With Software Overspend Running Rampant—and Unrecognized—What’s a CIO To Do?

By Marc Snyder, Managing Director, KPMG Management Consulting, and Amin Qazi, Director, KPMG Management Consulting

Think $12.3 billion annual overspend on commercial off-the-shelf (COTS) is a big wallop to U.S. companies’ pocketbooks? KPMG LLP (KPMG) believes the dollar amount may be considerably higher than that estimate, presented in independent research firm Opinion Matters’ “Software Efficiency Report 2011 – U.S.” report.

The unfortunate reality is that many organizations allow license entitlement and deployment mismatches, maintenance agreement excesses, and utilization misalignment to slice sizeable, unnecessary chunks out of their information technology (IT) budgets. Moreover, they frequently lack awareness of these often preventable spend issues, as they tend to ineffectively manage their software assets, their software lifecycle, and their governance function.

During client engagements focused on mitigating software overspend and identifying cost savings opportunities, KPMG typically concentrates on two work streams: license and maintenance cost reduction; and improving software asset management (SAM). And, with a trickle-down effect, numerous clients have generated sufficient savings through effective focus on cost reduction to fund their SAM refinement efforts.

As presented in the KPMG paper, “Eliminating waste from the software cost equation”, the following actions should help IT executives achieve ongoing software spend success:

Define and establish a SAM process that addresses:

  • Roles and responsibilities with unambiguous accountability and performance metrics
  • A clear interaction model between groups requesting, procuring, and managing software assets

Manage software asset information, and make sure the technical strategy includes:

  • Data clean-up and alignment between current systems and tools
  • A central SAM repository integrated with existing tools
  • Automated license pool management
  • Streamlined reporting for managing compliance risk

Work with IT customers to identify and agree on:

  • A software portfolio that supports the common needs of all IT users
  • More accurate attribution of software expenditures

For more details on areas in which companies often unknowingly overspend on software, the root causes of this waste, and a case study on how a major financial services company identified $16.8 million in software cost savings opportunities, please read, “Eliminating waste from the software cost equation.”

Please visit the KPMG Advisory Institute for the latest thought leadership from Management Consulting and KPMG’s microsite to learn more about guiding the CIO agenda.

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