The federal government spends approximately $19 billion per year on software. And mounting evidence from government watchdog groups reveals that much of this strategic expenditure is being needlessly wasted. Agencies unknowingly buy more software than they need, pay maintenance fees for software that’s sitting on the shelf and at the same use software they don’t own – subjecting the government to steep penalties. In short, the government is wasting billions of dollars on its software.
According to a recent report by the Treasury Inspector General for Tax Administration (TIGTA), the IRS is wasting as much as $114 million on software it purchased but has never used. Moreover, the TIGTA report found that simultaneously, the IRS used software that it never paid for, resulting in an additional estimated $29 million in costs.
The TIGTA report is only the latest in a series of investigations suggesting widespread and massive mismanagement of the federal government’s strategic software assets. In August 2013, the Naval Inspector General published a report that found, among other things, noncompliance in the U.S. Navy’s software procurement practices. In May of 2014, the Government Accounting Office issued a comprehensive report detailing agency-by-agency software license mismanagement.
So, how bad is the problem?
According to technology research firm IDC, software license complexity will indirectly cost organizations an average of 25 percent of their software license budgets by 2015. Waste at this level occurs because agencies cannot easily determine how much software they need. Nor can they easily see whether and to what extent they are under- or overusing the software. All told, this means approximately $4.7 billion of the federal government’s $19 billion software spend is likely being wasted because it is not proactively applying software license optimization best practices and automation to manage software license compliance and spend.
Software license management is complex
The government is not alone. Private sector organizations face the same challenges. Why? Because effectively managing software licenses is very difficult – and impossible to do manually.
Software’s digital nature makes it hard to determine where software is installed and/or being used. To comply with extremely complex software license agreement rules, agencies must track who is using the software, where it is being used and reconcile this data with contract terms. Finally, cloud computing, virtualization and mobile device use further complicate software license management.
However, software license optimization best practices and technology have emerged that can largely solved this problem.The private sector is rapidly adopting these practices and is significantly reducing waste in software spend. And if the work of one federal agency is any indication, the U.S. government can, too.
How to solve the software problem
In its report, the GAO laid out a practical list of recommendations, which, taken together, would make a solid foundation for a federal software license management policy that would save taxpayers money while maintaining capabilities. Those included:
- Identify clear roles, responsibilities, and central oversight authority within each department or agency for managing enterprise software license agreements and commercial software licenses.
- Establish a comprehensive inventory by identifying and collecting information about hardware and software installed in the IT environment using automated discovery and inventory tools.
- Regularly track and manage software licenses to assist the agency in enacting decisions throughout the software life cycle.
- Analyze software usage and other data to make cost-effective purchasing and contract renewal decisions.
- Provide training relevant to software license management.
- Establish goals and objectives of the software license management program.
- Consider the software license management life cycle phases (i.e., requisition, reception, deployment and maintenance, retirement, and disposal phases) to enact effective decision-making and incorporate existing standards, processes, and metrics.
Some government agencies are already doing this well and can serve as a model for the rest of the federal government. For instance, the Naval Facilities Engineering Command (NAVFAC) saved millions of dollars simply by optimizing licensing and maintenance for a single software vendor – Autodesk, out of the many hundreds that could ultimately be optimized. In doing so, they didn’t degrade their capabilities at all by saving themselves and the taxpayer some money. In fact, they were able to reduce software costs and support more users at the same time.
Using best practices and technologies similar to those recommended by the GAO, NAVFAC was able to reduce its Autodesk license count from 3,500 to 800. As a result, the NAVFAC’s Autodesk annual maintenance cost plummeted from $3.5 million to approximately $400,000. In total, over the past six years, it has saved more than $17 million on maintenance costs for just this one software title.
If you extrapolate these results across the federal government – the feds could recapture a significant proportion of its wasted software spending and fund other programs with this savings or return it to taxpayers. Many of the largest and most sophisticated companies in the private sector are now leveraging software license optimization in this way, and if NAVFAC is any indication, there is no reason why federal agencies could not do so and gain control over their software assets, establish governance processes and deliver material savings.
Jim Ryan is the chief operating officer at Flexera Software, where he leads the company’s worldwide sales team, ensuring operational alignment and driving organizational development and leadership. Jim has been affiliated with the business since 1998.