Congressman Joe Walsh (IL-8) is chairman of the Small Business Committee’s Subcommittee on Economic Growth, Tax, and Capital Access

On Oct 13, 2011, I announced the successful introduction of an amendment to eliminate wasteful software license spending in the House version of the Department of Homeland Security authorization bill. The language of that bill provides, among other things, that the chief information officer of the DHS:

• Conduct a department-wide inventory of all existing software licenses including utilized and unutilized licenses;
• Assess the needs of the department and the components of the department for software licenses for the upcoming two fiscal years; and
• Examine how the department can achieve the greatest possible economies of scale and cost-savings in the procurement of software licenses.

Why did I do this?

The answer is simple – anywhere from 10% to 30% of the federal government’s software spending could be eliminated through better software asset management. This legislation, aimed to rein in software spending at the DHS, is as good a place as any to start eliminating that waste.

This amendment answers the question: how can you give more productivity to users through software, while spending less money?

This bill brings into clear focus something that private enterprises have struggled with for years. The complexity surrounding enterprise software licenses is mind boggling, making it very difficult for organizations to understand how much software they need, how much software they have, and how much software they’re actually using.

This results in two wasteful consequences: 1) endemic over-purchasing of certain software packages; and 2) endemic under purchasing of others.

Over Purchasing

Over-purchased software – commonly known in the technology industry as “shelfware” – typically occurs when large organizations negotiate discount rates on software when they purchase licenses in bulk – but they don’t actually use all of the licenses they purchased. This means the negotiated discount is illusory because the organization has paid for more licenses than it needs.

Under Purchasing

Software license under purchasing occurs when the organization doesn’t purchase enough licenses – so there are more employees using the software than the government agency has a right to use. (It’s very easy for users to access licenses they haven’t paid for – so this happens all the time in government as well as private enterprise). The end result is that the organization is “out of compliance” with the software vendors’ terms of use. Software vendors frequently “audit” their customers to determine whether they are in compliance. If they are not, the organization can be saddled with “true up” bills for software that has been used and not purchased. And those true ups can run into the millions of dollars – and true ups are never budgeted for nor anticipated.

In the private sector, companies are becoming increasingly aware of Software Asset Management and Enterprise License Optimization as a means to bring software costs under control. Technology analyst firms like Gartner and IDC recognize software asset management as its own category warranting research and analysis of the problem and solutions to help organizations come into compliance.

In a recently published report on government IT — Predicts 2012: Government CIOs on a Tightrope — Gartner calls out the challenges for government as it reins in technology spending:

• Cost optimization remains top of mind for most government agencies, but there is a growing realization that what is at stake is their ability to continue operating and delivering services at the same or better levels while being asked to deliver unprecedented levels of efficiency.

• The key challenge for governments will no longer be to transform to improve their services, but to be able to fulfill their statutory obligations. While technology investments could favorably impact productivity and help with sustainability, cost containment remains a top concern, forcing IT executives and their organizations to embrace more agile and evolutionary development approaches, as well as more radical sourcing options.

Some software vendors, such as Flexera Software, are tackling the issue with solutions that are now widely adopted in the private sector to ensure continual compliance and license optimization. And corporations around the world – like Rentokil Initial, one of the largest business services companies in the world – are focusing on this issue and experiencing savings by getting their software license spend under control.

Given the critical need of the federal government to reduce spending, focusing on software license optimization is a no brainer. According to IDC, in 2010 the Federal government spent over $40 billion on software. If we can optimize that spend, the savings could amount into the billions. The passage of the amendment to eliminate wasteful software licenses brings us one step closer to realizing those savings.

The message is clear that cost containment will be a continuing dominant theme in government IT – but even more important will be cost containment strategies that deliver more capability and productivity to end users. That is, delivering more value for less spend.

This is actually one of the primary themes around software asset management and license optimization and why I introduced this amendment, which answers the question: how can you give more productivity to users through software, while spending less money by optimizing software procurement, reducing software audit cost and risk, and improving IT operational efficiency?

There is a tremendous amount of waste currently institutionalized in the federal government’s current system (or lack thereof) in procuring and using software.

Adopting best practices from the private sector around software asset management and license optimization is a painless and efficient way to eliminate this wasteful spending, while increasing the value being delivered to government employees.

I’m hopeful that when the amendment I introduced gets voted upon and goes into law – we will have taken some significant strides in eliminating that waste.