On the money
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“Knowing how much everything costs gives us empowers us to negotiate with suppliers"
There are many ways in which having the right information can improve IT finance management, as Information Age’s Managing IT Cost Effectively seminar heard
Going by a number of measures, UK businesses can reasonably expect to be better off in 2011 than they were in the two previous years, even if it is only by a margin.
As Ian McVicar, managing director of Lombard Technology Services, explained at Information Age’s recent Managing IT Cost Effectively 2011 seminar, economists are “cautiously optimistic” about the coming year.
“Most analysts believe we have avoided the dreaded double-dip recession,” he said. “The Office for Budget Responsibility has raised its estimate for growth this year from 1.2 per cent to 1.8 per cent.”
This, he commented, means IT investment is on the increase. Industry analyst predictions that spending will at least grow in 2011 are corroborated by the IT asset financing company’s own experience.
“We have seen an increase in deals, both in the SME market and among FTSE 100 companies,” McVicar said. “We expect this trend to continue as businesses realise they need to equip themselves for improved business opportunities.”
Be that as it may, there are still a number of factors that mean IT leaders still need to keep an eagle eye on spending. The first is that while business might be improving, such was the severity of the spending cuts that followed the recession, that even if they grow, IT budgets are still likely to be smaller in the coming year than they were in 2007
or 2008.
Secondly, in many cases the recession exposed the lack of visibility that organisations have into their IT spending. Even if 2011 proves to be a bumper year for every business, that is a situation to which companies cannot return.
A number of approaches to managing IT cost were discussed at the seminar, but one message united them – that the more information an IT department has about its expenditure, the more able to it is to optimise it.
Licences to kill
Software licences are a significant component of any organisation’s IT cost burden. As Patrick Gunn, vice president for sales at Flexera Software, explained at the seminar, many organisations struggled to get a handle on their licensing during the recession.
This was made an even more pressing issue by the fact that many vendors responded to the downturn by issuing licence audits on their customers, Gunn explained.
Typically, businesses assess whether they are fully compliant – i.e. that they are paying for no more or no fewer software licences than they need – by simply comparing their usage figures with their software invoices. “We see companies do this in a number of ways; sometimes it’s with a spreadsheet, sometimes with a dedicated application,” Gunn explained. “Sometimes they don’t do anything and just cross their fingers.”
The problem with this simple comparison is that it does not take the complexity of many software licences into account, he said. “Software licences sometimes include multiple-use rights, or secondary-use rights. These are things that most people don’t know exist.”
A company might therefore think it is under-licensed, and so acquire the necessary licences to remain compliant, unaware that its existing licences already cover its usage requirements, Gunn said. With enterprise software licences and virtualised environments, the complexity of licensing is only increasing, he added.
But by pulling more detailed licence information and usage data into a single system, companies can achieve significant savings. One multinational brewery managed to save almost $750,000 on software licences with Flexera’s licence optimisation tool, Gunn claimed.
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