By 2022, we expect the failure rate for SLM initiatives to reach 25 percent, whereby a customer quits their efforts altogether and either focuses elsewhere or abandons the investment because of useless information. Gartner and other IT research supports this statistic and suggests the failure rate could be even higher. Furthermore, we predict that 50 percent of customers who endeavor a SLM program will fall woefully short of benefit expectations due to failures to drive change, internal bureaucracy, missing skill sets, mismatched tool decisions and unrealistic expectations.
The first question most ask is, ”what’s the ROI we can expect from SLM?” In most cases, conservatively, the return on a SLM program is significant, often measured at 500% or greater. You might ask – is a 5x return possible? When you research the benefits, you’ll find analysts saying you can expect 3-5% of total IT spend, or 30% on annual software spend. The ROI figures can be big.
In the first half of 2020, I analyzed our largest managed service customers for both hard and soft savings. I was able to find $321 million in savings since 2019 alone – just for our top 20 customers in North America ($16M per customer). Similarly, in the UK in the first half of this year, our total identified savings came to over £57M – or an average savings of £4.3M per project. Clearly, the savings opportunities are real across areas like Oracle, IBM, and Microsoft, and organizations can benefit big through tool rationalization, software re-harvesting, hybrid use, and other means.
The challenge presents itself when clients have to turn opportunities into action. The realization percentage for hard cost savings is about 30% from identification to action. Try taking software away from an end-user, and the excuses for why it’s needed (e.g. if you take away my Visio, the ERP system may crash) are always amusing and still don’t turn into savings until you renegotiate the next deal.
The primary reason we continue to see many organizations failing or not delivering value is two-fold: 1) no strategic direction and 2) lack of skills. In one example, we had a Fortune 100 CPG customer who owned a SAM system for three years and the CTO finally found it and readied to rip it out unless value was delivered in four months. Once we fixed all the discovery issues, the root cause was a single SAM resource for 100,000 devices, an inability to integrate multiple data sources, no technical skills and no real strategy that senior executives were supporting.
The growing skills gap does not make success any easier. The ITAM skills shortage has worsened since 2018. It’s generally taking longer to hire and the global average salary has risen by 15% to £72K GBP in just two years per ITAM Review. The immediate impact from COVID-19 is interesting – companies like SoftwareONE are finding great SLM talent from layoffs and furloughs, but we unfortunately are seeing this as organizations reduce their IT staff and perhaps redirect or reduce their planned SLM investments.