Why You’re Overspending on Software Licenses 

Overspending on software licenses is a common problem many companies are confronted with. In fact, it is suspected that 93% of companies possess software environments that consist of up to 20-40% of unused or unnecessary products.

This is not a tiny sum considering many companies put millions of dollars into their software budget every year. But what is the root cause of this problem? And how can you proactively strive to avoid such a costly predicament? 

At MetrixData 360, we’ve helped our clients save millions of dollars on their software licensing just by simply cutting away the excess they didn’t need. After reviewing so many of our client’s profiles, we’ve noticed a few commonalities. So, let’s take a look at what causes this bloom of unused licenses and how you stop its spread. 

What Is Shelfware and Why Should You Be Worried?  

Shelfware is a rather informal term in the tech industry that describes software or hardware that you have purchased but are not using. There are many reasons why this shelfware might manifest in your company:
  • The product does not have a complete life cycle and has not been retired or re-harvested correctly. Even though no one is using the hardware or software anymore, it is still considered active.  
  • The product has been purchased in a bundle, a discount offer, a testing scenario, or simply as an impulse buy. Perhaps the company envisioned it being used for something or perhaps they thought they’d find a use for it later. Now however, it exists as excess beyond what the company initially needed and they continue paying for it. 
  • Despite investing time and energy into planning, testing, deploying and developing a product within their software infrastructure, the stakeholders of the company just aren’t interested, and the software is shelved for the time being, if not indefinitely. 
When your company houses significant amounts of shelfware, you run the following risks:  
  • Security Risks: losing track of assets may leave them outdated and under-patched, and therefore exposed to potential security breaches. Few hackers will try to butt heads directly with your firewall; most attacks occur through old and forgotten software. 
  • Financial Risk: the biggest risk of shelfware is a financial one: despite the software not being used, you are still stuck paying software fees in addition to continued maintenance.  

Common Causes for Shelfware  

Upfront Payments 

This is a common tactic that the software vendors use — they often offer a greater discount with larger upfront purchases in order to obtain those enterprise-level deals.  This makes sense when you consider their motivations. Their goal is to ensure you are perpetually increasing your spending with them and to make their year-end quotas, so it will not make much of a difference to them if you end up making effective use of the software. On your side of the table, you are optimistic that you’ll be able to use the extra licenses for something, if not now, later. Besides, it will be worth it regardless because you will have a better discount, right?  However, the result is a massive and growing stockpile of shelfware. It’s important that your discount is not your only goal during a contract negotiation. Instead, focus more on your company’s future growth and the exact amount of licenses you will need. 
Related: For information on how to conduct a software contract negotiation effectively, you can check out our article:  Guide to Software Contract Negotiations

Compliance Satisfaction  

Software audits are known to get messy. What usually happens is that the software vendors will send in their auditors. The auditors, who may very well have been paid based on the size of compliance gaps they can find, review your software environment and produce an inaccurately large compliance gap based on making conservative assumptions.  Since they assume the worst-case scenario and if you didn’t have a strong defense to counter them, then you likely had to settle the negotiation phase. This will be done by buying the number of software licenses you were told you owed, which turned out to be far from reality.  Since your compliance gap is overinflated, you have to overbuy on licenses just to satisfy the vendor and to bring the tedious audit to an end. This leaves you with far more licenses than you actually have a use for.   Having a strong software audit defense will give you the tools you need to prevent this fate. Imagine only paying for what you owe during an audit.  It’s possible, and if you’d like to figure out how you can get started on building out your rock-solid audit defense, you can check out our software audit defense page.

Licensing Metric  

Every company is slightly different in the way their software environment is run and how it can most effectively be licensed. Certain licensing metrics, therefore, can prove more expensive for certain companies than others.  For instance, let’s say you are licensing a product using a per-user metric.The system that will be hosting the product is accessed by nearly everyone in your organization, despite the fact that only 20% of your employees will need to use the product.  In order to be completely compliant, you will need to find a solid way to prove that only certain employees are using the product without having to buy a license for everyone. It all depends on how your unique software environment is configured and it is important to take into consideration the multiple licensing metrics that your vendor offers.  

Losing Track of Assets  

One of the root causes of shelfware is not having a clear picture of what you have and what you need.  Many companies purchase based on what they have purchased in the past or based on an educated guess (we have 1,000 employees, therefore let’s get 1,000 licenses, done!). This type of oversimplified estimation puts you at risk of guessing too high or too low, both of which can prove costly and unnecessary.   Having a clear picture of your software environment will help to prevent shelfware through reharvesting old licenses and avoiding the purchase of unneeded new licenses. This is an area where Software Asset Management (SAM) can prove highly advantageous since SAM will give you a clear picture of everything you have in your software environment and based off of that, everything you need to purchase.   You can also use SAM to create a value gap.  An organization is made up of all kinds of employees, and each employee needs a different type of technology in order to get their work done. Some employees sit behind a desk all day, working on five monitors with the best technology at their fingertips while other employees spend their days on their feet sharing a desktop with five other employees.  Licensing all of an organization’s employees the same way will mean that the employees on their feet will get the same technology as the high consuming employee with five monitors, despite the fact that they will use it significantly less.  Hand-tailoring your licenses to match the specific needs of each employee type will greatly reduce your end cost, but the type of data you need to create this type of solution is only provided by software asset management tools.  
Related: Want to Get Started on a Software Asset Management Solution? Check Out Our Article: Beginners Guide to Software Asset Management.  

Underused Software  

One simple remedy of shelfware is making sure that the communication chains are kept open between the people who buy the licenses and the people who will be using the technology. Ask users their opinions on the technology and assess how useful it will be to their job. This will give yourself a clear framework on how the investment will better improve the productivity of employees.  Make sure that you provide effective training that teaches employees how to work with new software so that you can ensure the proper integration of the software into your organization.  

Get the Software You Need and Skip Paying for the Extras  

Shelfware is a common occurrence that organizations suffer from. It is an unnecessary and unseen leech on their budget. There is, however, another way of doing things, which will allow companies to effectively control their software spend without running the risk of software compliance. This involves creating an effective software asset management strategy.  At MetrixData 360, we have helped many of our clients create a rock-solid SAM strategy using our combined tools and team of experts, giving them peace of mind while they move forward in developing their organization’s technology.

About Mike Austin

Mike AustinMike Austin is the CEO and team lead here at MetrixData 360. Mike brings more than 15 years of Microsoft licensing experience to his clients’ projects. He assists companies with negotiations of Microsoft Enterprise Agreements (EA), Premier Support Contracts, and Select Agreements, from Fortune 500 to organizations with as few as 500 employees. Mike's vast experience across multiple industries including financial services, high tech, manufacturing, media, health care, government, and retail give him an edge in any business environment. In addition to helping negotiate contracts, he assists clients with creating and implementing software asset management processes to prevent over-purchasing of licenses and ensures terms and conditions reflect actual usage.