‘Shelfware,’ Software Audit Costs on the Rise
Corporations are often looking for ways to automate their operations to save money as a way to "lower overhead." Software, rather than hiring another worker, is usually seen as the most cost-effective way to run an organization. According to a new report, that approach is increasingly a waste of money.
The report released this week by software license optimization vendor Flexera Software found that an overwhelming number of organizations it surveyed (93 percent) are wasting piles of money on unused or underused application software, otherwise known as "shelfware."
In addition, three-quarters of respondents were found to be out of compliance with their software contracts while 20 percent reported that software audit costs topped $1 million last year.
Indeed, it appears that major software vendors are creating a significant new revenue stream in the form of "true up" charges when increasingly frequent audits of software licenses find the user to be out of compliance. These fees are paid out in addition to the original contract.
"Software vendors smell money," the annual Flexera survey concludes, noting that 65 percent of enterprises surveyed faced software license audits last year. The number of companies paying more than $1 million in audit "true up" costs more than doubled from the previous year, the software asset manager reported.
Microsoft (NASDAQ: MSFT) was by far the leading software license auditor last year followed by Adobe (NASDAQ: ADBE), Oracle (NYSE: ORCL), IBM (NYSE: IBM) and VMware (NYSE: VMW), according to survey respondents (see chart).
Leading auditors of commercial software licenses. (Source: Flexera Software)
In response, more than 80 percent of enterprises surveyed said they perform self-audits at least once a year in order to be prepared for vendor license audits.
Ironically, more than one-third of enterprises said they are using commercial automation software to track application software usage along with license compliance. Nevertheless, 75 percent of companies surveyed said they remained out of compliance with software contracts last year, suggesting that audit compliance software itself might be a waste of money.
Besides audit costs, the survey found that more enterprises are simply wasting money on unused or underused "shelfware" at a time when enterprise software budgets are getting tight. Flexera reported that two-thirds of enterprises said their software budget would either remain flat or decline over the next 18 to 24 months.
Unauthorized use of software, a component of what is often referred to as "shadow IT," is also a growing problem. Hence, software management vendors like Flexera make the case that asset management and cyber security are "converging." The survey found that 73 percent of respondents monitor their systems "to identify instances of unlicensed and unauthorized software on the network for cyber security purposes."
The rise of shelfware and the growing number of license audits by commercial software vendors are together raising awareness of the problem of software waste. "The good news is that organizations are increasingly aware of the challenges around software asset management and are growing more proactive," the survey concludes. Still, the consumers of enterprise software "have a long way to go."
Flexera said its survey reflected 489 responses, including 33 percent from enterprises with revenues of $1 billion or more. Fifty-six percent of respondents were based in the U.S.
