Application Overload: Excess Software Can Spoil the Budget

Here's how to cut out waste in your software inventory

Mark Lack, who's in charge of business and financial reporting at Mueller Inc., a manufacturing firm in Ballinger, Texas, is only half-joking when he says the water cooler is his best source of information on what reporting software his company owns.

Lack oversees Mueller’s deployment of Cognos Performance Applications, a suite that’s supposed to be the standard for analysis and reporting for the entire company. But sometimes he finds that competing products are being used instead.

“Someone will say, ‘Hey, did you know this department just bought that package?’ So I go look at it, and it’s not got even the same level of capability ours could provide,” says Lack, manager of planning and financial analysis at Mueller.

“We recently found out that our manufacturing department had bought a piece of reporting software right under our nose,” he says. “They bought what they thought was a great software package without realizing we already had that capability in-house.”

Redundant applications, unused functions in ERP and CRM suites, and just plain old shelfware — applications that were purchased and then forgotten — are common and expensive. Costs related to the excess software add up: There are software license fees, maintenance fees and the cost of the IT labor needed to support the applications. On top of that, there’s a lack of integration and consistency among systems. Eliminating redundant or excess software can go a long way toward freeing up funds in an IT budget.

Sniffing Out Shelfware

There are several ways shelfware can accumulate, says John Schick, a consultant at Compass America Inc., an IT consulting firm in Naperville, Ill. “One way is mergers and acquisitions,” Schick says. “Another is through decentralized purchasing. That’s when one department funds a suite of tools, then another department funds a similar project and buys a second suite that does essentially the same thing.”

In Mueller’s case, lack of interdepartmental communication has been one of the chief causes. Like in many large organizations, departments don’t always coordinate their IT projects.

“We work constantly to communicate what this [Cognos software] can do. But there’s still a lot of duplication of effort with different departments, with different software systems, all trying to achieve the same thing,” says Lack.

Fortunately, there are a number of other ways that IT managers try to keep waste out of their software budgets. Here are some of their best suggestions:

[1] Beware of suite discounts. Software suites often wind up as shelfware, or partial shelfware. Jane Disbrow, an analyst at Gartner Inc., says plenty of CIOs complain that they’re not fully using large enterprise suites, such as multimodule ERP or CRM packages. She estimates that 25% to 30% of the capabilities within enterprise software suites go unused.

“Vendors really want to sell the complete suite of products, and they do that by offering very aggressive discounts,” Disbrow says. While that’s not initially a huge problem, given the large savings from discounts that can run as high as 75%, it can become one when the customer realizes that he’s paying annual maintenance fees on unused software.

“The vendors don’t want to remove those licenses [from the contract] because the revenue stream from maintenance is very, very profitable,” she says.

Lack says he, too, has seen managers unwittingly buy more software than they need. “Often, [the vendor] will throw in a sweetener, give them something extra. Maybe they’ll take them to lunch. Then [the managers] find themselves buying a new piece of software whether they need it or not,” he says. “It happens all the time.”

Steffani Lomax, an analyst in the Marlboro, Mass., office of Software Success Partners LLC, a consulting firm specializing in IT asset management, previously worked for an IBM organization devoted to helping customers with shelfware issues.

“Some large enterprise customers were complaining that they’d spent all this money on software but weren’t using a half of it,” says Lomax. “It wasn’t just IBM, but all vendors who sold the large, all-you-can-eat agreements. These agreements usually involve a huge discount, but they can also be three years long. Plans and priorities can change in that time.”

[2] Invest in software management tools. Asset management, license auditing and automated mapping tools all can help uncover and/or manage software assets and licenses. In some cases, say CIOs, it would be extremely difficult to learn of the existence of shelfware without the right technology to sniff it out. Here are examples of how different tools can help organizations get a better grip on their shelfware.

  • License management. The University of Michigan uses Sassafras Software Inc.’s K2 software license management suite to stay on top of software usage.

    “We create mountains of usage data through K2 that shows us in days, weeks, months, years the amount of usage an application has — by user, workstation, unit, department and so forth,” says Scott Lemm, IT contract administrator and IT asset management coordinator at the university.

    The data helps the university comply with license contracts and renegotiate them when use is lower than expected. “With usage data in hand, we can work with vendors to optimize our license by modifying contracts or by retiring the application,” says Lemm, noting that the university once saved $1.2 million through better license negotiations.
  • Application mapping. Boise State University uses Nlayers Inc.’s InSight, an appliance that can map out applications and their dependencies across an organization, says David O’Neill, executive director of the Idaho university’s office of IT. O’Neill uses that information both to evaluate the need to upgrade or downgrade licenses and to streamline application management — by consolidating licenses held by different colleges, or increasing or decreasing a site license, for example.

    “The appliance goes out and does an inventory of what machines are serving certain applications, who’s using them and where. Then you can find out what you are licensed for, what isn’t licensed and who’s serving it,” says O’Neill, noting that the results can sometimes be surprising. “In at least one case, I thought we were the only ones serving a particular application, but then I discovered that another one of the colleges was serving it as well.”
  • IT governance applications. These tools can offer a range of functions, including asset management, portfolio management and business process mapping. Warner Bros. Entertainment Inc., for instance, uses Troux Technologies Inc.’s Enterprise Architecture software to keep track of its portfolio and the relationships between the various applications and business processes.

    “[Using Troux], I can look for redundancies in my application portfolio... and take advantage of opportunities for consolidation and reuse,” says Douglas Rousso, vice president of architecture and planning at Warner Bros.

[3] Follow the maintenance money. Many CIOs advocate spending time with the accounts payable department. “Accounts payable people are going to have the best information,” says Schick. “Look for ongoing software payments and find out what’s included in the invoice. Often, it’s for a bundled suite of products, and there may be one payment that covers 30 or 50 payments. So ask what’s included in it, who needs them, and maybe talk to the vendor about lowering the price or getting rid of some of the products.”

Jeff McIntyre, assistant vice president of technology services at BNSF Railway Co. in Fort Worth, Texas, says it also pays to examine your maintenance contracts on a regular basis.

“Every year, I go through and say, ‘What is this, where are you using it?’ Because purchasing software is a double whammy, since you pay the license plus the annual maintenance fees of around 15%,” says McIntyre.

BNSF also tracks in-house application projects using a product from MKS Inc. to ensure that all development projects are fulfilling specific business requirements and aren’t duplicating past efforts.

[4] Advertise your assets. Rogue purchases by departments are huge contributors to the shelfware problem. So centralizing purchasing — and making it fairly easy for departments to get what they want — can help reduce maverick buying.

BNSF has a central Web site where users can get every software package the company owns, McIntyre says. “You can log on and see a list of standard products that anybody can download anytime,” he says. “If it’s not there, there are instructions on how to order it. But it’s easier for most people to get it by just downloading it from our site.”

It’s also a good idea to tell workers what software licenses the company owns, says Lomax. “Employees need to understand what licenses are available to them,” she says. “If they don’t know, they’ll be speaking to vendors themselves and purchasing software that the company already owns.”

Hildreth is a freelance writer specializing in enterprise software. She can be reached at

Copyright © 2006 IDG Communications, Inc.

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