The on-premise approach to Information Technology (IT) and Software Asset Management (SAM) is continually being disrupted with ongoing digital transformation, IoT, and all things AI. Traditional IT operating modes which rely on in-house applications and systems are being phased out in favor of multi-mode IT – a combination of on-premise assets and those hosted in the cloud. Gone are the days of solely acquiring software and hardware from third parties, building data centers, and maintaining them through periodic asset refreshes; in their place, we will continue to see the emergence of public, private, and/or hybrid cloud environments.
As a result, companies have begun to discuss whether a switch to the cloud is necessary to gain ground on cross-industry giants like Amazon, and to stay relevant in a market which leaves behind companies that fail to innovate or go digital. However, companies have to be wary of increased IT OPEX spend during migration to the cloud, and look out for retiring older equipment and software too early, as it may result in material impairments or write-offs.
The Solution Bias Dilemma
IT suppliers and vendors recognize these paradigm shifts as well, and are becoming increasingly opportunistic, often using cloud migration as a commercial lever to push their newer, and often more expensive, products and technologies. For example, in what’s known as solution bias, IT vendors upsell their own cloud technologies during migration without giving much consideration to current usage or future needs. At the same time, these vendors are adapting their license agreements and software counting rules for their own benefit, making it more cost-effective for customers to use their own cloud solutions.
In addition, IT suppliers are revisiting old unfavorable enterprise agreements which granted unlimited product usage, as they were written without the cloud in mind. In the process, they are capitalizing on any contractual landmines or “gotchas,” such as site or hardware restrictions, to uncover one-time and ongoing license fees.
Currently, licensees who have already migrated to the cloud are often getting a “free pass” from vendors and auditors during a traditional software review. Due to evolving supplier license models, rules, product metrics, as well as unpredictable customer behavior and patterns, IT suppliers have been excluding XaaS environments from the scope of their license assessments. SAM tool agents and audits scripts are also not yet commonly installed in the public cloud, so there isn’t an easy or effective way to discover software deployments. However, XaaS environments will likely soon become a standard part of inspections, unless customers acquire software licenses as a service (e.g., SQL through Azure) through a public cloud supplier.
Proper SAM and Cloud Governance is Critical
With all that being said, companies should not wait on the sidelines and observe how vendors or auditors begin to address software licensing in the cloud. Without proper SAM, cloud governance and controls in place, the risk of software deployment proliferating is incredibly high due to the agile and scalable design of cloud environments. Even companies with mature SAM disciplines are at risk, as they are not accounting for the layer of complexity that the public cloud adds to the SAM world.
In order to address these changes, companies must proactively inspect and uncover potential cloud licensing risks in vendor agreements before major migrations occur to help avoid significant license premiums and preserve their leverage over vendors. Companies should re-evaluate, challenge, and enhance their “people, process, and technology” framework that was standard for on-premise SAM to account for the perils of cloud licensing. Even when the supplier does not raise any issues, it’s leading practice to determine and assess potential licensing risks before launching into the cloud. Once software licensing risks are identified, IT Executives can decide whether to assume them or develop a strategy to mitigate their negative impacts, potentially saving their companies millions of dollars and protecting technology innovation funds.
Next Steps to Modernize Your SAM Program for Cloud
Have your IT vendor contracts been evaluated for migration risks or does your CIO prefer to take a “leap of faith” into the cloud?! To learn more about how you can best prepare for software licensing “gotchas” in the cloud, contact Connor Consulting at email@example.com today.
In the meantime, check out this on-demand webinar to learn more about how Connor Consulting – in partnership with leading SAM technology vendors like Xensam – can help you take your SAM efforts to the next level.
About The Author
Rich Reyes is an Executive Vice President for the Global Software Advisory practice at Connor Consulting. He brings 20 years of thought leadership around software licensing & compliance, technology asset management, and IT sourcing. Rich has performed hundreds of software audits on behalf of major vendors, and he’s established and led an ITAM/SAM department for a Fortune 100 retailer. He continues to advise companies on practical ways to mitigate IT supplier risks, reduce vendor total cost of ownership (TCO) and optimize software licensing environments. Rich holds CISSP and CISA certifications and is a frequent speaker at industry events.