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Know your software assets

By Martin Lynch

Who would want to be a company director? The upsides might range from the company BMW to the holiday home in Provence, but the downsides, especially for those in companies with inadequate software licences, are now quite severe. Until last year, a director of a company with inadequate licences or pirated software could be held directly responsible and face a two-year jail sentence. Since November, that jail term has jumped to 10 years.

It is widely accepted that no one will get 10 years for the crime, but the threat is there.

Along with hefty fines and public humiliation, the efforts of groups such as the Business Software Alliance (BSA) and the Federation Against Software Theft (Fast) are helping firms to wake up to the issues of compliance and asset management.

To have a Get out of Jail Free card these days, you have to know what your IT assets are, particularly your software assets. The BSA maintains that just one in five UK companies has any software auditing tools installed.

For the channel this translates into four out of five UK companies desperately needing to be sold some asset management software and services.

In fact, it is safe to say that if you are a reseller in the software game, most of your clients will have no asset management capabilities.

According to analyst Gartner, less than a quarter of firms worldwide have an IT asset management programme in place that can determine potential dangers.

It claims that without knowing what is there, companies end up gathering incorrect information on hardware and software upgrades, overspending on them, increasing their support costs and raising the average total cost of ownership of IT by seven to 10 per cent.

Ripe market for harvest

Asset management is a market ripe for harvesting, and it's growing all the time. Analyst IDC predicts that IT asset management software will become a $1.2bn business worldwide by 2005, up 42.1 per cent from the 2000 figure of $861m.

It expects much of this growth to be driven by large enterprise deals and the need for organisations to manage IT hardware and software assets smartly.

That said, the SME arena in the UK is vast and most have nothing in the way of auditing tools.

The channel opportunity is evident, and this is not just because hardly anyone knows what hardware they have. It is because most of the inadequately licensed software is being used by firms that are ignorant of their situation, rather than deliberately dodging licensing fees.

They don't only need help, they want it.

"The majority of offences are down to a simple lack of awareness, not deliberate," says Mark Floisand, chairman of the BSA.

"Obviously, some companies are not afraid of breaking the law and we have come across some that thought they were untouchable.

"But now, from a prosecution and settlement stance, we have found the police and legal system very keen to tackle the problem."

Steve Reynolds, managing director of Civica Services, agrees. "There are very few companies that break the licensing laws deliberately.

"Most companies actually think that when it comes to their own licensing they are there or thereabouts, but sadly they are not," he says.

Greg Finnigan, European head of sales and services at Bell Microproducts, says: "Most licensing problems are down to ignorance.

"The BSA does a lot of work via mailers that ask firms if they need help, and that's the right way to go because it all boils down to education.

"Large companies have a more complex set-up to manage, while small companies don't recognise the need to know exactly what they have. After all, licensing programmes can be complicated."

Asset management low on the agenda

Why is asset management so low on the agenda for many companies?

According to Reynolds: "Asset management is not the highest thing on the priority list for companies trying to survive, restructure, raise their share price and make redundancies.

"With 10 things on the agenda, asset management is probably last on the list."

Floisand adds: "It hasn't been the first thing on their list of priorities, but this is changing now. UK legislation has placed the responsibility squarely on the shoulders of directors with the possibility of very long jail sentences."

Nish Shah, product manager for the SystemHound asset management suite at Software Innovations, agrees.

"Companies are becoming more aware of the fines and jail sentences and they want to be licensed. They know that they can no longer afford to be illegal. There is a culture change going on now."

Ignorance is no excuse in the eyes of the law, though. Groups such as the BSA and Fast are visible reminders of the fact, constantly cranking up the intensity of their campaigns.

On the piracy front, a quarter of all software used in the UK is pirated, down from 30 per cent five years ago. The UK has the lowest piracy rate in Europe, with some of its neighbours looking at piracy rates closer to 50 per cent.

China takes the prize for the most pirated software, with 94 per cent. A recent study - the world's largest software piracy survey - conducted for the BSA by IDC, found that reducing the software piracy rate in the UK from 25 to 15 per cent would increase the value of the IT sector from £37.5bn to £54.4bn and create over 40,000 jobs over four years.

But asset management is about a lot more than just getting your software licences in order. Most tools also help firms track component changes, service-level agreements, support costs and upgrade needs.

However, fear of the law doesn't sell software half as well as benefits.

Asset management software might make you legal, but there are a host of other good reasons for a company to know just what they have. Fear might open the door, but it's the raft of positive benefits that allows resellers to close the deal.

Positive benefits

Not least of these is the chance that most companies, big and small, could be paying too much for their software licences.

Finnigan says: "Customers that don't know what they have are paying too much. About 15 per cent of any IT budget is software-related, so it pays to know what's going on.

"We did research on the top three reasons why end-users want asset management solutions. They are legal reasons, software version control and getting value from their IT.

"Standardising versions reduces support costs. Also, when you know exactly how many users and systems you have, you can buy your software in one go, not in bits and pieces. This alone will get you a discount of about 10 per cent."

Reynolds adds: "Companies today want to know two things: one, are we spending the right amount to be legal and compliant, and two, are we spending too much? Many companies are paying more for the software they have than they need to.

"It is not uncommon to find companies with older, Unix software, for instance, that have moved to a PC-based Windows environment but are still paying for a 100-user licence when only two people still use the application."

According to Nick Shaw, regional manager UK and Ireland for asset management software vendor Altiris, asset management means much more than just software compliance.

"Knowing where the hardware is, how old it is and what exactly needs to be replaced or upgraded can save money," he says.

"Application metering can tell you exactly who is using the software, and whether or not the number of licences you have for that software is justified.

"If you are thinking of moving to a new operating system, asset management tools let you easily find out if you have the right hardware requirements. The cost of auditing a PC by hand is not cheap. It can be anywhere from £20 to £50."

Shah agrees that the benefits of asset management tools can be seen across the whole of an IT infrastructure.

"You can suddenly find out what versions of software you are using, as well as find out whether you are under- or over-licensed," he says.

Shaw claims that conservatively, the return on investment of asset management software ranges from 100 to 120 per cent in one to two years.

Strengthening customer relations

Resellers are perfectly placed to strengthen their customer relations, armed with increasingly important cost-saving arguments.

According to Floisand, the reseller is coming to the rescue. "The reseller is often the knight in shining armour here and the opportunity in this market is great," he says.

Reynolds agrees that the market has a lot to offer. "Reselling software offers small margins on the sales front and it is in all of our interests to do some value- add.

"After looking at the market for nine months, we started offering an audit service to our customers, and the interest levels have been high," he claims.

Shaw says that over 90 per cent of Altiris's business goes through the channel. "Asset management for resellers is great for getting more business.

"It is not a saturated market. As well as a good way of making more money, it is a great way to increase your credibility with customers.

"In today's market conditions, resellers really have to help their customers, and helping them save money with asset management tools is a good way of strengthening relationships."

The BSA is happy that the message seems to be getting through on the software front. Making auditing easier and accessible to all has gone a long way towards raising awareness of the issues.

Nearly 9,000 companies out of 43,000 that the BSA wrote to completed an online software audit return, declaring that all the software on their systems was legitimate.

The response was a lot higher than it would have been a year ago. Vendors are also on the education trail.

Microsoft is visibly doing more to raise the awareness levels of its customers, especially following the public whipping it received last year for overhauling its volume licensing set-up without properly educating the channel and its customers.

"I think there was a lot of concern and a bit of a backlash to the Microsoft changes last year," Reynolds recalls.

"Microsoft was acting too dominant and overcharging for some of its desktop products. It played it all wrong, but it is being smoothed over now."

Even Microsoft admits that it got it all wrong and is now a lot more proactive about educating customers about the joys of asset management.

It has just launched a new campaign that it claims will help users stay legal and get a better licensing deal.

It plans to distribute a new booklet, Buying Microsoft Software, through trade bodies, exhibitions and via its website.

The role of the depressed economy cannot be underestimated in making asset management tools attractive.

With so little extra cash to spend, firms want something that will help them to save money. With solutions starting at under £200, there is a solution for all budgets.

And, looking at the research, there is no shortage of potential customers.


Many companies find they have too many software licences or are still paying for licences on older, little-used software. Also, keeping software versions the same saves on support costs.

According to Gartner, standardising a company's software products can reduce the duration and frequency of support calls by 15 per cent.

Staying legal

The chances of being visited by the Business Software Alliance or the Federation Against Software Theft are greater than ever - especially with a reward of up to £10,000 for whistle blowers. Bad publicity sticks, fines are larger than ever and jail sentences for directors have been hiked.

Lower hardware maintenance costs

An up-to-date list of hardware allows firms save money by enabling them to make more intelligent upgrades and negotiate realistic hardware support, disaster recovery and insurance contracts.

Tighter security

Auditing tools track IT moves, changes and installations, and also highlight any stolen machines or components. They also let IT managers see if unauthorised, restricted or illegal software has been installed on company PCs.

Due diligence

A comprehensive audit of the hardware and software is often a pre-requisite of an IT outsourcing contract, company merger or acquisition.

First published July 21, 2003

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