal and external costs experienced by the interviewed organization for implementation and ongoing management associated with the solution.

The organization has two hard costs for the SmartTrack investment: 1) SmartTrack license and maintenance costs and 2) Aspera services costs. The risk-adjusted SmartTrack costs over the three years were $1.5 million. This initial implementation took about six months to complete, and the organization relied on both internal FTEs and Aspera services to implement over 150 vendors. Among others project managers, technical experts, SAM subject matter experts, and database managers were involved. In total, this initial effort required approximately 11,300 FTE hours. The risk-adjusted cost of implementation and management time over the three years was $1.68 million.

Quantifiable advantages due to professional SAM

With SmartTrack, the customer is able to automate many SAM processes, reducing the time spent on these tasks and ensuring data is up to date. SmartTrack’s user-friendly interface improves reporting, provides real-time data, and allows for quick ad hoc searches for any type of information. Along with process efficiencies, the organization is able to easily prove and ensure compliance for all publishers and vendors. SmartTrack also provides license cost savings by enabling automated license harvesting via real-time scans of available licenses, ensuring the organization only pays for licenses it needs.

In detail, three categories of quantifiable benefits from SAM can be identified:

IT Support Team Efficiencies

The organization was able to realize efficiencies for the IT support team through automation with SmartTrack. The organization automated approximately 50% of its software requests, reducing the number of tickets that analysts would have had to manually process in the prior environment. The organization estimates that it processes more than 100,000 software requests per year, so a 50% reduction in manual processing resulted in significant time savings. The risk-adjusted total benefit resulting from IT support efficiencies over the three years was $4.4 million.

Compliance Team Efficiencies

The organization also noted efficiencies on the compliance team due to SmartTrack. With SmartTrack, the compliance team reduced the time spent on reconciliations by 50% due to real-time, accurate license data, saving approximately one-third of its overall time. The compliance team was also able to achieve time savings on responses to audits. The organization estimates that there are, on average, approximately 20 audit events or true-ups each year where the compliance team is able to collect and verify license data much more quickly with SmartTrack. The risk-adjusted total benefit resulting from compliance efficiencies over the three years was $444,920.

Software License Cost Savings

SmartTrack also enabled license cost savings compared with the prior environment. The organization was able to build an automated license harvesting system that tracked software licenses for products that employees request frequently and actively manage licenses for those products. SmartTrack enabled additional applications to be harvested and provided data in the right format much more easily, allowing for additional cost savings. The organization provided a range of software cost savings from the harvesting initiatives, from which Forrester choose a conservative value. The risk-adjusted total benefit resulting from software license cost savings over the three years was almost $2.3 million.

 

Risk-adjusted Cash Flow Chart

Abb. 2: Risk-adjusted Cash Flow Chart

Olaf Diehl

Olaf Diehl

Olaf Diehl betreut als Business Unit Manager die Bereiche Marketing und Produkt Management. Er studierte Betriebswirtschaftslehre an der Philipps-Universität in Marburg. Seit 1998 ist er für die IT Beratung im Bereich ITSM und SAM zuständig, seit 2002 in einer Führungsrolle.

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