Tips for trimming IT costs (page 1 of 2)

According to a recent analyst report, global financial services companies spend around $350 billion on information technology (IT) a year, including costs for proprietary and packaged software and hardware. And of this budget, approximately 36 percent of total IT spending in global financial services firms will go to third-party providers for software, professional services and outsourcing - including software licenses.

While companies strive to use IT as a competitive advantage, they are also looking for ways to streamline costs and the IT organization is often a good place to start. Within the IT department, software licensing is perceived as a confusing and expensive piece of the IT budget. But it's getting easier to decipher and IT managers, armed with a few tips, can learn to trim unnecessary costs.

In order to effectively manage software costs, it's important to have a keen understanding of the elements that affect licensing expenses, such as selecting the right product and licensing metric, and understanding the assortment of license terms, maintenance programs, financing options and available promotions.

Software options

Today, software vendors offer more options and flexibility than ever before and enterprises would do well to take advantage of new ways to get more value for the money they're spending. To do that, a customer must take the essential first step of evaluating their existing software licenses.

Just like every smart business tracks its physical assets, such as desktop computers and telephone handsets, IT managers should take equal care in tracking their software assets. That involves knowing how licensing agreements are set up, understanding how many workers are authorized to use the software and the conditions under which they can use it.

Once an IT manager has performed an evaluation of existing licenses, it becomes easier to determine if their current licensing configuration meets their needs. For some companies, something as simple as changing the type of the license from user based to processor based can save money or buying the base product compared to the premium product, which has features and functionality beyond a customer's current needs.

Most reputable companies have migration paths that allow you to upgrade to a more advanced product with more functionality when you need to. While there will be additional licensing fees required, it's still cheaper in the longer run to buy what you need when you need it.

Many enterprises can also reduce software costs by choosing a term license instead of a perpetual license. Typically these licenses are a good value for corporate initiatives that have a limited scope and therefore they have a limited duration for the length of time the software will be employed.

Term license agreements

Other companies have used term license agreements for pilot programs that will initially roll out in only a few locations. Later, the customer can then upgrade to a perpetual license when the program is introduced everywhere. Again, you will be saving money until the upgrade to a perpetual license is truly needed.

Another opportunity to examine ways to cut costs is when big changes within the enterprise occur. In these situations, close coordination with the human resources department will help. With knowledge of employee movement, an IT manager might learn that at the same time the company is adding a new division, it's also cutting a different one.