SoftwareONE's Top 5 SLM Predictions

Software Lifecycle Management

Checking In On Our Top 5 SLM Predictions

Checking In On SoftwareONE's Top 5 SLM Predictions

Back in November of 2018, we published a blog post titled Outlook 2022: Top 5 SAM Predictions. While we know a prediction is simply an educated guess, I’ve spent the last decade of my life living in the software asset management (SAM) ecosystem, seeing SAM in action at hundreds of companies, so I feel well-versed in the subject. Now that we’re in 2020, I thought we could look back to see how our predictions are tracking.

At SoftwareONE, we combine SAM with digital procurement, which adds up to what we call Software Lifecycle Management (SLM). SLM is designed to maximize the value of your cloud and software portfolios, and we’re dedicated to helping organizations leverage SLM in order to realize benefits such as cost optimization, decreased operational effort, reduced risk, and more. 

Let’s dive in to how our 2018 predictions line up with the current reality.

Prediction 1: Failures Galore

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.

Current Reality

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 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.

Prediction 2: Some Good News

One positive shift in SLM will be that 30 percent of SLM programs are considered “strategic”. This means that compliance will take a backseat for many as the focus shifts more to improved customer experience, integrated software supply chains, improved security and better business intelligence. This also means that organizations will need better advice regarding digital transformation, including end-to-end blueprints for making the changes real.

Current Reality

The shift we predicted has indeed happened, and while compliance will continue to be part of the focus for IT leaders, it has taken a backseat to the following in 2020. Flexera states in their 2020 State of Tech Spend Report that the top three initiatives cited by survey participants are digital transformation, cybersecurity and cloud first/cloud migration. A strong SAM tool and SLM strategy are integral to achieving all three of these initiatives, and they can help provide the visibility and cost savings your organization needs to succeed into 2022 and beyond.

Post COVID-19, we’re still seeing strong momentum in customers taking a strategic approach to SLM. For example, customer demand has spiked for integrated supply chain projects and strategic consulting services. These projects are all about integrating end-to-end across the entire asset lifecycle, from catalog to ordering to purchasing to entitlements to renewals management and even asset re-harvesting.

Prediction 3: The Economy Will Always Change

Arguably, many are predicting a recession coming for the U.S. This prediction is supported by notable firms like KKR, who predict a U.S. recession by 2019 amidst a massive cycle of millennial deleveraging. Investment bank JPMorgan also warns that the next global recession will strike in 2020. Boston Consulting Group surveyed a cross section of the public and found that a whopping 72% of Americans fear a recession is near.

Current Reality

Today a recession is happening as a result of the global pandemic. No one could have predicted COVID-19 and a U.S. unemployment rate near 15% in only four months. However, we did predict that 2020 would be a very challenging year economically.

As we enter the downturn now, an obvious reduction in IT spending will put the brakes on many technology investments, including those in Software Lifecycle Management. We know this to be true as many of our technology partners are suffering. For those companies that didn’t anticipate the recession or invest strategically to prepare for it, there are urgent steps that need to be taken. Now that the recession is here, organizations will need to look more aggressively at cost savings approaches without massive capital investment. Executives should push hard now for programs and funding that improves near-term cash flow, reduces cost and has a payback period of less than one year.

The current economic situation we’re facing also, unfortunately, makes a great case for why your organization should be practicing SLM to begin with. SLM is all about getting ahead of your roadblocks and finding a strategy that helps your organization function at its highest level. There will always be something that causes a downturn, so it is crucial not to wait to reduce costs until it happens. SLM helps you move from reactive to proactive so you can plan ahead for these specific situations and leverage the business intelligence that SLM contributes.

Prediction 4: Cloud Spend Will Matter Significantly More

The next prediction is for those customers seeking greater visibility into their cloud spend. Of course, the shift to hybrid cloud is real, but most customers will feel disappointed in the progress from most SAM tool vendors who are trying to solve their spend management dilemma. Done properly, cloud spend management requires asset tagging and other cleansing in order for the data to be meaningful. Having complete visibility into what you own in the cloud means you can only spend resources on what you truly need.

Current Reality

We’re seeing more and more customers evaluate cloud technologies like Flexera, Snow, and ServiceNow for SaaS and automated governance for AWS & Azure. Estimates around waste hover near 30%. Technical (right-sizing) and licensing (right-costing) strategies can help increase business productivity and savings for organizations, and at SoftwareONE we’ve seen organizations save an average of 20% on their cloud spend by implementing these approaches.

The importance of cloud cost optimization has never been more important, yet it can be overlooked. With COVID-19, the remote worker became fundamental to survival for many organizations and IT departments were forced to find pathways to keep workers working. Remote desktops, collaboration tools, messaging and communication were thrown in almost overnight. Security and business continuity concerns were pushed to the wayside. But now is the time to pause and develop a comprehensive workforce strategy given the new environment. To that end, smart organizations will need not only technical advice, but licensing support from their trusted partners.

Prediction 5: Rise of the Robots

Lastly, the longer-term future across IT will undoubtedly involve robotic process automation (RPA). In 2016, McKinsey said up to 70 percent of corporate tasks will be automated using Artificial Intelligence (AI). Since then, companies around the world have jumped on this bandwagon and are investing heavily in this topic – robotics. Susceptible functions for near-term RPA in asset management include invoicing, purchase ordering, catalog management and even entitlement management.

Current Reality:

While consulting for one of the world’s largest telecoms, I watched as the CIO embraced RPA and challenged his leaders to automate repetitive process work across all of IT. In checking back in with them a few months ago, they continue to invest heavily in bots to automate repetitive tasks. McKinsey Research found that many organizations are already using AI for data cleanup and classification.

According to AI Multiple, in 2020 AI is currently changing SAM via recommendations through predictive analytics and intelligent user interaction. “Machine learning and artificial intelligence will be critical to the rapid maturation of asset management technologies over the next few years,” they explain. “Since SAM relies on automation to discover software and estimate costs, it will benefit from smarter automation enabled by advances in machine learning.” In 2019, SoftwareONE joined forces with Intergrupo to begin to offer services within these in-demand and complex areas.

SoftwareONE’s SLM Predictions At-a-Glance:

SoftwareONE’s SLM Predictions At-a-Glance
SoftwareONE’s SLM Predictions At-a-Glance, source: SoftwareONE

As We Continue to Look Ahead

Overall, our predictions are on track. Some things we couldn’t see coming, while others were inevitable. The overarching goal in these predictions is so executives can keep these challenges in mind when building out their software lifecycle management strategy. As you move forward, take note of your most common challenges and ask yourself how SLM could benefit your organization. At SoftwareONE, we’re ready to back your organization with the people, process, and technology needed to carry out a successful SLM plan. After all, no matter what the future holds, our customers will always be our top priority. 

Prepare for the Future

If there’s one thing these predictions have taught us, it’s that you should always stay prepared for the future. Let SoftwareONE help you get started on your journey to strong software lifecycle management.

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Author

Kevin Hooton

Service Lead - Asset Management

Cloud, Software Asset Management, Software Procurement Services, Cloud Spend Management

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