Jul 28, 2016

The Sky's the Limit: Managing Software in a Hybrid Cloud World

Cloud adoption is racing forward at lightning speed. Global SaaS (Software as a Service) software revenues are forecasted to reach $160 billion in 2016 according to Forbes. It’s no surprise that a recent CIO article stated that 93% of businesses are now using some form of cloud technology.

Software vendors are also racing to keep up with cloud conversion. Since cloud service fees (such as SaaS) actually dilute their revenue and reduce short-term profits, you can expect vendor audits to escalate in an effort to generate lost sales revenue. In fact, 53% of cloud-focused enterprise professionals perceive “Compliance/Managing Costs/Control” as a top cloud challenge.

But cloud migration has a shiny, silver lining!

While vendors work to develop methods to track cloud licensing compliance, your organization can stay a step ahead by making sure that your Software Asset Management (SAM) program is razor focused on cloud challenges. By thinking strategically about license management, you’ll be prepared for upcoming changes in your environment.

The new world order: A hybrid existence

Most of us already reside in a hybrid-cloud world – licensing a mix of both on-premises, and cloud-based services. Last year, 82% of enterprises had a hybrid strategy, up from 75% in 2014. This precarious state is hard to avoid. Most vendors have yet to abandon all traditional licensing, and most organizations are not positioned to operate 100% in a cloud-based environment.

Yet, we’ve already witnessed a shift in how vendors approach the audit game, as they actively use audits to push their cloud offerings. Since vendors are under pressure to move you to the cloud, the audit process can be potentially beneficial for you – if you come prepared to bargain.

There are two main ways this can affect your SAM program. Understanding these insights is critical for your negotiation tactics with vendors. 

  1. Swapping unused traditional licenses for cloud services. Vendors are desperate to push cloud subscriptions. As a result, you can often proactively migrate unused “shelfware” licenses (licensing software that you already own, but don't actually need or use) and maintenance payments into new cloud services during audit negotiations. Larger vendors actually have established several programs offering discounts and incentives for you to do this. Remember to only buy the discounted cloud services on the licenses that you do not really need. We’ve seen extremely high discounts offered to customers who are able to position themselves with their vendor and take advantage of these programs.
  2. Purchasing cloud services to avoid audit fees. Vendors may push you to purchase cloud services in lieu of additional fees during an audit, even if you don’t actually need them. Selling cloud services remains a top priority for vendors, despite that many cloud subscriptions are being implemented at a slower rate or perhaps not even at all. For example, even though Office 365 reports revenue growth, organizations who purchased those licenses may not be ready to use them. Be savvy about what subscription services you need now – and avoid spending your budget on cloud licenses that will essentially become shelfware. 

Cloud compliance: A thunderstorm of risk 

A common industry myth is that compliance risk will be lower as cloud adoption increases. However, Gartner research actually shows that as SaaS becomes more widely spread, compliance metrics will shift from a simple count-based system (per CPU, per core, per install) to a more complex consumption-based system (per CPU hour, per authorized user at a specific point in time). So how do changes in compliance metrics impact your risk? Consumption-driven metrics can carry serious additional financial risks of unplanned costs, particularly when more hours than anticipated are used. An effective solution is to implement consumption-based analytics into your SAM architecture to prevent unplanned costs and business interruption.

In addition to a metrics shift, there are several other areas that cloud exposes for increased compliance risk within your organization. By defining comprehensive methods to defend yourself against these high-risk areas, you can further cloud-proof SAM foundation:

  • Unapproved and Untracked Services: Cloud services may be purchased outside IT Dept.
  • Hybrid Use: Your cloud users may also use on-premises services, in addition to cloud.
  • Credential Sharing: Is your service user really the authorized user?
  • Geographies: Is there any use outside the licensed territory?
  • Legal Entities: Is there any use outside the licensed businesses?
  • Multiplexing/System Integration: Increased “indirect use” potential.
  • Third-Party Access: Additional compliance risk.

Cloud Discover: The Forecast is Stormy

It’s no secret that the backbone of any successful Software Asset Management program depends on multiple accurate and up-to-date data sources for your software inventory. But cloud services directly challenge the capabilities of your current discovery tools.

As your SAM environment fluctuates with new cloud adoption and implementation, discovery tools quickly become obsolete. In a 2016 report, Gartner asserts that by 2019, existing discovery tools will be useless for 90% of SAM needs.

For example, a tool that works in your physical Windows environment won’t be the same tool that works on mobile or cloud environments. You can mitigate unmanaged risk by augmenting your SAM architecture with additional data sources and tools that reflect current shifts in licensing models.

Another challenge is simply being able to manage the vast deployment of cloud services. Gartner explains that SaaS applications make good candidates for driving your overall SAM discovery strategy because, through 2017, SaaS use in 75% of organizations will be dominated by unapproved and untracked services, making SaaS a prime target for compliance and audit failures.

That’s why you should immediately prioritize staying on top of potentially untracked services. Vigilant oversight is crucial as cloud expands at faster rates and unmanaged assets often lead to an increase in audit activity. Many vendors are still focused on pushing you into the cloud, and have yet to begin the next inevitable wave of audit activity. Capitalize on this time to get your systems in order, and monitor shifts in license models. 

Sunny Days Ahead: Take Your Time

Keep your head out of the clouds and one foot on the ground as cloud adoption grows! As you transition to the cloud, remember that there’s no need to completely abandon traditional services.

Rushing to phase out older applications can be disastrous for your IT budget. In the event of an audit, you will be left vulnerable if you’re forced to reinstate previously discarded licenses. Effectively position yourself by making a concerted plan to remain balanced in a hybrid world for the immediate future.

Most importantly, be strategic! Software vendors are desperate for cloud revenue right now. Be savvy and use this to your advantage. Ensure that your SAM program stays dynamic and evolving as you rise above the cloud.

Topics: Cloud