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How to optimise SAM budget in today’s heterogeneous environments
Hidden software costs and ecosystem complexity make managing a mixed software estate harder than ever. Here’s how to optimise your spending
Overspending awaits the unwary when managing heterogeneous IT environments incorporating on-premise software, cloud apps and software as a service (SaaS), even as software asset management (SAM) continues to adapt, evolving beyond mere inventory audits.
According to Kumaravel Ramakrishnan, IT service management (ITSM) marketing director at ManageEngine, which develops various IT management offerings, SAM remains a “grey area” that requires expertise to solve, even as the siloed SAM of a few years back increasingly integrates with contextual service management and enterprise service management tools.
SAM is often used on-premise to improve real-time monitoring of software deployments, licence use and compliance status. It offers a way to bring information from services that wasn’t previously available to tools that provide change or configuration management. Monitoring software usage with a SAM tool helps to reduce costs by keeping track of software licensing and usage.
“It’s gone beyond traditional on-premise licence management towards managing SaaS applications where there are very unique licensing models and challenges,” says Ramakrishnan.
Ideally, SaaS subscriptions should be managed by assessing the functionality people require to do their work. Tools that manage SaaS subscriptions should be able to manage all the SaaS products and add-on functionality an organisation uses in one place, with automated workflows to support licence approval, procurement, deployment, reconciliation or compliance checks.
“That reduces manual intervention and human errors, and you get a better level of management, tracking and management,” says Ramakrishnan. “SAM tools can deploy automated processes for retiring and decommissioning, so when an employee leaves an organisation, there’s a set of processes that cascade automatically.”
Yet hybridised and heterogeneous environments make the landscape “a little tricky”, and process or practice can help “very little” in this regard, he says, adding: “Which products are licensed from the cloud? Which run as installations in a company’s own environment with their own licences? It’s often unclear which are on-premise, which are in cloud, and what exists in one or more forms.”
Ramakrishnan also highlights the importance of keeping track of the subscription services running on corporate IT infrastructure that are not user-based. “To a large extent, these [areas] have become complex and diverse,” he says. “If you have the right tools, you should be able to implement AI [artificial intelligence].”
How to approach SAM
Eric Helmer, chief technology officer (CTO) at services provider Rimini Street, says avoiding SAM overspending hinges on ensuring that changes match desired business outcomes. In turn, any guidance sought should pertain to specific use cases.
“Many vendors incentivise as much change as possible, perhaps moving off on-premise software assets and reimplementing it all as SaaS,” he says. “Then you realise that you only took one year of data with you and still have 20 years of data on the old system. It can get completely out of hand.”
Are you relying on a traditional asset purchasing model, depreciating that asset over its lifespan and then retiring it through some sort of policy? What happens to that asset when or if you move to a leased model? What happens with operating expenditure versus capital expenditure? What about tax implications, data localisation and compliance considerations in software deployments?
“There are many considerations,” says Helmer. “People seek agnostic advice, but the big systems integrators and conglomerates are often keen on those bigger projects, which you might not need or want.”
Start with existing assets. Can your business outcomes be achieved with the software you have today? Maybe you don’t need a year-long $50m disruption. Perhaps you don’t need to implement a big package that will continue to bleed support and maintenance costs. Business enablement may not entail a new implementation or purchase as organisations may not realise the full capabilities or potential of assets they already have.
“Many people are only using a fraction of the features or functionality they’re entitled to, that they’ve purchased,” says Helmer. “Oracle and SAP [offer] some of the most extensible, customisable software packages on the planet.”
Helmer points to the VMware-Broadcom acquisition as an example of how supplier lock-in can force organisations into pricier subscriptions. A single provider might offer the traditional “one throat to choke” when things go wrong, but not having flexibility or agility can prove more costly.
“Gartner calls this a composable strategy,” says Helmer. “The options out there mean you can find best-fit solutions. Many people move HR to Workday or customer relationship management to Salesforce.”
Understand your objectives
Gartner analysts Jaswant Kalay and Yolanda Harris agree that sufficient thought and planning are needed to reduce potential overspending. Despite SAM tools evolving, it can be a mistake to assume they can work “out of the box”, integrating seamlessly or requiring little manual intervention.
Understand your short-, medium- and long-term objectives – what you want from SAM tools in relation to the business case, and when manual effort is no longer sustainable as the software stack increases in complexity – they urge.
“Organisations can overestimate SAM tool capabilities,” the analysts warn. “Develop clear and targeted use cases. Consider data inputs required for SAM tools to work effectively and the business needs SAM data is meant to fulfil.”
Identify a few suppliers, potential tool types or data integrations, and analyse the gaps between them, as well as any changing delivery models from on-premise to SaaS versus the organisation’s own cloud journey to ensure a fit not just today, but in future – and don’t rely solely on suppliers’ marketing claims in this.
The stakeholders involved should hail from across the organisation, moving beyond IT, sourcing and procurement to security, enterprise architecture, finance, risk and beyond. Pay close attention to stakeholder requirements, including their current challenges, and communicate credible SAM benefits for each division or department.
Claims must be realistic and achievable, not least because supporting SAM tool success may require specific data from individual stakeholders, with use cases prioritised with in-depth demos or proofs-of-concept, they add.
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Steve Ponting, director of Software AG, notes that most businesses have grown their tech stack, often ending up with redundancies or overlapping technologies. “We found that between the Covid pandemic and 2023, SaaS applications have grown to about 1,061 applications within the enterprise. That’s going to cause huge problems for interoperability, security and data,” he says.
Achieving visibility and control over all this means going broader than monitoring and management applications. Who is funding what? Is centralised purchasing or procurement by marketing adding applications to solve a particular problem they have? What about shadow IT, the use of which may not be formally documented anywhere or by anyone?
“You can end up with siloed functions in each geographic region,” says Ponting. “Then you’re not benefiting from economies of scale either. If you’ve got six different applications, how do you start to wrangle all that data together, structure all of that data, deduplicate all that? It’s chaos.
“The answer won’t be ‘just move it all into the cloud’. That may only make sense with a need for elasticity over time, with data transit charges also a consideration. Outsourcing infrastructure, meanwhile, brings its own risks, as with the CrowdStrike update snafu for Windows-based organisations globally on 19 July.
Think about critical business services, what creates revenue, how that might be impacted by disruption or outage, and what the core systems are in relation to that. Optimal SAM helps you work back from what you have, drawing a more detailed picture for “strategic portfolio management” and bringing further opportunity for cost optimisation.
“You want to be able to modernise and take advantage of new capabilities,” says Ponting.
Complexity may be a given
Simon Morris, vice-president of solution consulting at ServiceNow, underlines that with heterogeneous environments the “real question” is how to manage complexity. “We’re always going to have to operate with legacy on-premise kit. And the common large language models [LLMs] could be prohibitive [to implement] in the cloud as well,” he says.
Morris prescribes “a platform of platforms”, bridging and managing data diversity and sources, facilitating visibility beyond inventorying assets or “building a big database”.
“Drive action on data, drive down costs and drive up the experience. Fragmentation is bad for people trying to get work done,” he says. “Elevate the data from silos so you can properly put it to work.”
After property and people, assets are what drive cost and the shape of balance sheets, so it’s crucial to start by considering desired business outcomes, moving on to getting the people ready for change and making “smarter partnerships”.
“If you start with the tech, buying a solution, you’re never going to get substantive business transformation,” Morris warns.
That said, overspending can be discovered anywhere, not just in areas such as licensing or data transit, including overbuying of tech, buying when you could reuse, or buying too soon. Avoiding overspending on SAM means factoring in considerations around entire IT and employee lifecycles.
“The first waste is people seek a business outcome and are waiting for software to be delivered, and they’re not able to reach the outcome,” says Morris. “Opportunity is in cash flow and solving problems to get people productive sooner.”
Steve Schmidt, vice-president of product management at Flexera, which recently acquired asset management-focused Snow Software, agrees there’s a real lack of IT estate visibility in general. “Even among the teams that do work on this, many say they don’t have complete visibility,” he says.
Flexera has surveyed advanced ITAM-ers who believe 20% to 30% of spend is wasted, he adds, including high-value software workloads now in the cloud – a historic FinOps and SAM team blindspot.
Pick your areas of highest spend or opportunity, and think in terms of layers – about your visibility and then related optimisation insights that can be built on and leveraged. Don’t forget security and financial management either when it comes to SAM cost optimisation potential, advises Schmidt.
What is clear from the experts Computer Weekly has spoken to is that metrics on SaaS usage are key to managing costs. According to Gartner’s Kalay and Harris, there may be as much as 25% SaaS wastage, in terms of unused subscriptions.
Gartner’s data shows SaaS spending has been expanding at 15% annually. Managing potential SaaS waste requires a good understanding of software and SaaS usage across various stakeholders in an organisation. This is all part of a SAM process that is regularly updated to take into account how the use of software and SaaS changes over time, helping organisations to maximise value in their software licences and SaaS fees.
