If the Department of Defense couldn’t account for the tanks, planes and weapons it purchased, there would be hearings and heads would roll. If the Social Security Administration didn’t track who paid into the system and who is eligible for benefits, the system would collapse. If the Nuclear Regulatory Commission didn’t have systems in place to track the nation’s fissionable material…the public outcry would be deafening.

In truth, no government agency can function without the ability to see, manage and account for the core assets critical to its mission. But in essence, that’s what’s happening right now with the federal government’s software assets. And legislators are getting wind of this disconcerting fact, and they’re taking action.

It shouldn’t come as a shock to anyone who knows their way around an iPhone that apps have infiltrated how we live, work and govern. “There’s an app for that” applies to every aspect of our lives, our jobs, and our federal government. Without software, the very cogs of government would not function.

And the government buys a lot of software. According to research firm IDC the federal government will spend more than $9 billion on software this year. And much of that spend will be wasted.

Most organizations spend too much – anywhere from 10% to 30% too much – on software, based on experience. It’s wasted when organizations purchase too much software that they don’t need – turning software into “shelfware.” It’s also wasted when organizations don’t understand and apply their license entitlements, such as vendor-specific product use rights, and when enterprises don’t purchase the right license types for their users.

The problem is so pervasive mainly due to the complexity involved in tracking and managing software licensing and usage.

“It sounds counter intuitive, but it’s very difficult to know how much software an organization actually has versus how much it actually uses. And if you don’t know this, you can’t accurately determine how much you need to buy,” said Amy Konary, research vice president, Software Licensing at IDC.

“License agreements are enormously complex and can be hundreds of pages long and contain very detailed rules around installation and usage that must be adhered to. When you consider that the federal government runs at least thousands of different software applications, managing this asset becomes extremely complex,” she said.

But increasingly, federal agencies are becoming bolder about tackling the problem – because the payoff can be so substantial.

For instance, one US military agency we’ve worked with was facing budget cuts of one third, or $15 million, in its IT operational costs for fiscal year 2012. In order to avoid slashing mission-critical services, the agency got creative in looking for new pools of waste – and discovered that software license optimization was an untapped resource for significant cost reduction.

The agency piloted the concept, by focusing on optimizing just one of the hundreds of applications that it runs – in its case, Autodesk design software. In the process, it slashed the number of licenses it needed by three quarters, and reduced its annual software maintenance bill by more than $3 million, for a total 6-year realized savings of more than $17 million in maintenance costs – for just this one piece of software.

The agency now believes that it can achieve its budget cut objective solely through centralized software license optimization.

Once an organization arms itself with visibility into how much software it actually needs, how much it uses, how much it owns and what its usage rights are, the potential savings are often staggering. The magnitude of this agency’s cost-savings is typical for what we see in both private enterprise as well as the federal government.

Feds Are Getting the Message

Government officials are waking up to the opportunity. With acrimony in Congress at an all-time high, the appetite for compromise at an all time low, and the drumbeat for budget reductions relentless, the lure of cutting billions of dollars in unnecessary waste from the federal budget – without controversy or the need for political brinkmanship – is irresistible.

On September 21, 2011, the Senate Homeland Security and Governmental Affairs Committee approved its version of the DHS Authorization Bill (S. 1546). The bill included language that requires the Chief Information Officer (CIO) of the Department to achieve the greatest possible economies of scale and cost-savings in the procurement of software licenses.

Congressman Joe Walsh (R-IL) also connected the dots between federal spending waste and software licenses. In October, 2011, he announced the successful introduction of an amendment to H.R. 3116 in the House version of the Department of Homeland Security authorization bill to eliminate wasteful software license spending.

Agency and department heads are also getting the message. In April, 2012, Department of Defense CIO Teri Takai, as part of a House Oversight and Government Reform Committee hearing examining efforts to reduce waste in IT spending, was asked about the department’s efforts to improve software license optimization.

Takai’s response:

“The department understands the importance of effective IT asset management in order to avoid over buying or over deployment of commercial software… To this end, the department proactively shares best practices, such as the Navy Facilities Engineering Command’s enterprise license optimization approach, with and among Defense Components. Establishing and enhancing an IT asset management framework for use in the department that includes software license management optimized at the enterprise level is an element of the emerging DoD Joint Information Environment.”

And more recently the Senate Committee on Armed Services took notice and has proposed language to ferret out waste in federal software procurement. In Section 931 of National Defense Authorization Act for 2013, the senate version of the bill text directs the CIO of the Department of Defense to conduct an inventory of software licenses and consolidate the department’s software spend.

Similar reforms in software procurement are being considered in other legislation, and will be watched closely by budget hawks this fall when Congress convenes after recess.

Perhaps the momentum behind software license optimization is building because it is so fruitful and yet non-controversial.

“Businesses and governments are now awakening to the extent of the waste that exists in most software procurement processes,” said Konary. “If you can apply some best practices and technology to solve an expensive problem that at one time was unknown or appeared intractable – why wouldn’t you?”