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Software Efficiency Report

2011 United States

Software Efficiency Report 2011 - U.S.

A license to print money
In the United States alone, there is more than $12.3 billion worth of preventable and ongoing cost associated with unused software and shelfware1
Waste is a very significant problem in all aspects of IT. 1E wanted to look specifically at software waste and what we found astounded us. Our research shows that when managing software licenses and assets, most organizations here in the United States focus on compliance, rather than on controlling costs. Organizations are simply buying more software than they use. Driven by the very real anxiety that a sudden software vendor audit could result in heavy fines or lengthy litigation, many organizations simply over license, buying more and more software just in case. This tendency to err on the side of caution is only part of the story. 71% of those surveyed felt that software asset management is overly complex. This is perhaps not surprising, given the complicated nature of software license agreements, bundled license and maintenance deals and the general vagaries of product names, versions and editions. You would think that organizations would want to do something about this waste, but our research reveals that just 9% are actively trying to manage the problem by regularly identifying and reclaiming unused software across their corporation. Unfortunately, merely detecting unused software and shelfware across a myriad of systems, locations, PCs and servers presents a very real challenge for most, never mind reclaiming and reusing those licenses. Our findings reveal that the problem of waste is likely to get worse if organizations don’t focus on managing their software assets more efficiently. There is a clear financial imperative in every organization to do so.

Over 80% of respondents agreed that there was more than $100 worth of waste per PC.

Sumir Karayi CEO, 1E

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Software Efficiency Report 2011 - U.S.

Software waste
Over half of organizations in the United States admit to having software waste
When asked directly, most senior managers accept that there is software waste within their own organizations. Over a half admitted they had software waste and more worryingly, nearly one third (29%) admitted that they have no way to quantify the problem. Businesses are increasingly subject to vendor audits. At a recent Gartner conference, 61% said they had been audited by at least one software vendor in the past 12 months2. These audits are the cause of much anxiety. Software waste adds significant and ongoing additional costs to most organizations across the United States. It is created when any organization purchases software which adds no value and is typically made up of: Unused software - software that is installed on a user’s PC which is not needed or used Shelfware - software that is purchased but never deployed

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Software Efficiency Report 2011 - U.S.

I advocate what I call “license optimization”, which answers three key questions: what do we own, what are we using, and what do we really need?3
Forrester Research Inc. Principal Analyst quoted in Computing magazine, March 2011

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Software Efficiency Report 2011 - U.S.

Unused software
Four out of five license managers we spoke to estimated that the cost of unused software was more than $100 per PC
There are many scenarios that can lead to software licenses being installed but not used. Licenses may be allocated to users based on their department as opposed to their need, they may be bundled together by the vendor, or users may be given software for a specific need or role when they first join the company which is never reclaimed when that need changes. Whatever the reason, unused software is a significant drain on IT budgets - on average costing organizations $414.50 per PC.
1%

Estimate of the value of software installed - but unused - on a typical PC

12%

30%

28%

25%

The user’s perspective
0

3%

5

10

15

20

25

30

35

Many users are well aware of the problem of unused software on their desktops. Nearly three quarters of users believe that they have some unused software on their PCs. A third believe they have five or more applications installed on their machine that they never use.

$50 - $99 $100 - $249 $250 - $499

$500 - $999 $1000 + Please specify I don’t know

Estimate of how many unused items of software users think are on their machine4

40% 35% 30% 25% 20% 15% 10% 5%

0%

None

Fewer than 5

Between 5 and 10

More than 10

Don’t know

5

Software Efficiency Report 2011 - U.S.

Shelfware
83% of managers admit to having shelfware, with an average of 23% of products destined never to be deployed
Shelfware is, as its name suggests, software that is left to sit, undeployed on the proverbial shelf in a forgotten corner of the IT department. But even though it remains undeployed, shelfware still incurs maintenance and support charges.

Shelfware costs every organization in the United States $155 per user per year5
The challenge with shelfware is that, though widespread, it can be hard to find in most organizations. Traditional systems management tools can only detect software that has been installed, so many organizations are aware of the problem of shelfware but unable to do much about it.

It’s unreasonable to expect customers to continue paying maintenance on unused products and undeployed capacity.6

Forrester Research Inc., April 2011

The manager’s perspective
Shelfware has many different manifestations, but they all cumulatively drain the IT budget every year. IT management teams need to learn how to hunt down and eliminate shelfware, in order to free up budget for more important activities.

Estimate of the percentage of software purchased but undeployed in U.S. organizations
17% None 24% 1-9 percent 14% 10-19 percent 13% 20-29 percent 11% 30-39 percent 7% 40-49 percent 4% 50-59 percent 4% 3% 1% 2% 80-89 percent 90-100 percent 60-69 percent 70-79 percent

0

5

10

15

20

25

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Software Efficiency Report 2011 - U.S.

52% of enterprises still use spreadsheets to record software licenses, with 12% still using a paper-based filing system and a staggering 12% using nothing whatsoever.

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Software Efficiency Report 2011 - U.S.

Managing complexity
71% of those surveyed believe that software asset management is overly complex

The root of the problem in identifying all this waste lies in the massive complexity caused by bundled license and maintenance deals. This is compounded by unfathomable software license and entitlement options, the general vagaries of product names, versions, editions and increasingly, virtualization. Organizations across the United States face a daily challenge to reconcile the software they have deployed with the software they have licensed. Answering this seemingly simple question is a real issue for many - which is why projects aimed at understanding and managing software compliance and licensing frequently run on for many years and struggle to demonstrate any return on investment (ROI). Few organizations are totally aware of how much money and waste can be tied up in software and how much they could save with efficient management of their software licenses.

What does your organization use to manage licenses?
12%

52%

56%

2%

12%

18%

“Software sourcing managers faced tough

0%

0

10

20

30

40

challenges in 2010. Under continued pressure to control costs in an uncertain economic environment, they also faced ever-more complex licensing rules, increased license audit activity and proliferating commercial models.6

50

60

We don’t use anything / We don’t have a process in place We use spreadsheet(s) We use an internally developed database / solution We have an off the shelf software asset management solution, (please state) Filing cabinet / Paper based system Document management system Other - please state

Forrester Research Inc., April 2011
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Multi select

Software Efficiency Report 2011 - U.S.

Each year, greater numbers fall foul of compliance audits, face unexpected costs, or suffer unreasonable restrictions on their use of the software they’ve purchased or thought they’d purchased.8

Forrester Research Inc., December 2010

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Software Efficiency Report 2011 - U.S.

Audit anxiety
Two thirds of organizations in the United States find preparing for a software vendor audit challenging
The number of audits from ever more vigilant software vendors is on the rise. It is perhaps not surprising then that many organizations in the United States have come to believe that their number one priority when it comes to managing software is to ensure compliance, not to cut waste or reduce costs. This is particularly true given the potentially damaging results of failing a vendor audit - heavy fines, substantial back-charges and the threat of legal action. When coupled with the time and complexity involved in comparing the amount of software being used with the amount being paid for, it becomes easier for many organizations to over provision licenses just in case. By focusing solely on preparing for an audit, organizations are buying ever increasing amounts of software, ignoring the very real danger that much of it will never be deployed, never be used and never add value.

Forrester sees many software license agreements that are seriously flawed. [...]These flaws result in problems, unexpected software costs, and, sometimes, legal disputes.8
Forrester Research Inc., December 2010

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Software Efficiency Report 2011 - U.S.

The majority of organizations (77%) have never reclaimed any unused software licenses.

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Software Efficiency Report 2011 - U.S.

A missed opportunity?
Only 9% of organizations in the United States are regularly reclaiming software licenses to save money
Uninstalling unused software and redeploying those wasted licenses will drive down costs and deliver a better return on investment from existing assets. Despite the obvious benefits of software license reclaim and the staggering cost associated with unused software and waste, three quarters of U.S. organizations have never done it. Their biggest obstacle is usually fear.

Have you ever considered reclaiming unused software licenses to reduce costs?

29%

No we have never considered doing this
18%

We have thought about doing it, but it was deemed too risky
19%

We have thought about doing it but were concerned about how users would react We would like to do this, but do not have a tool or process in place Yes - We have done this for one or two applications

11%

14%

Yes - We do this regularly for most of our apps
9%

0

5

10

15

20

25

30

Almost half (48%) of respondents said that they had considered actively uninstalling and redeploying licenses, but that they are unable or unwilling to take the next step. Reclaiming unused software would mean that many organizations would be able to avoid buying new licenses until they actually need them, which could have very real financial impact on the value they get from their software. Despite only 18% of managers responsible for software licenses in the United States stating that their primary goal is cost control, we believe there is a clear financial imperative for every organization to identify and reduce software license waste.

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Software Efficiency Report 2011 - U.S.

There’s a software license time bomb armed, ticking and buried deep in the foundations of many a Global 200 firm’s elegant IT architecture.10

Forrester Research Inc., July 2010
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Software Efficiency Report 2011 - U.S.

Financial imperative
Unused software and shelfware in the United States accounts for $12.3 billion in preventable and ongoing costs1
Organizations are frequently concerned about software vendors audits and compliance, so they often overlook the huge waste involved in shelfware and unused software. This anxiety, coupled with the complexity of software licensing, is generating significant inefficiency and waste in many businesses. These costs are largely preventable. As this report highlights, few organizations are truly aware of how much money can be tied up in software waste and how much money they could be saving.

The software sitting unused on PCs in the United States could have historically cost those organizations $45 billion.11

Software waste per PC per year 16
Software waste Purchase cost Maintenance cost Total per PC per year Unused software $138 $83 $221 Shelfware $155 $31 $186

When considering this over a typical three year replacement cycle, a U.S. organization with 10,000 users has $4.1 million worth of unused software sitting on its PCs. It wastes a further $1.1 million yearly on ongoing maintenance and support charges for software that has either been installed but not used or literally left on the shelf.

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Software Efficiency Report 2011 - U.S.

About the research
This survey was conducted online within the United States and United Kingdom by Opinion Matters, an independent research company, in March 2011. It was commissioned by 1E and analyzes the results from over 500 IT professionals who are responsible for managing software licenses in companies with more than 500 employees. This report focuses on the results from the United States.

A majority of workers in the U.S. and U.K. regularly use a PC to do their jobs
Source: Harris Interactive

U.S.
108 million employees

U.K.
17 million employees

What is your job title?
CIO Head of IT IT Manager SA Manager IT Operations Pocurement Other 0
6 4 13 9 6 1 34 29 22 42 60 60 110 110

What size company do you work for?

More than 10,000

33 38

115

1000 - 9,999
105

103

500 - 999
50 100 150

112

0

50

100

150

U.S.

U.K.

U.S.

U.K.

About Opinion Matters
Opinion Matters is an Independent International Market Research Agency. Consultancy and client service are placed firmly at the top of its agenda, and creative thinking at its core. Opinion Matters reaches and engages audiences, ranging from the general public through to the leaders of industry, delivering robust results with advocacy. Opinion Matters complies with the Market Research Society (MRS) Code of Conduct in the United Kingdom and the ICC/ESOMAR Code and ESOMAR World Research Guidelines. For more information, please visit: http://www.opinionmatters.co.uk/

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Software Efficiency Report 2011 - U.S.

About 1E®
1E believes every one of our customers should expect more from their IT. Founded in 1997, 1E is recognized as a leader in software and services that improve IT efficiency by identifying and reducing costs and waste in hardware, software, energy and time. 1E pioneered advanced PC power management with the release of ground-breaking solutions like NightWatchman® and WakeUp™. That innovative approach has continued with the development of revolutionary concepts like Useful Work™, Drowsy Server®, Computer Health™ and Shopping™ as part of a unique range of industry-leading solutions. Headquartered in London and New York and with 16 million licenses deployed world-wide, over 1,400 organizations in 42 countries have trusted us to help them to work effectively, productively and sustainably. To date, we have helped our customers save in excess of $550m in energy costs alone, reducing their electricity consumption by 5.8 million megawatts and cutting CO2 emissions by 4.5 million U.S. tons. For more information, please visit http://www.1e.com

About AppClarity™
AppClarity, from 1E, offers an immediate reduction in software costs by intelligently helping organizations to manage their software assets more effectively. AppClarity enables you to financially quantify software waste on all applications by identifying and controlling unused software across the whole enterprise.

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Software Efficiency Report 2011 - U.S.

About IAITAM
The International Association of Information Technology Asset Managers Inc. (“IAITAM”) is the professional association for individuals, organizations and providers involved in any aspect of IT Asset Management (“ITAM”), Software Asset Management (“SAM”), Hardware Asset Management, and the lifecycle processes for IT Asset Management in organizations of every size and industry across the globe. IAITAM’s mission is to provide real-world based skills development, and to support IT Asset Managers already setting the standards for successful ITAM business practices such as, saving money, gaining control, reducing risk, increasing accountability and improving performance. Over the past 9 years, IAITAM has strived to support the IT Asset Management industry through expert training and advice as well as lead the profession down a path of best practice to enhance the business drivers of ROI, Efficiency, Risk Avoidance and Professional Development for themselves and their organizations. For more information, please visit: http://www.iaitam.org/

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Software Efficiency Report 2011 - U.S.

References
1. $414.50 is the average amount of unused software on a user’s PC Typically support and maintenance costs 20% of initial software license cost12 $414.50 x 20% = $82.90 on-going software maintenance costs on unused software $155.09 is the cost of new licenses that become shelfware / user / year5 $155.09 x 20% = $31.02 on-going software maintenance costs on shelfware $31.02 + $82.90 = $113.92 total maintenance cost on wasted software licenses / year 108m regular business PC users in the United States15 108m * $113.92 = $12,303,172,080 spent on maintaining unused software and shelfware licenses each year “In a survey of attendees at Gartner’s IT Asset Management, Procurement and IT Financial Management Conference conducted in November 2010, 61% of the 144 respondents said they had been audited by at least one software vendor in the past 12 months.” Gartner Survey Analysis: Survey Shows Another Increase in Software Vendor Audits? IT Asset Managers Should Prepare Now. Jane B. Disbrow, Alexa Bona, Stewart Buchanan, Frank DeSalvo, Frances O’Brien, Jo Ann Rosenberger. March 2, 2011 Duncan Jones, Forrester Research Inc. in Computing, March 8, 2011 http://www.computing.co.uk/ctg/feature/2032105/cut-waste-licence-optimisation#ixzz1Im6d6zL7 Helpdesk Efficiency Report 2010, Vanson Bourne http://www.1e.com/contenthub/doc_download.aspx?id=44674123 IT budget = $12,350 / user / year12 21% IT budget spent on software12 21% of $12,350 = $2,593.50 spent on software per user per year 26% of software spend is on new software14 26% of $2,593.50 = $674.31 spent on new software per user per year 23% of new software becomes shelfware (this report) 23% of $674.31 = $155.09 This figure does not include on-going maintenance Duncan Jones with Chris Andrews, Rory Stanton, Forrester Research Inc., as quoted in Software Pricing And Licensing Trends 2011: Software Sourcing Leaders Should Create Sourcing Strategies That Take Advantage Of Profound Changes In The Software Market, April 5, 2011 Reserved Duncan Jones with Christine Ferrusi Ross and Rory Stanton, Forrester Research Inc., as quoted in Updated Q4 2010: Check your Software License Agreement for These Common Flaws Update Familiar Contract Clauses to Accommodate Technology Changes, December 23, 2010 Reserved

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Software Efficiency Report 2011 - U.S.

10.

George Lawrie, Forrester Research Inc., as quoted in Defuse Software License Time Bombs With Software Asset Management, July 9, 2010 $414.50 is the average amount of unused software on a user’s PC 108m regular business PC users in the US15 $414.50 x 108m = $44,766,000,000 historical total of unused software on PCs in the United States This figure does not include on-going maintenance IT Key Metrics Data 2011, Gartner, G00208190 Reserved Forrsights Software Survey, Forrester Research Inc., Q4 2010 Harris Interactive Survey for 1E, September 2008 Software waste per PC per year calculates as: Unused software = $138 + $83 = $221 $414.50 is the average amount of unused software on a user’s PC $414.50 / 3 years typical refresh cycle = $138.17 cost per year $414.50 x 20% = $82.90 on-going software maintenance cost per year Shelfware = $155 + $31 = $186 $155.09 new shelfware acquired each year 5 Typical software maintenance fee = 20%12 $155.09 x 20% = £31.02

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