Software Spend and the 80/20 Rule
A common theme running through a variety of management techniques and methodologies, everything from Agile to Lean to Six Sigma is the Pareto Principle – also known as the 80/20 rule. Named after economist Vilfredo Pareto – who observed that 20% of the pea plants in his garden produced 80% of the peas, and that 80% of the land in Italy was controlled by just 20% of the population – the Pareto Principle tells us that, generally speaking, about 80% of effects tend to come from about 20% of causes.
While it doesn’t always come to be an exact 80/20 ratio, this imbalance is often seen in various business cases:
- 20% of the sales reps generate 80% of total sales.
- 20% of customers account for 80% of total profits.
- 20% of the most reported software bugs cause 80% of software crashes.
- 20% of patients account for 80% of healthcare spending
In business, applying the 80/20 rule means looking for those opportunities to get the biggest possible bang for your buck. It means constantly striving to find that 20% of what you do that can deliver 80% of the results you’re looking for.
When it comes to managing software spend, most businesses face what could be described optimistically as “tremendous opportunity for improvement.” Gartner analyst Stephen White writes that 80% of companies surveyed report that between 1 and 49% of their licensed software is “shelfware.” That is to say, they’re paying for it, but they aren’t using it.
And ponying up for unused software is only part of the equation. In an average month, an organization may spend 40 hours or more per SaaS vendor managing usage, overall spend, and contract renewals. Preparing a Microsoft Enterprise Agreement true-up can take two months and consume up to 120 hours of productive time. A full contract renewal may take 300 or more hours to complete.
The seemingly obvious remedy to these challenges is to implement a Software Asset Management (SAM) solution. A good SAM system will automate a lot of the tracking, monitoring and research required. But there’s a catch. In fact, there are several catches. To be effective, the typical SAM solution requires extensive knowledge, managed services, licensing expertise, and tool administration training. So, to manage (and potentially reduce) the costs associated with managing your software assets, you have to incur the costs not only of implementing the system, but also of training, supporting and maintaining a whole team of SAM experts.
This is where the 80/20 rule comes in. What if you could get 80% of the benefit of implementing a full Software Asset Management team at only 20% (or less) of the overhead?
It may sound too good to be true, but it’s not.
The trick is to take a lightweight approach, without compromising on the need for complete and timely software asset information. While most SAM efforts are focused on enabling you to create time consuming ELP (Effective License Position) reports – which tend to fall quickly out of date and which, it turns out, are not always what you need, anyway – a growing number of organizations are finding that what they really need is a solution that captures the software asset information and provides quick and intuitive access to it. A summary of software asset data, continuously updated and presented in dashboard form, provides immediate insights to support renewals and to mitigate against the dreaded shelfware. Quick and easy access to asset data also ensures a more secure environment, enabling IT managers to isolate and exclude out-of-date software versions lacking the most recent security protections.
And just imagine what you can accomplish, both in terms of managing software assets and elsewhere, with that 80% savings on overhead.
Businesses are finding exactly this combination of capabilities in Ivanti Neurons for Spend Intelligence, which provides instant insights into your software landscape and application spend for on-premises, cloud, and edge environments. Spend Intelligence helps you improve operational speed, asset visibility, and utilization. It provides detailed analysis within minutes, presented in dashboards showing your licenses, purchases, and instances so you can track your purchase history, upcoming license renewals, contract expirations, and ongoing spend more effectively.