Licensed to kill?

The post global slowdown phase witnessed a huge change in the mindset of CEOs. Now, they focus more on value creation than just selling the products in the market. With most of the IT giants making their IT budget tighter, the onus now lies on the CIOs to cut the extra cost being spent on software licensing. And, it can only be done by ending the trend of overspending for unnecessary and unused software licenses and work at limiting the risks associated with infringing licensing agreements, which could help in putting the organization on the hook for unauthorized software distribution. This whole process makes the internal discussion important before any software distribution. Explaining the role of internal discussion, Dhiren Savla, CIO, Kuoni Travels said, “It is extremely important to showcase value proposition to the internal decision makers, which helps in getting required buy-in. Internal discussions are mostly based on two key parameters — cost and value.”

Describing the increase in the expectation from the vendors and CEOs, Karan Singh, CIO, BSES Rajdhani Power said, “Realization about requirements is great these days thus, the pressure is from CEO or other higher authorities, so that we remain aligned with time and requirements with full compliance.”
The negotiation process seems to play an important role in vendors' selection criteria for getting license for any software, but for CIOs, who are the pillars of any company; negotiation seems to be one of the toughest tasks. CIOs presume the negotiation process to be time-consuming and burdened with uncertainty about exact usage, requirements and entitlements. Also, it is not an easy job to have a successful software license negotiation every time. Before the negotiation process starts, vendors need to be very clear about the usage of the software, but many vendors struggle to gather the important data on a timely manner and give vague and unauthentic information at the time of negotiation. This type of behavior by vendors makes it more difficult for CIOs to select right vendors.
Industry analyst firm Gartner has observed that vendors, which go into a software negotiation, prepared with good asset management information buy more optimally. However, most of the companies have incomplete and outdated information in the procurement system with the rest stored in the original form as a paper document in a dusty old file cabinet. Unfortunately, there is hardly any quick solution to close the gap in the procurement and asset management systems without the manual work required to pour over the agreements and enter them into the system. Usually big companies are able to close that gap contract easily.
Explaining about the selection of vendors, Singh said that CIOs need to see if the technology matches the roadmap defined and the vendor can meet the set direction and requirement. In fact, a well-mapped work should be sketched for a successful roadmap, and has to be reviewed periodically keeping all on the same wavelength. Also, the selection of vendor largely depends on past experience in the area, cultural fit, reliability as well as ability to meet the SLAs. SLA (Service Level Agreement) is intent to provide service within mutually accepted boundaries. When there is a breach, the root cause needs to be analyzed and fixed rather than focusing on punitive damages. SLA can be enforced if the breach of SLA is established due to lack of effort from the vendor. Speaking on the similar note, Savla said, “The selection of vendor needs to begin with what we need now and in the mid-term. This will define 'needs' and 'wants' separately. For each of the solution, when you apply these criteria, you will be left with few options to choose from. From this shortened list, best way to approach is to use TCO and RoI analysis. TCO should not be initial one time cost. It should include lifespan of product — say three to five years, as case may be. RoI needs to be measured with tangibles and non-tangibles. This gets coupled with other softer but important aspects like support, local presence etc before making a choice.”
TCO seems to playing one of the important roles in selecting the vendor. Arun Gupta, Group CIO, Shoppers Stop said, “Within our organization, we work with our business colleagues to formulate the business case for any solution along with the list of potential vendors, who can offer the solutions. The decision is taken after considering all the aspects of the solutions including TCO over five years.”

In the current context, with the software licensing becoming more complex for any company; ERP has become the basic infrastructure to run the business. Whether an enterprise adopts a large-scale ERP solution, smaller vendor products or custom develops the solution, is a decision that the CIO needs to drive with the management team. ERP excellence is a journey and not a milestone; CIOs along with the functional heads should review the usage, adoption and changes required to stay aligned to the needs of the company as well as the evolving market. But many of the experts believe that it is just a myth. All the enterprises do not really need ERP and ERP is not the solution to all IT problems of the enterprise. Savla opined, “Need is one word, which drives deployment of the ERP. Complex business processes handled through loosely integrated or independent systems can become a serious business issue. To address this, enterprise need to simplify and standardize processes and work towards deployment of integrated ERP solution. This integrated approach would ensure 'single source of truth' for all data.”
Understanding the complexity of software licensing, most of the CIOs believe that licensing process is likely to undergo some change in the next two to three years with everyone looking at hosted solutions and moving to 'cloud'. Even experts have opined that as a result of the cloud pricing pressure, traditional enterprise software vendors, who endured up to 25 percent declines in new license revenues in 2009, have actually begun offering 'long-term' subscription fees as an alternative to traditional licensing. But they also add that for vendors, the transition from upfront licensing to flexible pricing, however, needs to be managed carefully. For a large organization, it is important to have someone responsible for license management.

SIKTA SAMANTARAY
(siktas@cybermedia.co.in)