Software Sweep

Here are four proven strategies for identifying and clearing out costly shelfware.

Researchers estimate that seven out of 10 companies have little or no idea who exactly uses the software deployed throughout their businesses. Many of these companies are equally clueless about what their software portfolios include and whether the applications have actually been installed or remain shrink-wrapped and collecting dust on cubicle shelves.

In 1999, U.S. corporations wasted $90 billion by buying IT assets they already owned, buying the wrong technology and making unnecessary payments for returned and retired hardware and software assets, according to Meta Group Inc.

Five years later, the same problems remain rampant. Gartner Inc. estimates that most companies typically have about a 30% discrepancy between what they think is in their IT inventory and what they really have. Yet many still fail to collect and integrate software usage data into their overall IT management plans. Consequently, U.S. businesses continue to overbuy licenses for 60% of their software portfolios and are noncompliant on another 30% of their software assets, Gartner says.

But poor IT asset management isn't the only culprit. So-called shelfware can accumulate as a result of canceled or scaled-back projects, corporate downsizings, decentralized IT purchases, a failure to adequately train and subsequently monitor users or a failure to buy the right technology to begin with.

Here are four proven tactics for identifying and clearing out shelfware, plus leveraging the software you have to yield maximum business value:

1 Purchase Just in Time. Buying only the software you need -- and only when you're ready to use it -- sounds simple enough. Yet vendors' offers of hefty volume discounts, sometimes as high as 50%, frequently induce companies to buy ahead for projects still in the planning stages or to buy more licenses than they immediately need as a way to accommodate future growth. Neither option is a good deal, experts say.

"It's a time-delay issue. The more you buy, the better the deal you get upfront, but the more maintenance you pay down the road," says Gartner analyst Scott Nelson. He notes that vendors usually peg maintenance fees to list prices, not discounted prices, and the fees kick in immediately, regardless of whether the software has been installed. The upshot is that the long-term savings are negligible.

That's one big reason CIO Jim Jackson says he doesn't purchase software suites for his company, Intertape Polymer Group Inc. in Bradenton, Fla. Instead, Jackson and his IT team identify the specific requirements of a user group and then buy an off-the-shelf software package that meets 70% to 75% of those requirements.

"That way, I achieve immediate benefit on the implementation of that product," he explains. "I then look at the remaining requirements and, in most cases, I can go out again and buy another off-the-shelf package and bolt it on and achieve up to 90% of the original requirements. I've never had to go more than one iteration beyond [the original package]." The result: "I don't have software sitting on the shelf," Jackson says.

2 Hire a Software Evangelist. "You have to put someone in place and make them accountable for watching over an application to make sure it has a business impact," says CIO Rich Bursek at Lydian Trust Co. in Palm Beach Gardens, Fla.

Lydian recently implemented a multimillion-dollar IP telephony system from Cisco Systems Inc., and Bursek hired a dedicated person whose job is to make sure that users leverage all of the system's features. The evangelist also conducts ongoing training and looks for additional ways to integrate the new IP telephony system with existing software.

Bursek also hired an evangelist for Lydian's deployment of enterprise business intelligence and reporting software from Crystal Decisions Inc. Because evangelists feel they have ownership of their particular applications, they tend to be passionate about their use, Bursek says.

But constant vigilance is also critical. Almost two years after completing a new $10 million customer service and call center system, PacifiCorp, a Portland, Ore.-based electric utility, continues to monitor employees' usage and gather their feedback about the system as a way to gain maximum business value from it.

"After a system goes in, we monitor who's using it and ask if they need additional training and hold focus groups to see what changes they'd make," says Jann Davis, director of systems development and asset management.

One of the initial goals of the system was for PacifiCorp's 325 call center agents to handle 80% of incoming calls in less than 20 seconds. This entailed scripting responses tailored to the types of calls that typically came into the company's two call centers. But keeping the team to the 80/20 rule was a problem because certain team members wanted to script responses for the rarest types of customer requests, says Davis. "I had to keep pointing out we didn't need a Ferrari," Davis says.

3 Charge for Software Usage. If only one or two departments use a software application that costs, say, $500,000 a year in license and maintenance fees, shift the expense to those departmental budgets, suggests Dave Dworkin, director of product management at Isogon Corp., an asset management software and consulting company in New York. "We see these types of applications all the time," he says. "And it's amazing how quickly the department can do without the application."

A variation on this pay-your-own-way model is in place at Houston-based BMC Software Inc., where all software purchases are approved by IT but are paid for by individual departments. "If someone wants a new application, they come to IT and ask for it, but they come with their checkbook," says CIO Jay Gardner. An added benefit of BMC's centralized buying and strict IT governance model is a much more accurate picture of the company's hardware and software inventory and overall IT infrastructure usage.

"To control costs, you need a good understanding of which applications are using which servers, network components and databases. IT and CIOs have been forced to be more cognizant of this issue because they're much more accountable for the money they spend," Gardner says.

On the other hand, Lydian's Bursek says a decentralized IT buying model can also keep departments from overbuying software or buying software that languishes unused. At Lydian, each business unit has its own technology group and its own profit-and-loss responsibility. "They don't want to overbuy because it has a direct impact on their P&L," Bursek says.

4 Reuse and Retire. Business departments seeking a new piece of software at The Vanguard Group Inc., a mutual funds giant in Valley Forge, Pa., take their requests to the so-called tech team, through which all IT acquisitions are made. Reusing standardized software already in place is the team's top priority. "If a [user] group wants an ad hoc reporting tool, we'll go through our [enterprisewide] inventory of applications, and if we have a standard tool in place, we tell them what it is and what it does. Then their job becomes knocking out the incumbent software," explains John Mercante, a principal who heads Vanguard's technology operations. Replacing software is a zero-sum exercise at the company. Multiple software tools and applications that do the same thing simply aren't tolerated, he says.

That's why retiring software is just as important as buying it, Mercante emphasizes. In 2002, Vanguard retired 87 software products when better ones came along to take their place. In 2001, it retired more than 100 applications. The company also has a dedicated program manager of software retirement.

"Pulling the plug is a very key metric for us," says Mercante. "We constantly look at what we brought in and what we've retired. It pays huge benefits, but you have to control monitoring and accountability."

Copyright © 2004 IDG Communications, Inc.

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