E-Center Asset Management: Controlling the Cost of the Enterprise

The growing interest in managing IT assets reflects the increased awareness that many businesses are spending too much for the technology they license. The problem exists, in part, because managing the deployment of hardware and software among hundreds or thousands of users can be a daunting logistical burden. At the same time, organizations are uncertain about the best way to handle the more intangible issues of hardware and software ownership, such as the tracking of license terms and conditions, usage constraints, asset interdependencies and lifecycle costs.

In terms of bottom-line payback, industry analysts estimate that every organization can realize cost savings through implementation of focused software asset management practices. Organizations that have begun IT asset management initiatives confirm that their actual expense savings are significant and immediate.

The problems became manageable only when they adopted an asset management tool that built and maintained a comprehensive central database full of detailed information about suppliers, products and negotiated license agreements.

Historically, IT managers have tried to respond to the problem of tracking asset information by designing homegrown spreadsheets to support and maintain hardware and software assets. Using a spreadsheet, however, can dramatically reduce the financial returns the organization otherwise would gain from using a comprehensive suite of deployment and ownership management tools. For large-scale asset management initiatives, spreadsheets have inherent limitations:

• As they fill with data, spreadsheets quickly become cumbersome to use and difficult to maintain.

• When the contents of the spreadsheet are incomplete, the information becomes inaccurate for budgeting, forecasting and invoice verification purposes.

• Organizations, usually, must create multiple spreadsheets – one for hardware, one for software and one for each computing platform. This forces managers to enter redundant information and increases the risk of having inconsistent data.

In addition, many managers who opt to use home-grown spreadsheets as asset management tools overlook the less-obvious ownership issues that are unique to licensed technology and make it much more difficult to track:

• Spreadsheets provide no way to track interdependencies and no history of past transactions.

• Spreadsheets have no mechanisms for warning of important decision deadlines that are approaching.

• Spreadsheets provide no features to help record and analyze the terms and conditions found in hardcopy license agreements.

The process for managing IT assets involves a different set of considerations, because the issues surrounding hardware and software "ownership" are very different:

• Software is licensed, not owned, and usage is constrained by license terms and conditions.

• IT assets are acquired on a corporate scale through negotiated deals that are complicated legal contracts.

• Invoices for ongoing maintenance and service have no accompanying physical deliverables.

• Many software and hardware assets have interdependencies that determine what components are part of a standard configuration, how those components are priced and who to call for support.

• Today’s IT assets have ever-shortening deployment lifecycles and are subject to greater turnover as organizations find compelling reasons to implement replacement technology.

• Compliance with the original terms and conditions of software and hardware licenses is often complicated by the high rate of vendor and product consolidation in the IT industry.

Where to Begin?

Understanding the characteristics of a sound asset methodology is a prerequisite for deciding which approach and which tools are best for your organization. Successful implementations follow these steps:

Start with management commitment. All asset management efforts, regardless of the approach taken, need someone to implement and control the process.

Decide which costs are most important to control. Limit the initial scope of the program and focus on generating savings that will justify investing further resources.

Create a central repository. This can serve as the "corporate memory" of all information about vendors, acquired products and license terms and conditions.

Track the longer-term lifecycle costs of assets. In addition to license and maintenance fees, the asset management team must analyze the total costs of asset ownership, including technical support, administration, training and lost productivity.

Monitor vendor and product quality. Identify and track information that shows when a vendor consistently provides high-quality products and services.

Analyze product cost/benefit ratios by quantifying the business benefits of each asset. Use the results to justify consolidating licenses, migrating users or implementing other strategic changes.

Managers of legacy systems have wrestled for years with the inherent complexity of corporate-size license agreements that limit use of licensed technology. Vendor contracts routinely restrict product usage to certain sites or CPUs, define intricate upgrade conditions and specify multi-year fee scales and payment schedules. Contracts like these require ongoing management, not only to prevent non-compliance, but also to avoid missed opportunities for savings.

Managing client/server-based hardware and software assets is a large-scale issue on the same order as the problems of ensuring network security, keeping up with the demand for central storage and backing up significant quantities of data. Yet, many client/server managers may not realize that the need for asset management is growing in direct proportion to the burgeoning size of their user populations and networks.

Few organizations have taken the first steps to set up IT asset management programs outside of their central data centers. In most companies, managers simply have not identified asset management as a top-priority problem. Managers are focused only on the initial goal of managing asset deployment. In most shops, the less tangible, but more costly, factors of ownership are ignored. As a result, few IT managers have acquired tools that are specifically designed to help them:

• Enforce negotiated contract terms and conditions.

• Build a "corporate memory" of costs and historical information throughout an asset’s lifecycle.

• Pinpoint vendor-billing discrepancies that result from evolving pricing policies, new licensing models and inconsistent license agreements.

Ownership management is the logical foundation for an overall IT asset management program. Ownership management achieves dramatic savings by focusing primarily on software assets and uncovering the less-obvious expenses associated with:

IT accounting. Tracking all past, present and future costs helps an organization avoid paying unnecessary expenses during the invoice verification process. It also provides important input for building better budgets and forecasts.

Maintenance. Tracking the usage provisions defined in license agreements and comparing them with actual deployment records provides the data needed to obtain service at volume discounts, eliminate payments on unused assets, migrate users and consolidate licenses onto the least costly systems.

Contract terms. Tracking legal paperwork and the accompanying terms and conditions helps organizations make timely decisions and take advantage of negotiated price caps or escalation percentages. Tracked terms are preserved for future negotiations and can be included in agreements from other vendors.

To support an effective ownership management strategy, organizations must build a robust central repository of asset data. Once the repository is in place, the information can be used to create comprehensive historical records, license terms and conditions and information about asset relationships. As assets are tracked throughout their lifecycle, the contents of the repository become the "corporate memory" that provides the only true picture of corporate IT asset ownership.

The following industry trends confirm what IT managers have already learned – managing the ownership of licensed software assets is the most strategic area of focus in any asset management initiative. Considered together, these trends reveal why managing the cost of licensed software yields such a substantial return on investment.

Desktop hardware is becoming a commodity item. Managers shop for the lowest price on PCs within a particular tier of suppliers.

The price/performance ratio of hardware continues to improve. In client/server organizations, the speed and capacity of PCs is expanding, while purchase prices are declining. Similarly, legacy systems managers can expect to see a continuing decline in the cost per mainframe MIPS2.

IT managers are steadily increasing spending on software. More software installed on each PC means more licenses to be purchased. More complex software applications, offering intricate GUIs and cross-platform solutions, drive up the cost per node in a client/server environment.

Industry consolidation will continue as product vendors pursue mergers and acquisitions. Hardware and software contracts will be transferred to new owners, products will be renamed, and pricing and license administration practices will be changed with little advance notice.

Increasing vendor invoice discrepancies will require tighter scrutiny. The license agreements and cost structures associated with large-scale software purchases are becoming more complex. As customers demand lower software costs, vendors will respond by reducing the purchase price in return for a commitment to future revenue.

For organizations that are considering an asset management program the greatest return on investment is received by implementing a suite of best-of-breed tools instead of a spreadsheet – or any of the other stand-alone alternatives.

Best-of-Breed Suite. With an ownership management tool as the foundation, assembling a group of complimentary deployment management tools is the most practical solution, both for the long-term and short-term. As contracts and licenses increasingly become the mechanisms that define the ownership costs for IT assets, businesses need a full set of tools for tracking terms and conditions, agreement dates, renewal clauses, fee schedules and other details of the agreement. With this core functionality, it is easy to add tools for managing deployment tasks, such as inventorying, metering and distribution.

Outside Services. These may achieve many of the same results as best-of-breed tools – but at a much higher cost. Dependence on outside vendors erodes organizational control and opens confidential agreements with other vendors to outside scrutiny.

Deployment Management Solutions. Implementing a single deployment management product or adding an "asset management" module to support a fixed asset system is not a comprehensive solution. Eventually, deployment management functionality will be supplied directly by the hardware or operating system. No single product solution will be broad enough to fully address both deployment and ownership management needs.

Homegrown Spreadsheets. These tools have inherent limitations and provide no help with the less-tangible issues, like ownership managment.

The followingdescribes basic requirements for any tool that is intended to serve as the foundation of an asset management program:

Robust Central Database. All asset related data must be placed into a single repository, which can be accessed from anywhere in the organization. A best-of-breed product will use a non-proprietary relational database to gather information from spreadsheets, hardcopy files and the personal recollections of various individuals.

Capacity to Build Corporate Memory. Any basic asset management tool must provide a historical snapshot to help predict the impact of maintenance commitments in future years. The burden of vendor compliance ultimately rests with the customer. If a business cannot easily check on what has been negotiated, they may pay thousands of dollars in incorrect billings.

API for Data from External Systems. The tool must provide an open Application Programming Interface (API) that allows easy integration with other systems. This is critical because the repository must serve as the foundation for other tools, such as procurement systems and license management systems. This reduces the amount of manual data entry and paper handling required during the initial building and subsequent updating of the central database.

Interfaces to Specific Deployment Management Tools. Any solution should provide predefined interfaces to specific best-of-breed discovery systems that gather data on whether deployed assets are being over- or underutilized.

Online Terms and Conditions. The tool must allow you to automate and easily track the details of your legal agreements. You should be able to record information about the document itself and enter the terms and conditions that you negotiated as part of the deal. In addition, it should offer you the flexibility to scan entire documents or just enter selected contract highlights.

Relationship Tracking between Assets. Decisions that affect one asset usually have repercussions for other assets. The ability to define relationships that show, for example, which assets are covered by legal documents or what relationships exist between two vendor companies or what software is installed on certain hardware. This allows you to easily identify, for example, what assets will stop working if you dispose of a related asset, which assets are components of a standard system configuration and which assets are covered under common license agreements.

Automatic Reminders. An optimum solution will notify management regarding important action dates.

Reporting and Modeling Capabilities. The tool must provide a flexible and customizable reporting facility that allows easy retrieval of any information from the database. Ideally, the product should provide a generous supply of standard reports and allow for creation of user-defined reports.

User Customization Capabilities. Support of user-defined fields for all objects in the database is key. Specifically, it must allow the definition of unique license types, legal document types and special relationships between objects.

Larry Shoup is Senior Vice President of Product Strategy for Intraware Inc.