While enjoying a nice bottle of wine with a friend and fellow Software Asset Management consultant last week the topic of the future came up (which I think is probably pretty common when alcohol is involved), the future of Software Asset Management.
Well, we couldn't really discuss the future without rehashing the past and disecting the current.
History of Software Asset Management: SAM has been very cyclical in its popularity over the years. In the mid to late 1980’s when desktop computers were gaining in popularity within business there was a constant eye on the cost of such technology. Volume agreements and product use rights were very different from today with the minimum entry point for a volume discount being much higher and use rights flexibility such as concurrent usage being more current. Also during this time we saw the formation of the industry watch dogs (the Software Publishers Association and the Business Software Alliance) to educate and “police” organizations in regard to copyright infringement on software. In the early 1990’s there was a strong concern for the potential fees associated with being audited on improperly licensed software causing companies to implement SAM programs. The mid-1990’s saw a dramatic shift in volume license programs and product use rights creating a need for education on these changes and their impacts on organizations. The late-1990’s saw organizations moving away from a focus on SAM as publishers and industry watchdogs became more concerned about potential litigation. While there was some increase in attention due to the concerns around the Year 2000 problem, the cost cutting requirements of the early 2000’s had the effect of eliminating many internal controls as organizations cut positions. Now, in the mid-2000’s we see an increased focus on internal controls with the various regulatory requirements, an increased aversion to risk and an increase in industry audits.
SAM Present Day: As I mentioned, we're now seeing an increased focus on internal controls and increased regulation. This is resulting in a renewed interest in SAM. For some companies that threw out their programs in the 90's with all the other cuts - that means starting from scratch. For others, it's just a brush-up to become current with new product use rights, new licensing programs and better tool options. Unfortunately for a few, it means continuing to stick their head in the sand and hope that they don't have to deal with it.
Future of Software Asset Management: OK, so I don't really have a crystal ball. I'm actually going to raise more questions than I answer...
Many that I talk to think that we will be facing more regulations and therefore SAM will continue to grow. Personally, I don't think business will continue to support that model...how regulated can private industry become (and how much money can companies spend on regulation compliance versus increasing profits) before it rebels?
Others feel that Software as a Service (SaaS) will remove a lot of the licensing demands on companies making it a pay for service commodity. While I think we've already seen an increase in SaaS (or ASP for the old school), I also think there are basic desktop applications that are going to remain being exactly that...desktop applications (OK, not sure betting against Google is a smart move...but I also don't really think they expect to win big business). Mind you, I've predicted for the past 10 years that software licensing would move to a "lease" model...but this isn't the way I expect to see us get there.
So, what does this mean for SAM? Personally, I think it means that SAM will be an ongoing part of business and just like it has for the past many years the true adoption of it will be more a basis of the maturity of an organization rather than an indication of the industry.
What do you think?
Tuesday, March 27, 2007
Tuesday, January 09, 2007
Mergers & Aquisitions - the importance of software licensing
I got a call the other day from a former co-worker. It appears that her new company had recently spun off from it's parent and in preparing for their software upgrade they got an ugly surprise...their former parent had never bought the software they contractually "transfered" to my friend's company. About $400,000 worth of software needed to be bought.
Knowing for sure about software licensing during Mergers and Acquisitions or any other type of change of control activity is extremely important.
Divestitures
When a company splits off from a parent company there is a lot to be figured out, including who gets the software.
If the company has only purchased OEM software then the software rights transfer with the machine – however; documentation is key. The onus of ownership remains with the company using the software.
If the company purchased retail software, will this be transferred to the new company? If so, physical transfer of the licensing agreements and records needs to occur as well. It would also be wise for the new company to insist on financial records showing the initial purchase.
If the company purchased under volume agreements (non-contractual), then the publisher needs to be notified of the transfer (transfer fees may be involved) and appropriate documentation needs to be retained by both companies.
If the company purchased software through a contractual agreement then there are additional considerations. Is the contractual agreement also covering any of the former parent’s software as well? In most cases it would be. Does the contract allow for separation or transfer of licenses? Is there a license transfer fee or notifications? Will either company still be of appropriate size to qualify for the contract?
Acquisitions
The last thing a company wants to do is acquire someone else’s software licensing nightmares. Ensuring that you receive full documentation of what you are paying for when you acquire the company and its software assets is key.
Additionally, a company that is acquiring another company generally has its own software assets already under various forms of contracts (or through acquisition a company might finally be of a size to qualify for a contractual volume agreement). Maintaining separate agreements or being able to wrap multiple agreements together is one of the items to be considered. Additionally, some contracts have language in them requiring a company to wrap acquisitions into an existing contract. It is important that a company be aware of any such requirements upfront so there are no costly surprises.
Knowing for sure about software licensing during Mergers and Acquisitions or any other type of change of control activity is extremely important.
Divestitures
When a company splits off from a parent company there is a lot to be figured out, including who gets the software.
If the company has only purchased OEM software then the software rights transfer with the machine – however; documentation is key. The onus of ownership remains with the company using the software.
If the company purchased retail software, will this be transferred to the new company? If so, physical transfer of the licensing agreements and records needs to occur as well. It would also be wise for the new company to insist on financial records showing the initial purchase.
If the company purchased under volume agreements (non-contractual), then the publisher needs to be notified of the transfer (transfer fees may be involved) and appropriate documentation needs to be retained by both companies.
If the company purchased software through a contractual agreement then there are additional considerations. Is the contractual agreement also covering any of the former parent’s software as well? In most cases it would be. Does the contract allow for separation or transfer of licenses? Is there a license transfer fee or notifications? Will either company still be of appropriate size to qualify for the contract?
Acquisitions
The last thing a company wants to do is acquire someone else’s software licensing nightmares. Ensuring that you receive full documentation of what you are paying for when you acquire the company and its software assets is key.
Additionally, a company that is acquiring another company generally has its own software assets already under various forms of contracts (or through acquisition a company might finally be of a size to qualify for a contractual volume agreement). Maintaining separate agreements or being able to wrap multiple agreements together is one of the items to be considered. Additionally, some contracts have language in them requiring a company to wrap acquisitions into an existing contract. It is important that a company be aware of any such requirements upfront so there are no costly surprises.
It's also important to know your rights. It's not unusual for software publishers to limit what rights can be transfered when a company is bought or sold.
If you need to know more, contact us through our website at www.cynthiafarren.com
Friday, November 03, 2006
Do You Know SAM?
What is Software Asset Management (SAM), and why is it important for all size businesses? SAM is the framework for managing the acquisition, deployment and retirement of software in order to fully leverage your company’s software investment. SAM is not just software licensing.
While software is traditionally the jurisdiction of the technology department, SAM is a company-wide responsibility. From the end-user who uses the software to the CEO responsible for ensuring growth plans include funding allocations to ensure users have the tools to do their jobs, every level of a company is responsible for and impacted by SAM.
I think everyone knows the heavy risks associated with being out of compliance with software licensing (and not simply the fines for copyright infringement). What is not as well known are the benefits that come from implementing SAM and being appropriately licensed.
The financial rewards for implementing SAM are dependent upon your company’s software purchasing practices. If your company makes it a practice to remain fully licensed, then the financial rewards can easily be 15% of your software costs. If your company does not purchase software to be compliant with licensing then it will cost you money, but it could easily be 20-30% less than if you simply attempted to become compliant without an assessment.
The benefits of SAM extend far beyond financial savings. Businesses that employ SAM can realize tremendous benefits through improved security, faster rollouts, better negotiating capabilities, better supported operations, and enhanced planning and forecasting capabilities -- not to mention the comfort of knowing that your company is appropriately licensed on all your software.
The first step to implementing SAM is to complete a SAM assessment to obtain a baseline and a plan for improvements.
A SAM assessment is typically comprised of: (a) a review of past purchases to identify the investment made and identify purchasing habits; (b) an inventory of what is installed on each machine; (c) a review of existing policies to ensure the company is protecting itself as well as educating its users appropriately; (d) a process review to identify the current process and any process improvements; (e) a gap analysis to determine a baseline between what is owned and what is deployed; and (f) a purchasing plan taking into consideration the company’s future planned growth or changes.
Generally, there are two different ways to perform a SAM assessment: in-house or outsourced. An in-house assessment typically completes only the inventory and a portion of the gap analysis. The primary reasons for this partial in-house assessment is lack of time and lack of knowledge. Outsourced solutions will depend upon the outsource partner. If the outsource partner is your re-seller, they will typically focus on the inventory, gap analysis and purchasing plan. However, businesses need to keep in mind that your re-seller is in the business of selling software. The other option for outsourcing is to use a firm that does not resell software and has an actual SAM practice. Using this type of firm will result in a full assessment being completed by an independent third party.
Cynthia Farren is the president of Cynthia Farren Consulting (CFC), an IT Consulting firm specializing in Software Asset Management. CFC is headquartered in California with offices in Colorado and Georgia. (www.cynthiafarren.com)
While software is traditionally the jurisdiction of the technology department, SAM is a company-wide responsibility. From the end-user who uses the software to the CEO responsible for ensuring growth plans include funding allocations to ensure users have the tools to do their jobs, every level of a company is responsible for and impacted by SAM.
I think everyone knows the heavy risks associated with being out of compliance with software licensing (and not simply the fines for copyright infringement). What is not as well known are the benefits that come from implementing SAM and being appropriately licensed.
The financial rewards for implementing SAM are dependent upon your company’s software purchasing practices. If your company makes it a practice to remain fully licensed, then the financial rewards can easily be 15% of your software costs. If your company does not purchase software to be compliant with licensing then it will cost you money, but it could easily be 20-30% less than if you simply attempted to become compliant without an assessment.
The benefits of SAM extend far beyond financial savings. Businesses that employ SAM can realize tremendous benefits through improved security, faster rollouts, better negotiating capabilities, better supported operations, and enhanced planning and forecasting capabilities -- not to mention the comfort of knowing that your company is appropriately licensed on all your software.
The first step to implementing SAM is to complete a SAM assessment to obtain a baseline and a plan for improvements.
A SAM assessment is typically comprised of: (a) a review of past purchases to identify the investment made and identify purchasing habits; (b) an inventory of what is installed on each machine; (c) a review of existing policies to ensure the company is protecting itself as well as educating its users appropriately; (d) a process review to identify the current process and any process improvements; (e) a gap analysis to determine a baseline between what is owned and what is deployed; and (f) a purchasing plan taking into consideration the company’s future planned growth or changes.
Generally, there are two different ways to perform a SAM assessment: in-house or outsourced. An in-house assessment typically completes only the inventory and a portion of the gap analysis. The primary reasons for this partial in-house assessment is lack of time and lack of knowledge. Outsourced solutions will depend upon the outsource partner. If the outsource partner is your re-seller, they will typically focus on the inventory, gap analysis and purchasing plan. However, businesses need to keep in mind that your re-seller is in the business of selling software. The other option for outsourcing is to use a firm that does not resell software and has an actual SAM practice. Using this type of firm will result in a full assessment being completed by an independent third party.
Cynthia Farren is the president of Cynthia Farren Consulting (CFC), an IT Consulting firm specializing in Software Asset Management. CFC is headquartered in California with offices in Colorado and Georgia. (www.cynthiafarren.com)
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