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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
Over 80% of
a very real challenge for most, never mind reclaiming and reusing
those licenses. respondents agreed
Our findings reveal that the problem of waste is likely to get worse that there was more
if organizations don’t focus on managing their software assets
more efficiently. There is a clear financial imperative in every than $100 worth of
organization to do so.
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 Estimate of the value of software
being installed but not used.
installed - but unused - on a typical PC
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 12%
specific need or role when they first join the company which is
never reclaimed when that need changes. 30%

28%
Whatever the reason, unused software is a significant drain
on IT budgets - on average costing organizations $414.50 25%
per PC.
1%

The user’s perspective


3%

0 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 $50 - $99 $500 - $999

they have some unused software on their PCs. A third believe $100 - $249 $1000 + Please specify
they have five or more applications installed on their machine
$250 - $499 I don’t know
that they never use.

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

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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%
60-69 percent
3%
70-79 percent
1%
80-89 percent
2%
90-100 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 What does your organization
software they have deployed with the software they have licensed. Answering
use to manage licenses?
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 12%

return on investment (ROI). 52%

56%

Few organizations are totally aware of how much money and waste can be 2%

tied up in software and how much they could save with efficient management 12%

of their software licenses. 18%

“Software sourcing managers faced tough


0%

0 10 20 30 40 50 60

challenges in 2010. Under continued pressure to We don’t use anything / We don’t have a process in place

control costs in an uncertain economic environment, We use spreadsheet(s)

they also faced ever-more complex licensing rules, We use an internally developed database / solution

increased license audit activity and proliferating We have an off the shelf software asset management solution,
(please state)

commercial models.6

Filing cabinet / Paper based system

Document management system

Forrester Research Inc., April 2011 Other - please state


Multi select

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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

11% 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


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 Unused software Shelfware

Purchase cost $138 $155

Maintenance cost $83 $31

Total per PC per year $221 $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. U.K.
108 million employees 17 million employees

What is your job title? What size company do you work for?

22
CIO
42

60 33
Head of IT More than
60
10,000 38
110
IT Manager
110

6
SA Manager 115
1
1000 - 9,999
34 105
IT Operations
29

6
Pocurement 103
4

13
500 - 999 112
Other
9

0 50 100 150 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

2. “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

3. Duncan Jones, Forrester Research Inc. in Computing, March 8, 2011


http://www.computing.co.uk/ctg/feature/2032105/cut-waste-licence-optimisation#ixzz1Im6d6zL7

4. Helpdesk Efficiency Report 2010, Vanson Bourne


http://www.1e.com/contenthub/doc_download.aspx?id=44674123

5. 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

6. 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

7. Reserved

8. 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

9. 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

11. $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

12. IT Key Metrics Data 2011, Gartner, G00208190

13. Reserved

14. Forrsights Software Survey, Forrester Research Inc., Q4 2010

15. Harris Interactive Survey for 1E, September 2008

16. 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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