Organisations waste billions of dollars on IT each year. They buy unnecessary software licences, pay for hardware products after their leases have expired, and even dump unwanted equipment in ‘corporate mausoleums’. At the same time, employees steal and lose computers, copy software illegally and

download pirated software from the Internet.

And it is getting worse: more companies are distributing their systems to remote – and therefore less manageable locations. For IT managers, the task of tracking and managing a remote workforce using devices, such as laptops, and personal digital assistants, is a logistical nightmare (see box, Developer makes IT pay).

The financial and regulatory environment compounds these problems. IT directors are under pressure to reduce this wasted expenditure; stronger corporate governance requires that all assets are accounted for; and there are new and stronger punishments for those companies that allow their staff to use unlicensed, or pirated, software (see box, Piracy? Not us).

While the threat of the punishment might encourage some managers to be more vigilant, executives from one group of software suppliers – those supplying IT asset management (ITAM) software say there is a much more compelling reason to accurately track and control the use of both hardware and software: it saves money.

Their argument: many companies continue to pay for IT resources that they no longer require. For example, many continue to pay software licence fees for staff who have either left, or no longer require them, as well as maintenance fees for obsolete equipment. Companies can also rack up exorbitant help desk costs if help staff do not know exactly what systems are being used.

“Companies often don’t know what IT assets they have, so when they come to buy a software licence, for example, they over-compensate by purchasing too much,” says Ron Nabors, chief marketing officer at ITAM supplier Tangram Enterprise Solutions (Tangram). For example, during a restructuring, a US telecommunications company found it had several high-end servers, each with a full stack of registered and paid for software – but it found no-one using them and no manager who remembered originally having bought them.

One way to tackle these issues is to spend even more on software – on ITAM software, to be precise. Suppliers, who include Computer Associates, IBM, Peregrine Systems, Tally Systems, Tangram, and MRO Software, all say their customers save money and gain greater control over their business using their software.

Their products can be separated into two main types: IT asset tracking software and IT asset portfolio management software.

IT asset tracking products, from suppliers such as Tally Systems, are mainly used to monitor changes made to an asset’s configuration; portfolio management software, from, for example, MRO Software, concentrates more on the relationship between on an asset and its contractual elements, such as cost, depreciation and warranty terms, says Robert McNeill, an analyst at market research company Giga Information Group.

Vendors of both sets of products promise to deliver very substantial savings. “On average, just for the software management element, ITAM software can save between 5% and 10% of an organisation’s IT budget,” says Nabors at Tangram. That is not trivial: in some cases, it could even make a company five or ten per cent more profitable.

These cost savings are not limited to software. For example, IT services giant Accenture claims it saved about $11.5 million in 2001 by using MRO Software’s ITAM products to track the use of PCs across it global operations.

How? Accenture says it was able to slash its PC procurement budget by $3 million via enhanced asset tracking capabilities, as well as an additional $600,000 from the company’s existing PC warranty and leasing agreements with suppliers. But Accenture’s biggest savings: it was able to cut salary costs as a result of being able to redeploy IT staff on client projects (obviously, not an option open to most organisations), and it was even able to reduce the number of employees who ‘walked away’ with its PCs.

For all these reasons, ITAM software is selling well. Organisations will spend about $145 million on ITAM software licences in 2002, compared to just $20 million in 1998, estimates Giga.

But Giga warns: “A positive return on investment for ITAM often takes between 12 and 18 months.” That is short by most standards, but too long for some finance directors seeking to control costs. Giga thinks the installation and use of ITAM software should be tied to specific business process change. “ITAM is a business process supported by one or more tools, not a tool supported by business processes,” says McNeill.

Hard labour

IT directors rarely question the need for some kind of monitoring and tracking software for IT – after all, it makes their jobs much easier. The questions they always ask: What are the cost benefits and challenges of implementing ITAM projects? And what alternatives are there to buying packaged software? One alternative is to physically audit the systems (which will still be necessary from time to time, anyway). Many organisations routinely carry out inventory checks of their IT assets. But physical inventory checks can be expensive, error prone and labour-intensive, because the auditor has to visit each user’s desktop, says John Mahon, vice president of Europe at IT asset tracking specialist Tally Systems. And, of course, many

devices are now portable.

Analyst company Gartner estimates that physical inventories can cost, on average, $50 per system, given the time associated with visiting each station, identifying the hardware and software components, and merging information onto a single database or spreadsheet.

To help companies reduce the cost of physical inventory checks, ITAM products include auto-discovery tools, based on semi-autonomous software agents that log all hardware and software in use. These tools capture technical data about an IT asset’s hardware and software components.

The benefits of using such software may not always be apparent at first. Back in 2000, a US cosmetics manufacturing conglomerate, which refused to be named, licensed Tangram’s Asset Insight product. The goal was to reduce the burden of making physical inventories. The company’s administrators were soon running automated inventory checks across its 3,800 workstations and servers every two weeks, producing a claimed saving of more than $750,000 on its IT inventory activities in 2001.

Then, in late 2001, the company received a letter from the Business Software Alliance (BSA), a US industry lobby group allied to the UK’s Federation Against Software Theft. The letter requested an audit of its Microsoft applications. Microsoft estimated that the company required 10,000 licences of its software, but it was only paying for 4,000.

After running an audit using Asset Insight, it was able to prove that it only needed 4,000 licences. Without this auditing capability, the company says it would either have had to pay $1.8 million for an additional 6,000 licences worth about $300 each, or conducted an expensive manual audit to the satisfaction of the BSA.

ITAM software can also be used as part of a help desk suite. Often, help desk staff are not able to view details about a user’s equipment, and previous problems, when users call with a query. But by integrating help desk software with ITAM products, help desk staff can receive a detailed analysis of a users’ equipment – ranging from their software configuration to hardware serial numbers, to memory capacity.

Alistair McPherson, a business strategist at Computer Associates in the UK, says the integration of ITAM and help desk software enables companies not only to cut costs, but also “to escalate the problem to the most appropriate person more quickly”. Accenture claims it saved $1.9 million from its help desk operations in 2001 by using ITAM products from MRO Software.

Asset test

If all this makes the case for ITAM sound overwhelming, there is a caveat, and a big one. Despite all the vendors’ promises, many organisations have failed to generate an acceptable return from ITAM software. “ITAM has promised so much for so many years and I have seen it fail many times. It often becomes ‘shelfware’ because companies do not make a clear business case,” says McNeill at Giga.

Giga’s advice is that ITAM projects need to be tied to business process change, such as getting business managers to submit monthly expenditure reports. But that means an escalation of the overall investment, and an increase in the number of managers in its effective deployment.

Because of this, many IT managers still prefer alternative approaches. For example, many companies use inventory management modules within popular systems management software, such as HP OpenView, which has some asset management functions. Other companies simply record data in spreadsheets, such as Microsoft Excel, which can then be made available to the help desk staff on an intranet.

Whatever tools they use, however, more organisations are recognising the absurdity of not accurately recording and tracking changes to the IT infrastructure. Even if the software copying legislation is not an issue for most IT directors, getting the most from next year’s budget most certainly is.