Early in my career, I supported software that was primarily used by law firms.

The software was a document management solution which provided lawyers the ability to quickly access documents related to legal issues. Some of the software's most impressive features included intelligent search capabilities, powerful reporting tools, and version control for thousands of documents on a single network.

As you can imagine, these capabilities boosted the efficiency of legal departments and law firms around the world. Legal experts could enjoy digitizing legal documents with automated billing capabilities.

Software license optimization

However, the software alone would be useless for anyone who needed legal representation. I am amazed by how many organizations still do not employ or contract with licensing optimization solutions including software license experts for data center software license management.

When organizations need legal expertise, they hire legal experts and purchase software tools to support their legal efforts, or they contract with external legal experts and solutions. Accountants are hired or subcontracted by organizations when calculating their taxes. Software companies who audit their customers employ software license experts along with software tools to meet their objectives, or they subcontract to a third party company that has the expertise and the software tools.

Software audits are on the rise because they can be a significant revenue stream for a software vendor. Many software vendors can make up for missed quotas or lower software sales by performing software audits. This means that as long as there are organizations that are non-compliant with their license agreements, software vendors will continue performing software audits.

In a gated Gartner report published May 28, 2014. Gartner claimed: “Tracking license entitlement has become a priority for many organizations as a means to alleviate the anxiety caused by annual software vendor audit. Gartner has seen an exponential increase in the number of contracts it has received from customers looking to purchase an SLOE tool during the past nine months. We don’t expect this trend to slow down…”

Why is software license optimization needed for the data center?

It is not practical to rely on IT managers without software licensing expertise to manage software licenses in the data center.

This would be like asking an accountant with very little legal expertise to represent the organization in a lawsuit claiming misappropriated funds. Although an accountant could provide the information required to defend against such an accusation, the accountant does not have expertise with legal process, legal negotiation, and most importantly knowledge of applicable laws.

Every organization should consider implementing a software license optimization solution in the data center for the following reasons:

1. Complex license variations

Software licenses can be based on multiple factors such as the physical server, the number of processors, or the number of users; however, licensing becomes much more complicated when using virtual servers, cluster or fail-over solutions, and storage arrays.

IDC predicts that “Software License Complexity will Indirectly Cost Organizations an Average of 25 percent of their Software License Budgets in 2016.”

Software vendors selling into the data center tend to have multiple license variations for their product offerings. For example, terminology such as Power Value Units (PVU), Resource Value Units (RVU), and Core Factor Table, are just some examples of language used in software licensing contracts to define software entitlement. Furthermore, complex statements in software license contracts can be confusing when conditions or exceptions are added to the license definition. Currently, there are software vendors that have up to 5,000 active license variations for their software solutions, leaving many IT managers guessing about how they should apply the licenses they purchased.

2. License vendors make changes which can affect licensing

Software licenses can be affected by changes to the environment, configuration changes, or software updates.

IT managers are often tasked with understanding how these updates or changes impact current license agreements, in addition to managing the software solution. Without licensing experience or expertise, this can be a gamble for the organization, which could result in a large bill after a software audit.

3. Technology alone is not able to correctly calculate most server licensing

Many organizations try to manage software licenses in the data center using software licensing tools provided by their software vendor or a third party. The problem is that these tools alone are not sufficient for most IT managers with limited licensing knowledge and experience. The complexity of software licenses for software in the data center requires those that manage licenses have a proficient understanding about the licenses they are attempting to manage.

4. Market expertise required – having the right people with the right knowledge

A proficient software optimization solution for the data center should include people with expertise to support the solution. Software licensing tools alone without the software license experts would be like providing a legal software solution to the organization without an attorney.

Software optimization solutions require people with expertise in many areas. For example, Microsoft, IBM, and Oracle have unique licensing models with many variations that are constantly modified or updated. Software optimization providers typically employ software license specialists for each vendor to keep up with changes or updates. These specialists provide valuable insight and recommendations to help their customers stay compliant with their software license agreements.

5. Software audit protection

The biggest value provided by software optimization solutions is that they will fight on your behalf if you are audited. Companies that provide software optimization solutions typically employ experts that have worked as software auditors in the past. Not only are these people familiar with software licenses, they are familiar with the software audit process.

Many organizations wait until an audit request before they seek out software license experts. Unfortunately, these experts will not be able to help the organization avoid penalties if they are, or have been non-compliant with their license contracts; however, these experts can negotiate or your behalf and are often successful in reducing penalties or fines demanded by the software vendor.

When software vendors are aware that an organization employs ITAM best practices, they tend to audit them less. In a study, Express Metrics claims: “Respondents whose organizations have implemented IT asset management (ITAM) tools report a 32 percent lower audit rate within the last two years than organizations with no such tools.”


It is important that organizations have a software optimization solution for the data center. Be sure to choose a solution that employs software license experts, preferably with software auditing experience. Avoid employing a company that is currently providing software audit services to software vendors. This is a conflict of interest.

Employing a software auditor to help you fix your software licensing problem would be like calling the police instead of a taxi for a ride home if you had too much to drink. Although the police might give you a ride home, they also might give you a ticket, or take you to jail. Those software license solutions that also do software audits could report you to the software vendor, something that is often required by their agreements with the software vendors they support.

Organizations that do not partner with software license solutions and experts should budget for unknown expenses. Why? Because these organizations will probably be out of compliance with software license agreements and as a result, they will pay the price.