Control Software CostsWhen Household Credit Services (Salinas, CA) decided to install Microsoft Office throughout its network of 4300 nodes and 53 file servers, Microsoft suggested that it buy a per-seat licensing agreement. But before taking the plunge, Household Credit used SiteMeter, a software-metering program from McAfee Associates, to see how the existing copies of Office were used on its network, which it uses to manage several private-label credit cards.
"We found that concurrent usage of Microsoft Office rarely exceeded 10 percent," says Dale Gunderson, a communications analyst in charge of Household Credit's enterprise-wide metering project. "As a result of the findings, we decided to purchase a concurrent-usage license instead of the per-seat license." The result? By opting for this alternative licensing agreement, Household Credit expects to save $800,000 in licensing fees over the next two years, according to Gunderson.
Software-metering programs such as SiteMeter haven't traditionally performed such a dramatic role. Most companies meter software usage just to ensure they have enough legal copies of applications for all the employees who need them. Information like this is important defense against an audit by the Software Publishers Association (Washington, DC), or SPA.
But metering has recently become a tool used by companies to optimize software resources, which is becoming a necessity for companies with large networks like Household Credit's. Unwary corporations are finding that unnecessary fees, rising support costs, and redundant upgrades dwarf the initial software-licensing fees, which may already be too high.
Per-seat licensing is not the only problem. Because of poor inventory tracking, some companies buy additional licenses for applications they already own. The Personal Computer Assets Management Institute (PCAMI, Rochester, NY), a group of vendors and users that studies the cost of managing hardware and software assets in organizations, estimates that public and private organizations in the U.S. last year spent as much as $2 billion for software they already own.
On another front, a Gartner Group (Stamford, CT) study found that software support accounts for 45 percent of the total cost of ownership of an application and that the handling of administrative tasks, such as ensuring that concurrent licensing agreements are enforced, represents another 13 percent. By contrast, licensing fees constitute only 14 percent.
Information Is Key
Savvy network administrators are successfully cutting the costs of software ownership by studying usage patterns to help guide their software-purchasing and support strategies. What information is important? It can be as simple as knowing that only half the people in one division use a particular application. Or it could be more complicated, such as determining that one department is responsible for a disproportionate number of calls to a help desk with questions about using an application.
The software-metering and software-inventory programs that can help gather this information cost from about $295 for a single-server program to about $1200 for a 1000-user license (see "A Class of Their Own"). Some vendors that currently offer these tools include Elan Computer Group (Mountain View, CA), Frye Computer Systems (Boston, MA), McAfee (Santa Clara, CA), Microsoft (Redmond, WA), Microsystems Software (Framingham, MA), Saber Software (Dallas, TX), Symantec (Santa Monica, CA), and Tally Systems (Hanover, NH).
Software-metering programs allow network managers to limit the number of users that can simultaneously access a particular application. If a company licenses Microsoft Word for 300 users, for example, a metering program allows 300 people to run Word and restricts any other users until one of the 300 quits the application, thus freeing up a license. In addition, astute network administrators can exploit the more advanced features of metering programs to drive down software costs. Such features include logging usage by application and the ability to manage licenses so they can be shared (see the table "Metering-Tool Features").
Software-inventory programs offer a more passive form of license compliance by allowing managers to know what's running on their network. Inventory programs produce lists of the applications that are residing on the network as well as on the local drives; these lists can be matched to software-purchasing invoices to demonstrate that the company is obeying the terms of its licensing agreements.
Paying Top Dollar
Software-metering and inventory tools can help a company maintain centralized control over software purchases. This lets an organization leverage volume-purchasing strategies that can lead to discounts of up to 60 percent, based on typical volume discounts and site-licensing agreements offered by applications vendors.
A software-inventory program can help a network administrator determine what applications are in use and in what quantities. "By knowing the real number of licenses that you need, you can negotiate price with vendors," says Bill Holder, director of Micropath (Bellevue, WA), an integrator that specializes in microcomputer-asset inventory services.
For example, Microsoft's Select program provides discounts on volume license and maintenance agreements for 1000 or more licenses. In April 1994, the company announced its Open License Pak, which offers discounts on as few as 50 licenses. Deals worked out under these programs include discounts on future upgrades, as well as provisions for phone support. Discounts, which are negotiated on a case-by-case basis, typically range from 10 percent to 50 percent, according to Microsoft.
Concurrent licensing can provide even greater savings in some instances. A corporation pays for a number of licenses that is less than the number of users on its network who will use the application. For example, a company might pay for 800 licenses even though 1000 users will use the program. However, only 800 of them can use the program at any one time.
The savings realized from moving from a one-to-one licensing basis to concurrent licensing is typically about 30 percent, according to the PCAMI. But others say that figure is low. "Conservatively, I think you can save 40 percent," says Holder.
Even if concurrent licensing saves 30 percent of the cost of buying individual licenses, that translates into a one-time $90,000 savings if a company with 1000 users buys a $300 program.
The savings can be even greater for programs that perform a special function, such as an organizational flowchart package or a mapping program that prints out directions between two locations. Such packages are often used by many people within an organization, but only a few times a year. Seldom are there more than a handful of people running such a program at the same time. So, instead of buying 1000 copies of such a package, a company might be able to get away with a concurrent license for only six users.
One way for a company to plan for concurrent licensing is to first let its users run all the applications they need, without restricting access. Most metering programs let you run in this mode to gather data; they then visually display the information so it's easy to spot the patterns (see the screen in "A Class of Their Own"). By examining this information, a network administrator can determine how many licenses are needed.
One note of caution: There's some debate in the industry about the liability risks involved when you collect information in this manner. Hard-liners in the licensing-agreement legal area say that allowing more users to access an application than you have valid licenses for is a violation of the licensing agreement, which makes your company subject to fines. Acknowledging this, some companies take a best guess as to the number of licenses they need: Once an application is up on the network, they use a metering program's data-collection ability to study usage trends and adjust the number of licenses for future purchases.
Nevertheless, the ability to examine trends in usage and then license accordingly saves money. The amount that can be saved varies by application, company, and even by department. For Household Credit, various departments have contributed in different ways to the company's projected $800,000 savings in licensing fees. "We estimated the initial savings of approximately $312 per user for customer-service personnel, who rarely use Office, and $31.25 per user for administrative personnel, who use Office more frequently," explains Gunderson.
Managing Users
With concurrent licensing, a company's cost savings can vary, depending on whether it licenses for the maximum number of users or the average number of users. Licensing based on average demand saves a company more money because fewer licenses are needed. However, when a company licenses for average demand, it will always encounter peak periods when some users are blocked from an application. Some companies find this situation unacceptable and always license for maximum demand.
But if a company chooses to license for average demand, many metering programs can help. For instance, most display a message--with the relevant information, such as how many other users are waiting--on a blocked user's screen, telling the person he or she has been placed in a queue. When a license is freed up, the user is notified, and he or she has the option of either taking the license or passing.
In addition, many metering programs have an option that allows certain classes of users to always have access to licenses. For example, a network administrator can designate that 10 licenses out of 500 are to be used only by the company's 10 executives. Likewise, an administrator can ensure that the marketing department has more licenses for a presentation application than the engineering department does, even though users in both departments might frequently use the application.
License-hording is one sociological aspect of metering that network administrators must often deal with. Hording can be intentional, but often it's not: Many users simply load every application they'll ever need into their StartUp Group within Windows. This practice may seem logical to them; they may even think they're saving the company money by being more efficient--having the application a mouse-click away when they need it instead of having to wait for it to load each time they use it. But these users often don't realize that they might be blocking access to an application from another user who needs it.
To help solve such problems, some metering programs have inactivity trackers that can determine when a user simply loads a program and rarely uses it. For example, Tally's CentaMeter 1.0 uses agent software that intercepts common calls and detects every instance when a window is open. This helps CentaMeter to determine whether a program is being used or is simply sitting on a user's desktop as an icon.
Having knowledge about how long programs sit idle on users' desktops can help a network administrator negotiate with department heads when it comes to purchasing additional licenses. For example, one department might lobby for additional licenses of Excel because it can't tolerate having any of its personnel locked out of it. A preliminary check of the software-usage pattern might indicate that everyone in the department runs Excel when licenses are available, so the purchase of additional licenses may indeed be warranted. But with an inactivity tracker, a network administrator may find that some people are loading it and never using it.
Having such information enables sound decision-making. If software is merely sitting idle, loaded but unused, a network administrator might simply send out a memo explaining to users that this practice costs the company money. On the other hand, if all loaded applications are being used and many people are locked out of accessing a program, more licenses should be purchased.
Sharing for Profit
Metering software can also help you reallocate or share underutilized licenses. This results in the purchase of fewer licenses and can reduce your overall software expenditures by as much as 30 percent, according to the PCAMI, because many companies have software licenses that simply go unused.
For example, a company's accounting department might have 100 licenses for Lotus 1-2-3, but the most it ever uses is 75. Meanwhile, the company's expanding marketing department brings in 25 new employees and buys an additional 25 licenses of the same package. The company could have saved the cost of additional licenses by reassigning the 25 unused licenses from accounting to marketing.
Situations such as this can be avoided by using a software-inventory program that lets a network administrator know what software is sitting on the network and on local drives. With this information, an administrator could easily size up the situation and, in this particular example, save the cost of 25 licenses, or approximately $7500 (based on the $300 retail price of Lotus 1-2-3 release 5.0 for Windows).
Dynamic Reallocation
Besides saving money by identifying unused programs and shifting them to departments that need them, many metering programs allow for the dynamic reallocation of licenses between servers. This is different than simply finding unused licenses and making a one-time transfer to another department. With license sharing, licenses are transferred between groups on an as-needed basis.
For example, the aforementioned accounting department might use its 75 Lotus 1-2-3 licenses only at the end of the month to balance the company's books, but on a typical day use only a maximum of 60 licenses. By dynamically sharing the 15 licenses that merely sit idle for most of the month with another department, the company could save the cost of those 15 licenses.
Some companies have taken license-sharing to the extreme by dynamically reallocating licenses across different time zones (see "You're Saving Money when the Meter's Running," March BYTE).
Such cross-time-zone sharing is likely to be a short-lived phenomenon, however. One executive at a large operating-system development company, who declined to be identified, says that in the future, companies will probably be allowed to reallocate licenses between time zones, but they will likely have to pay twice as much per license to do so.
Most companies can save money by dynamically reallocating licenses within a smaller geographical area--and the cost savings are not limited to 1000-plus-node networks. For example, John Calmon, a programming-language administrator at the University of Pennsylvania in Philadelphia, administers a 25-workstation NetWare LAN and saves money by license sharing.
He originally purchased a metering program for license compliance, but he found that he could save money on license purchases by using information gathered by the metering programs in conjunction with the blocking feature once the licenses were purchased. He was able to cut the number of concurrent licenses for a word processing application from 16 to 10 (a 37.5 percent savings) and purchased three licenses (instead of six) for a $150 project management application--for a total savings of $450 for that application alone.
Treat Your Users Well
Cutting licensing fees certainly saves a company money. But these fees are not the biggest expense when it comes to using software; support and administrative costs can be much greater over the lifetime of an application on a network. In a survey of 180 large organizations, the Business Research Group (Newton, MA) found that companies spend, on average, $778 per user annually on Novell NetWare LANs. And, as noted earlier, a Gartner Group study found that software support accounts for 45 percent of the total cost of ownership of an application and that the handling of administrative tasks accounts for another 13 percent.
The use of metering and inventory programs can reduce a company's support and administrative costs. A company can cut its troubleshooting time by using the information gathered by such programs about what's running on a network. For instance, by quickly identifying (with an inventory program) that a caller to a help desk is using an old version of a program with an incorrect printer driver, a help-desk technician can save lots of time. Or a person might call to ask about a bug that has been fixed. A help-desk technician can quickly check to see if the caller has the fix--a new driver, for instance--installed on his or her machine.
One network administrator at a Texas oil company says that he is able to cut, on average, one-third of the troubleshooting time from each phone call to his help desk by simply knowing what program (and what version of it) is running on a caller's desktop. Without an inventory program, many companies have trouble keeping track of who has the latest fix or patch. This makes it harder to provide support, prolongs the troubleshooting process, and adds unnecessary expenses.
The ability to track who has which patch or fix will become increasingly important as more users obtain access to on-line resources, such as America Online, CompuServe, and the Internet. Specifically, users will most likely see on-line notices that new patches are available and then simply download and install them themselves. Thus, a company's IS department will lose control of a process that it has traditionally managed. More important, an IS department without an inventory program won't be able to tell when a user has installed his or her own patch or fix.
Another way to cut support costs is to use information about software usage and become more proactive in managing a network. For example, a company might link software-usage patterns with the frequency of calls to a help desk from a particular department to plan training programs to reduce recurring calls. Or it could use information to develop a hardware-upgrade plan. For example, a company that wanted to replace the old Pentium chips in its systems could do so in a prudent manner: Instead of upgrading everyone in a day or week, the migration could be done gradually, leaving an IS staff sufficient time to handle its normal duties.
Moreover, an upgrade like this could be done in such a way that the people who needed the replacement the most got it first. For example, an engineering department that runs CAD/CAM programs would need a Pentium-chip replacement sooner than a marketing group using a desktop publishing program that doesn't rely on the Pentium's FPU.
Yet another way for a company to reduce its support costs is to use information about software usage to charge back the costs of support. With networks that have no centralized management, it's often hard to quantify support costs, and it is generally impossible to properly bill back the charges. But by using a metering program's logging functions, which can track how often a department uses a particular program, an IS department can charge back support costs based on usage. Metering programs allow equitable charge-backs for support. This charge-back concept is not a new one; it's similar to what was used in mainframe environments, where costs were charged back based on usage of processing resources.
It's not coincidental that software management strategies are in a sense reverting back to the methods used in mainframe days. For many years, networks have been allowed to proliferate without any centralized management. Now corporations are finding that the huge hidden costs of managing their resources, such as software on these networks, needs a centralized approach. Companies that have adopted such strategies are discovering the cost savings that stand to be gained.
Blocking The key to all metering programs. Ensures compliance with terms of concurrent-licensing agreements. Usage logging Determines usage patterns on which to base purchasing and support decisions. Cross-server license sharing Dynamically reallocates underutilized licenses within an organization. Queuing Places users in a queue when all concurrent licenses are taken. Notifies a waiting user when a license becomes free. Inactivity monitoring Detects applications that are loaded on a user's desktop but go unused.
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