Global Partners CIO Ken Piddington discusses how the company works with its vendors, especially its software vendors, and enlists them as strategic partners.
Diving into the software side, how do you effectively manage your licenses to ensure that your software and vendor portfolios are both optimized?
We track everything related to the software licenses and the portfolio of products we have with each vendor. This has been done through traditional asset management products and spreadsheets. Recently we partnered with one of our vendors to add a vendor management module to a project and portfolio software suite we already owned. We did so with the intent of leveraging it for vendor management. One of the components in the module is software license tracking. This will contain all our licenses and costs by vendor, along with renewal terms and price escalations. It also includes maintenance costs and renewals. Basically, it puts all the relevant information for managing our software vendor relationships in one place that can then be managed by vendor, groups of vendors, product portfolios, lines of business served and the like. This, I believe, will give us a less manual way to manage our software licenses and maintenance, but even more valuable is getting the holistic view of the portfolio and being able to better optimize it for our business.
Are there metrics you bear in mind as they relate to software license management that helps you determine if you are achieving the value intended?
We really try to break everything we do in IT down to a per unit cost. These can then be tied to the services provided to any of our lines of business. We can take that per unit cost of IT services, in this particular case related to a software product and its associated licenses, and relate it to each gallon of product sold. Together with the head of a business unit we can look at the cost of doing business and see where we stand from a cost and benefit perspective. If the cost of a particular software system starts going up, thus taking away a percentage of profits, we investigate why the costs are increasing and determine what the appropriate actions are. This proactive management is essential to ensure that we are maintaining the health of these relationships while also keeping an eye on the profitability of the company.
It is great to hear that you are so mindful of the relationship between IT's actions even in managing software vendors, and the profitability implications to the company as a whole. This is not the norm among IT leaders, unfortunately, though hopefully with examples like this, it will increasingly become the norm.
I hope it does become the norm as CIOs are business leaders. Not to think of the business implications of the decisions we make relegates us to a position that is less than the minimum requirement for being a business leader.
How has the process of managing software licenses evolved as software as a service (SaaS) has become the dominant model?
Obviously, it has changed from the financial management side where traditional software licenses were a capital expense and, with SaaS, it is now an operating expense. So processes for budget management and forecasting have had to evolve along with contract negotiation and management of the licenses. With traditional software licenses, especially for large mission-critical systems, we would purchase an enterprise site license, and the system would be used for as many transactions and by as many users as were necessary. In today's SaaS world you need to focus more on transaction volumes and user counts. This means putting the tools in place to monitor the transaction and user activity and negotiating pricing terms that continue to be cost effective to your business as it grows.