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Technology Insights for Leaders in State & Local Government
6 Tips On Acing Asset Management
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Jeff Kunkle of the Housing Authority of the City of Colorado Springs recommends combining hardware and software into a single purchase.

John Johnston

6 Tips On Acing Asset Management

Follow these pointers to save money on software licensing.

posted January 11, 2012  |  Appears in the Winter 2012 issue of StateTech Magazine.

From office productivity applications to large databases, state and local governments depend on software to deliver services. Software licensing is therefore an essential consideration for public-sector IT managers.

But with budgets tight, IT managers face two tough challenges: controlling licensing costs without adversely affecting services and controlling the cost of administering the licenses themselves.

Jeff Kunkle, senior information systems analyst at the Housing Authority of the City of Colorado Springs, achieves efficient license management through consistency. By consolidating license purchases at certain times of the year and using standard hardware and software configurations, Kunkle substantially reduces the complexity of tracking licenses and ensuring timely license renewals.

There are several other ways organizations can reduce their overall licensing costs without compromising the ability of users to access the capabilities they need, when they need them.

Obtain outside assistance.

The Housing Authority further simplifies license management by offloading administration wherever possible. For example, Kunkle recently purchased both new hardware and the corresponding software licenses from CDW•G at the same time, rather than purchasing licenses directly from the software maker. By doing so, he gained the convenience of managing those licenses via the CDW•G extranet. Similarly, by contracting hosted services for web and e-mail, he also relieved his department of the need to track and manage licenses for the associated software.

"Whenever you can shift the burden of managing software licenses to a vendor, you're getting added value," Kunkle notes. "In many cases, it's included in the price of their service anyway."

Don't pay for licenses you don't need.

Don't assume everybody needs the ­licenses they have — or needs what they say they need. Agencies often purchase new ­licenses even though those they ­already have aren't all being utilized. This "shelfware" wastes precious budget dollars.

"If you ask someone whether they're using a given piece of software, they'll tend to say 'yes' just because they don't want you to take something away from them," explains Scott Nicewarner, technology and support services manager for the city of Hagerstown, Md. "The better approach is to audit your environment and see for yourself which licenses aren't being used."

Buy off the right schedule.

IT managers should check every license purchase against deals available through state contracts and the federal General Services Administration schedule. Comparisons should not be based on price alone, because the structure and terms of those licenses can also offer advantages.

"Software licenses aren't just about raw cost. They're also about other entitlements, such as portability, upgrades, support and volume discounts," says Shawn McCarthy, research director at IDC Government Insights. "All these factors can impact the total efficiency of your software spend."

Make virtualization work for you, not against you.

Virtualization can ratchet up software costs, because virtual machines tend to proliferate across multiple physical machines, leading to a need for additional licenses. But the hypervisors can also reduce costs by squeezing more performance from physical servers. The city of Alexandria, La., for example, was able to slash its Oracle costs in half by moving from two quad-core servers to multiple VMware hypervisors running on just one quad-core server.

"VMware utilizes processor resources with tremendous efficiency," says Blake Rachal, Alexandria's assistant director of information systems. "As a result, we not only cut our licensing costs, we also got better I/O, fewer application hang-ups and improved service levels."

Don't be afraid to negotiate.

While it's definitely useful to take advantage of statewide contracts or the GSA schedule, agency IT managers may still want to try negotiating with software makers or resellers for concessions — especially when price, training or implementation support are absolutely critical to an agency's objectives.

George White, CIO for the commonwealth of Pennsylvania, encourages public-sector software buyers to be creative when structuring their deals. "Most agencies are used to only paying for this year's licenses in this year's budget," White observes. "But, if regulations permit, you can gain substantial savings from vendors in the out-years of a multiyear deal by paying for those out-years in advance."

Use the right tools.

While some environments may be simple enough to manage with a basic spreadsheet, most are not. A good software license management tool will make it much easier to ascertain exactly what you have and to get the most out of it. It will also provide you with the reports you need to ensure compliance with your software licensing agreements.

"I like having at-a-glance visibility into all of our software assets," says Hagerstown's Nicewarner. "It lets me make fact-based decisions about software purchases and pinpoint opportunities for cost savings."

Peaks, Valleys and Clouds

One common problem state and local governments face when it comes to purchasing software licenses is the fluctuation in their needs. During peak periods such as tax season, for example, an agency's needs may be greater than at other times of the year. Agencies will also need fewer licenses if they reduce their staff headcount.

Conventional licensing models force IT departments to buy enough licenses to cover their peak requirements, even though those peaks may last for only a few weeks.

Public cloud services offer a possible solution. Because cloud vendors can charge based on month-to-month utilization, agencies can quickly scale up their capacity as needed and then scale it back down when the peak has passed.

Several states, however, are also starting to implement their own private cloud services. Under this shared-services model, states can make their licenses and other IT resources available to county and municipal agencies for a fee. This allows resources to be dynamically allocated as needs fluctuate.

"We're starting to see cloud hubs emerge in Michigan, Utah and elsewhere," says Shawn McCarthy, research director at IDC Government Insights. "Shared services eliminate the need for every agency to maintain its own infrastructure — which means savings in payroll and energy consumption, in addition to actual software and hardware expenses."

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