How Global Partners Manages Its Software LicensesBy Peter High | Posted 07-12-2013
How Global Partners Manages Its Software Licenses
By Peter High
When Ken Piddington joined Global Partners as the firm's first-ever CIO five years ago, the energy supply business was already a Fortune 500 company. In the four years since, revenues have tripled, but his IT department remains lean. A key to his success has been better vendor management in general, and better software vendor management more specifically.
WHO: Ken Piddington
WHAT: An overview of his approach to software license management and the company’s Strategic Partner Program and Strategic Partner Summit
WHERE: Waltham, Mass.
CIO Insight: You were the first-ever CIO of Global Partners, a large company that has grown astronomically during your tenure. Naturally, as Global Partners has prospered, you've had to creatively leverage external partners. Can you talk about the way in which you have thought about vendor engagement?
You are right. When I joined Global Partners in 2009, our revenues were $5.8 billion. Last year, with the rapid growth we've experienced, primarily through acquisition and commodity diversification, we stood at $17.6 billion. We do not have any intention to slow down either.
We run lean, and with so many growth initiatives going on at the same time we had to better leverage our vendor partners in order to be successful. In my opinion, an organization receives the most value from its vendor partners when a real effort is made to build true partnerships. These are partnerships and relationships that are mutually beneficial. If you expect to always take from your vendor partners and never give anything back, the partnership and relationship will fail and the organization won't receive the expected value. This is the basis for our vendor management initiative that we call our Strategic Partner Program.
How did you develop the concept of the Strategic Partner Summit?
When we developed the concept for our Strategic Partner Program I didn't want to have to explain the details of the program to each and every vendor one at a time, plus I wanted our vendors to know that they had to compete and earn Global Partners' continued business. So I created the Strategic Partner Summit, which is a dinner hosted by me in which we invite all our vendor partners, and which is an opportunity for Global Partners to give back to them and at the same time lay out and reinforce the ground rules and expectations for being a partner of ours.
As we increasingly rely on our vendors to deliver key components of our technology, it is important that we be open with them about where we see the company going. Therefore, our CEO speaks at these events, providing insights about our corporate strategy, and then I speak to provide insights about our IT strategy. The key is to ensure that as they suggest solutions for us, that they do so with our plans in mind, not theirs. Companies that keep secrets from their vendor partners are developing a relationship that is all tree and no forest, so to speak.
Do you engage software vendors differently than you do hardware vendors?
Yes, we do, especially the software vendors that provide software systems specific to our day-to-day business operations.
How Global Partners Manages Its Software Licenses
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.
How Global Partners Manages Its Software Licenses
Whose responsibility is it to manage the licenses? Is there a member of your team who does so primarily, or does it depend on the software and who the primary user of it is?
The responsibility of managing software licenses is the responsibility of my team in IT regardless of the product or the primary user. This was not always the case. Previously, it was managed by the primary user of the software. With our rapid growth and software systems being utilized by multiple business units, this method was no longer practical or cost effective. With the demonstrated successes of our Strategic Partner Program and our holistic view of the organization, the management of these licenses was handed over to IT.
How often are they reviewed?
As part of our Strategic Partner Program we do a yearly review with all our vendors and twice a year with some mission-critical software vendors. This yearly review is part of the vendor assessment component of our program. Within the assessment are scoring items related to software license, maintenance management and value. Again, due to our rapid growth and the evolution of Global Partners, we have processes in place to review the software systems we have in order to ensure that they are still meeting current needs, planned future needs and that we are receiving the right value from the products compared to market competitors. Basically for mission-critical software systems we do a software review and RFI every couple of years. This ensures that we have the right products for our growth strategies, that the ROI or TCO from the product is still meeting our targets, and that we keep the vendors working to provide us continued value. It doesn't let them get too comfortable as an incumbent.
You've mentioned the Strategic Partner Program a few times through our conversation. What lessons have you garnered from having done the program for a few years now?
One of the biggest lessons we learned is that you have to continually review your software systems and vendor partner capabilities to ensure you have the right products and partners for your growth strategy. We found that we had many systems in place that had been here a long time and that they served us well when our primary business was as a distillate products wholesaler. Not all of those systems were able to scale and accommodate our growth in an efficient and effective manner and as such continuing to rely and utilize these systems would reduce or slow down the ROI of our new growth opportunities. So creating an environment of continuous improvement not just for processes but for software systems and vendor partnerships is critical to achieving the expected ROI from software system investments.
About the Author
Peter High is president of Metis Strategy, a boutique IT-strategy consultancy based in Washington, D.C. A contributor to CIO Insight, High is also the author of World Class IT: Why Businesses Succeed When IT Triumphs, and the moderator of the podcast, The Forum on World Class IT. He can be reached at firstname.lastname@example.org.