Before you even think about the software asset management business case, it’s important to understand what software asset management is. Software asset management has been in existence for quite some time, but it’s not widely used the way it could be.
Over the years, you’ve heard the term “software asset management” more and more. But what is it, and why should you care? The truth is, software asset management (SAM) is a way of managing software licenses, avoiding software piracy and overspending on software purchases. By implementing SAM in your organization and ensuring your license compliance, you can save time and money and prevent unexpected costs from building up in the future.
Strategic SAM reduces costs, improves business efficiency and reduces your audit response time by 50%.
So why isn’t it top of your CIO’s priority list?
Well, you need to build a business case.
SAM has to be an ongoing project. It’s not a quick fix, and with the right combination of best practice plans, processes, skilled people, and proven technology it can reap rewards to your business and make you a company hero.
Typically the factors that prevent your organization from adopting a SAM program involve senior management within the company who need you to demonstrate the business value of software asset management with a SAM managed service provider.
This guide will show you how to build up that business case that will help senior management and C-level executives prioritise software asset management.
This guide will show you:
- How to define software asset management to senior executives
- Why it’s important to invest in software asset management
- What are the risks of not investing in software asset management
- What are the benefits of investing in software asset management
- Which business units benefit from SAM
- Two business case frameworks
- Two ROI calculations
Successful SAM enables companies achieve lower IT costs – by proactively managing software assets, companies gain control and benefit from high percentages in IT cost reductions. Find out how to convince senior executives that SAM matters.
The leading SAM tool providers are reaching for the cloud because that’s where the action is. These acquisitions are designed to do cloud expense management, cloud instance rightsizing, cloud lifecycle governance – how you request a virtual machine deploy it, track it, dispose of it. They do license management, enable deployment automation, support on prem to cloud migration. These areas are many of the same priorities that take precedence over SAM. Well, perhaps if you can’t beat them you should join them.
Another way to raise the level of the SAM conversation is to use the topic of service management. Organizations are spending a lot of money in this category. ServiceNow is coming on strong with their add-on SAM offering.
The funny thing is many clients think they’re great at service management. We hear it all the time: “Oh, yes, we’re investing in it, we’re following ITIL, the industry framework for service management. We’re awesome at it.” But at the same time, I know for a fact that these clients are very weak at asset management, the natural partner of service management. I know this because we do compliance work for them. When it comes to asset management, many of them don’t know where their servers are, they don’t know where their PCs are, they don’t know what software is installed, and they don’t check their contracts when they make a service change. That’s why ServiceNow has become such a force in the SAM tool space recently — they recognize that you can’t do service management without doing asset management.
The takeaway is that you must find opportunities to relate SAM to other priorities in the organization to gain momentum.
These are just a few ideas to help you get a SAM program up and running. For more information about SAM, you can download this webinar or contact your ClearEdge representative. View the webinar “The Business Case for ITAM” below.
Here’s how to calculate a clear-cut return on investment to justify your purchase.
3 steps to calculate the ROI of asset management software
Step 1: Calculate the total cost of ownership (TCO)
Before you can calculate ROI, you need to fully account for the costs involved in purchasing asset management software. This includes one-time upfront costs as well as ongoing, long-term costs. Here are a few items to consider:
Initial purchase costs
To calculate the software purchase and licensing costs, you need to look at the pricing model closely. In some cases, this is a variable cost based on the number of users. Other software vendors have a standard monthly or annual subscription fee. Some EAM softwares offer custom pricing depending on your needs. Take the time to talk with each vendor you’re considering as you evaluate your options.
IT infrastructure costs
If you decide to set up your infrastructure on premise, you’ll need to determine the hardware costs along with software licenses. This will likely require additional IT investments. Fortunately, if you opt for a software-as-a-service (SaaS) asset management solution, you can eliminate these upfront costs. Instead, you’ll just need to determine how many users or modules you’ll need and make sure each user is equipped with a laptop, tablet, or mobile device to access your EAM software.
Setup costs or transition costs
Many EAM software vendors charge a one-time fee for installation and setup. If you’re switching from one system to another (such as moving from a CMMS to EAM) you will need to factor in additional time for onboarding and training your team.
Ongoing maintenance, support, and upgrade costs
When it comes to maintaining and upgrading your asset management software, this is another case where SaaS solutions offer a clear advantage. On-premise software updates can involve significant costs, planning and time. That’s assuming you have a dedicated IT team to handle them. With a SaaS model, the software vendor rolls out updates to all users as needed. The cost of those upgrades is typically factored into your monthly subscription fee.
Step 2: Estimate your savings from asset management software
Once you figure out the TCO, you’ll need to estimate how much you expect to save.
Asset management software savings can come in various forms, so you’ll likely need to talk with several people at your organization and analyze data from different sources.
Here are four areas to focus on:
Savings from better asset life cycle management
To determine this component, you need to estimate the percentage improvement in the asset life you expect to gain using your EAM system. Then, you can calculate the savings as expected increase in asset life multiplied by the total fixed asset costs.
Savings from reduced equipment downtime
EAM solutions are expected to reduce downtime hours and associated costs. Take a look at what those costs amounted to in the previous year and set a realistic target for reducing them.
How much would your organization save if you reduced your equipment downtime by just 10%? This will give you a good sense of your expected savings.
Savings from reduced labor
For every unplanned downtime or unscheduled maintenance activity your team handles, you also incur overtime hour costs. Using enterprise asset management software to schedule preventive maintenance can significantly reduce these costs. Asset management systems also give you greater transparency into how your team is spending their time. If you’re using software with a mobile app, technicians can complete tasks and log their hours from anywhere.
Savings from improved inventory management
Inventory management can be tricky. While you want to have the necessary parts available when you need them, you also want to avoid high storage costs that can come from keeping a large stockpile on hand.
The transparency you get from using an asset management solution can help you estimate your stock more accurately and generate savings. Savings from better asset tracking equals the total cost of carrying unnecessary parts.
To calculate these numbers accurately, you need a thorough understanding of your processes. If this proves too difficult and you’d rather refer to industry averages, this guide by our maintenance management partner, Hippo, can help. You can also look at case studies within your industry to get a better idea of your potential savings.
Step 3: Calculate expected returns
Now that you have an idea of the estimated costs and savings from your EAM software, you can calculate your returns. Follow this simple equation:
ROI% = 100 x (Total savings – TCO)/TCO
Congratulations — you have successfully quantified your expected savings! Now you can take this information to your leadership team and present an airtight case to justify your investment.
Conclusion
Businesses of all shapes and sizes utilize enterprise software for work and for play. It is commonplace across the globe, and the vast majority of these companies do not use software asset management (SAM) or license management within their businesses. This is because SAM and license management is often discovered to be a hard task to do, and is one which requires a dedicated department to monitor and manage.