Uncle SAM is an unpopular colleague: working with him costs time, money and nerves, no question about it. But at the same time SAM can be very helpful – if you work closely with him he provides you with detailed information in difficult situations, helps you to save costs and defends you against unjustified accusations. SAM’s full name is Software Asset Management and in reality he just wants to be popular.

Software asset management is difficult – for many reasons: on the one hand, since software is an intangible asset, its users tend to consider it a commodity. On the other hand, the subject of software asset management in itself is so complex that it can be very difficult to master.

Nonetheless, getting to grips with this subject is not only incredibly useful, but also necessary. And worthwhile! Because the advantages you can achieve are numerous and valuable!
As experience has shown, the biggest and most sustainable potential savings in IT management come from a systematic reduction of IT running costs, which are mainly made up of personnel costs and IT investments.

Savings made via reductions in personnel are often expensive and only effective in the short term. Redundancy programmes tend to be followed by waves of employment because too many, or even the wrong employees were made redundant, with the result that resources and skills have to be replaced and developed all over again.

More attractive efficiency potentials – also demonstrated by recent discussions on virtualisation, cloud computing, infrastructure and software as a service – can be found in the intelligent optimisation of investments. However, this optimisation sounds much easier than it is.

The new trends mentioned above are particularly full of pitfalls that will quickly complicate the intended optimisation process. It is of course an extremely attractive option to replace numerous servers by a few effective virtual ones. However, any projected cost advantages may diminish rapidly, if the licence models for the implemented software do not positively support virtualisation.

Software manufacturers make it extremely difficult for their clients to determine the optimal structure. Their licensing models use – depending on the situation – the most diverse parameters as a basis for calculation, and are therefore barely understandable.

Whereas the use limitation for Microsoft Server Enterprise Licensing, for example, is based on the number of licensable virtual machines on the server, licensing the same servers in the Data Centre Model takes into account the number of CPUs, while the number of virtual machines on the server is unlimited. Oracle calculates the required number of licences for the database based on, for example, not only different types of virtualisation and the number of CPUs, but also on different manufacturers and CPU models.

In addition to the complexity caused by the provided software, the optimisation of company investments often fails on account of homemade problems: companies generally have very clear information on their material assets (just quickly check how many objects in your office have an inventory label!), whereas meaningful data on the software products used in the company is usually unavailable.

The reason for this is the more passive management of these intangible assets and – more importantly – the failure to comprehensively integrate licence management into the company's process landscape. If a company carries out software asset management it is usually the responsibility of the purchasing department, which controls purchases and administrates licences – as a rule, however this department lacks the expertise needed to determine the correct licence for the intended use, or rather to control the use of licences.

Instead, purchasing licences is initiated at the specialist level, which again lacks the necessary know-how concerning licence matrixes and parameters relevant to pricing. The result is that in terms of total cost of ownership the IT architecture is sub-optimal.

If you understand software asset management to be a real part of comprehensive IT asset lifecycle management it can very effectively support „proper“ IT management. Located at the interface of IT architecture, IT operation and finances it can bring significant cost reductions by optimising IT investments, determining whether there are too many or too few licences, thus reducing maintenance delays and consequently business risks and by helping prevent unnecessary support expenses, as well as safety or compliance violations.

Experience shows: companies that are actively involved in IT asset lifecycle management, recognize that software and hardware assets are integrated and actively control their IT management, solving one of the main conflict of goals in IT – cost optimisation with simultaneous risk minimisation – and bringing sustainable competitive advantages on the market.

Commentary by Marc Strüßmann and Thomas Becker, September 20th, 2010