- Jan 12, 2017
- Olaf Diehl
SAM Round Table, Part 1: Winning the Savings Showdown
Recently in Berlin, Aspera GmbH was once again the sponsor of we.CONECT, an international SAM conference that combines speaker sessions with attendee round tables. It’s a great place of knowledge for companies, service owners and practitioners with mature Software Asset Management practices, and the topics are all relevant for strategic day-to-day SAM, especially in mid-size organizations.
The following is Part 1 in a series of insights from event discussions with SAM professionals and experts. → Read Part 2 here!
Defining costs in the data center
As part of this year’s Platinum sponsorship, Aspera hosted a World Cafe round table on the topic “Cost Savings in the Data Center”. It’s a subject that I enjoy talking about because our license management solutions are the industry leaders for optimizing the server environment. As the moderator, I had the pleasure to talk to 45 attendees, split into four different groups for 20 minutes each.
Whenever you talk about server optimization, you always talk about how to measure your results. So the key question that I started with is how these SAM professionals define “cost avoidance” versus “cost savings,” and the thin line between them.
Cost avoidance vs cost savings
Savings is obviously a huge driver for SAM. But how do you define and measure those savings? As a primary step, we all agreed that it’s crucial to spell out the basic terms. This helps a SAM team to organize goals, and get buy-in from decision-makers by clearly establishing the financial advantages that a SAM program delivers.
Cost avoidance is theoretical savings. We defined it as all activities and their effects that influence future or potential spending in a positive manner. From the company’s perspective, cost avoidance deals with “virtual money.” You identify something that the company no longer has to spend money on.
Good examples of cost avoidance are the reduction of software usage by reharvesting licenses, or the optimization of license consumption by reallocating license types such as Windows Server Standard and Windows Data Center. Another example is delivering hard facts to favorably define the negotiation of the next year’s contract with a software vendor.
Cost savings is real world savings. We defined it as all activities and their effects that influence cash out or concrete reduction of acute risk in case of an audit. From the company’s perspective, cost savings is seen when “real money” is not spent. You directly reduce the spending, for instance, by finding and terminating licenses which are active but not being used.
A good example of cost savings is when penalty payments for under-licensing are reduced or avoided in an audit. Other examples are identifying less expensive alternative products before renewing a contract; or optimizing a usage structure before ordering licenses; or terminating maintenance contracts for software that’s not being used.
Which cost effect is more important?
It’s always most important to cut costs. But how much less important is it to avoid them?
The round table groups felt that both cost-cutting efforts have a positive impact on how your SAM team’s budget size looks against the value of delivered IT services. Each effort contributes different results to being able to predict costs by project, and separating this on a vendor or even product level will allow your team to understand the full scope.
This is a valuable position in all internal budget reviews that your SAM service team will face. The SAM team is often not at the table during negotiations, so the decision to realize its potential savings may be taken by departments like business, purchasing or IT. But if your team delivers an overview plus details of options to save money or avoid costs, you’ve enabled the company to make decisions with real facts and information.
Ultimately, the participants agreed that it’s important to identify cost avoidance, but it’s more important to find cost savings. Their recommendation was to handle them as different KPIs that can be concretely defined if the overall SAM value needs to be shown.
There is always a gray area between theoretical savings and real world savings, and that’s why it’s difficult to internally advocate for optimization services. In my next article, I will dive deeper into the business value of SAM, and how those savings can positively impact other areas of your company.