Gaining Visibility Over Licensing in a Diverse Technology Market

The 2016 ProcureCon IT Benchmarking Report
Gaining Visibility Over Licensing in a
Diverse Technology Market

2
Table of
Contents
Executive Summary............................... 2
Additional Contributors....................... 2
Key Findings.............................................. 3
Research Analysis
As IT spending grows, the
procurement department
must adapt................................................. 4
Managing the procurement
team for peak efficiency...................... 5
Creating visibility around
cloud technology..................................... 6
The challenges of sourcing
major enterprise solutions.................. 6
Key Recommendations......................... 9
Appendices
Appendix A: Methodology ...............10
Appendix B: Who Responded
to the Survey ..........................................10
Flexera Software...................................10
WBR Digital ............................................10
It’s an exciting time for IT and IT Procurement, as the increasing prevalence of the
cloud promises new opportunities for a more agile approach to delivering software
and infrastructure. With many in the IT procurement field predicting up to 20%
growth in their cloud spending within the next couple of years, the technology’s
adoption is as rapid as it is promising. This creates its own set of challenges for
procurement. The ease with which Software as a Service (SaaS) and Infrastructure
as a Service (IaaS) solutions can be purchased makes controlling costs and optimizing
utilization more difficult. This necessitates a centralized approach to cloud purchasing
that can avoid redundancies, establish the right service level agreements, and extend
the benefits of a single negotiation and purchase across the business as opposed to
within a single business unit.
The cloud is not the only area that requires a centralized approach to handle
effectively. With major enterprise software vendors dominating the IT landscape,
making sure that software license entitlements are kept track of is another vitally
important role for the procurement organization. With a growing risk of vendor
audits, migration to cloud based services, and a need to secure the latest functionality
going forward, procurement must understand their current license position if they
are to negotiate from a confident position and gain the best contract terms from their
enterprise software vendors.
Ultimately, the increasing complexity of negotiations and contract terms means
that the relationship between procurement and IT must be stronger than ever,
and a collaborative approach to controlling technology spending will become
more essential. Procurement’s role around technology must evolve into that of a
trusted advisor to IT, a partner in the sourcing process, and an empowered negotiator
that can obtain the best contract terms, and not just the best discounts.
Selected quotations from industry thought leaders have been used to add
context to the statistical information contained in this document. Interviews
centered on benchmark findings as well as key trends identified by research.
Matthew Corsi
Director, Global Technology Vendor Management Office,
MetLife
John Emmitt
Senior Marketing Manager
Flexera
Ed Rossi
Vice President of Product Management
Flexera
Executive Summary
Additional Contributors

3
62% of IT procurement groups are embedded in
a centralized procurement department.
Procurement has successfully moved to centralize in order to facilitate a more strategic
approach to spend management. By operating out of a center-led or centralized
structure, a more complete view of organizational spending can be created, which in
turn builds efficiency around leveraging purchasing power and avoiding risks.
60% of procurement teams with IT responsibilities
work consultatively with their IT departments.
The large majority of IT procurement groups recognize that the IT department will
typically be the most attuned to the needs of the organization from the standpoint
of functionality. However, in order for them to be able to create the greatest level of
value for the organization, they also need to be involved in the sourcing process. Now,
IT procurement will play a consultative role throughout the sourcing process, working
with IT as a team.
44% of IT procurement teams manage their
enterprise software license positions on an
ad-hoc basis.
Despite the importance of actively managing software license entitlements, nearly
half of IT procurement groups will still wait till they feel they need to access this
information, managing them on an ad-hoc basis outside of a centralized database. This
can lead to increased organizational risk, issues with vendor audits, and decreases in
the ability of a business to adequately prepare for renewals.
Within the next two years, 27% of respondents
predict that their cloud services spend will grow
by more then 20%.
While in some cases, cloud spending may not be a large part of an organizations
current IT costs, the trend of both vendors and businesses moving towards cloud
based solutions is continuing, with many businesses predicting a drastic increase over
the next several years. Creating centralized views of cloud spending and utilization is
another task that demands attention in the near term in order to protect value for the
organization.
Key Findings

4
As IT spending grows, the procurement
department must adapt
23%
Center-led
27% 16%
15%
Decentralized
62%
Centralized
What is the structure of your procurement department?
What is your estimated annual software
procurement spend?
<$10M
$10M-50M
$50M-100M
Over $100M
$1M
$1M-2M
$2M-5M
$5M-10M
Over $10M
What is your estimated annual cloud services
spend (including SaaS, PaaS and IaaS)?
Currently, the majority of procurement professionals with IT responsibilities (62%) are operating
out of a centralized department, reflecting the increased level of control over total indirect
spending that many departments have cultivated over the past several years. Close to a quarter
(23%) are operating in a center-led model, which can confer its own advantages within a growing
business, where granting individual teams some autonomy can help a center of excellence focus
on more strategic aims.
Procurement departments are typically being called on to manage a growing range of specialty
categories, such as travel and energy. Of these categories, IT tends to be one of the largest in
terms of total costs. This can be seen in the breakdown of annual software spending, where 73%
of respondents are paying somewhere above $10 million annually for their software costs, and
22% are paying over $100 million.
Apart from the growth in actual dollars spent for IT procurement, a trend of increased spending
on cloud based services and infrastructure is adding complexity to the technology-sourcing role.
For 26% of respondents, their cloud services costs are already north of $10 million annually.
With 32% paying under $2 million annually, it seems that cloud solutions are already being widely
integrated into sourcing strategies, with market pressures indicating that these adoption rates are
only going to increase in the near future.
Research Analysis
“Having a more centralized
approach to software and
cloud services procurement
definitely has advantages from
a software asset management
perspective. We see that
organizations benefit from
that because it helps them to
fully leverage global enterprise
agreements that cover several
different regions. Centralized
procurement also helps
organizations to negotiate
better contracts and pricing
because they’re looking at
meeting needs across the
whole enterprise, as opposed
to a scenario where individual
groups might be procuring
software independently. In
that setup, you’re probably
paying more than you have to
for software and don’t have as
much flexibility to utilize assets
across different parts of the
organization.”
- John Emmitt, Senior Marketing Manager,
Flexera
39%
16%
12%
24%
22%
18%
26%

5
13%
36%
What is the level of control procurement has over sourcing cloud based solutions?
How many employees make up your procurement team?
Full oversight and control
Consultative role assisting
IT or other departments
Tactical involvement
during negotiations
No direct involvement
1-5
6-15
16-25
26-35
>35
The role that IT procurement plays in sourcing for cloud solutions can reflect the level of
centralized control of the department at large. While 13% have managed to fully take cloud
based sourcing under their control, the most common method of sourcing is for procurement
to work collaboratively with the IT department, which is the technique of choice within 60% of
departments. For 23% of IT procurement groups, involvement in cloud sourcing only comes at
the end of the process, where they are called in for their expertise in negotiating to close the deal.
At this point, only 4% of respondents have no involvement at all in sourcing cloud technology.
Compared to last year, the percentage of respondents who are operating with a team of over
35 employees doubled, from 10% in 2015 to 20%. However, the percentage that have a team
of 1 to 5 employees also increased, albeit by just 3%. Just under a quarter (24%) have a team of
between 6 to 15 employees. The pattern is a concentration around smaller teams, with a bump
at the end of the spectrum, suggesting a gap between IT procurement in businesses that are still
developing their roles, and those that have become key components of a centralized procurement
department in mature national or multinational businesses.
“The companies that are the
most mature in this space are
investing in vendor management,
asset management, and
category planning. I would say at
this point most companies have
an IT procurement function,
but the question is: are they
managing contracts after they’re
being executed. You can get a
great price on the frontend, but
if costs leak through on the
backend through deteriorated
performance, missed SLA’s/
deliverables and/or overstaffing
of agreements, then you are
shifting costs to other places in
the organization.”
- Matthew Corsi, Director, Global
Technology Vendor Management Office,
MetLife
60%
24%
23%
13%
4%
7%
20%
Managing the procurement team for
peak efficiency
“Many companies have very complex software environments where maintaining
and understanding their licensing positions is a challenge. As companies begin
to understand these financial implications they are beginning to invest in asset
management tools and resources. These deficiencies pose a lot of risk for the
enterprise from over-deploying software, legal costs, as well as overpaying where
they may be re-buying licenses they already own.”
- Matthew Corsi, Director, Global Technology Vendor Management Office, MetLife

6
Do you believe that your IT procurement team has the necessary knowledge to effectively
buy cloud based solutions?
39%
Yes
17%
Not Sure
44%
No
Similarly, there is a divide between procurement groups that feel they have the support of
their staff to effectively purchase technology contracts, and those that do not. While 17% of
respondents are not sure either way, 44% believe that their team lacks the ability to source
technology at peak effectiveness, compared to 39% who feel that they are able. Given the amount
of spending that now goes through a sourcing process where procurement is at least tangentially
involved, it’s surprising that such a high percentage feel that they should be more prepared.
However, that may have a significant amount to do with the complex and constantly evolving
nature of the technology marketplace, where the differences between on-premises software and
cloud-based contracts are rapidly changing the way procurement must negotiate.
Chart 11: What percent of your cloud services spend is for Infrastructure as a Service (IaaS), such as Amazon Web Services?
62%
What percent of your cloud services spend is for Infrastructure as a Service (IaaS), such
as Amazon Web Services?
0-20%
20-40%
40-60%
60-80%
80-100%
Separate from other types of cloud technology, infrastructure as a service (IaaS) is an emerging
technology solution that reduces the need for on-premises IT hardware infrastructure for a
business, instead allowing a suite of services and infrastructure to be rented on a pay as you
go basis and accessed remotely. The current market leader, Amazon Web Services, launched
their IaaS offerings in 2006, yet while the technology has been around for a decade, many
organizations are just now awakening to the potential it represents for controlling technology
costs. While about one in four procurement groups will now spend between 20-40% of
their cloud services spending on IaaS solutions, 62% spend less than 20% of their total cloud
expenditures on this type of solution.
24%
10%
4%
0%
Creating visibility around cloud technology
“Analysts are saying that cloud
spend is growing at five times
the rate of other IT spend. And,
infrastructure as a service is
growing at a 15% annual rate,
according to IDC. Amazon Web
Services is the market leader
in that space with about 30%
market share. Because they
are the market leader, we
have focused our first release
of FlexNet Manager for Cloud
Infrastructure specifically on
managing Amazon Web Services,
with the plan to expand out
to other cloud infrastructure
providers like Microsoft and
others in the near term.”
- John Emmitt, Senior Marketing Manager,
Flexera
“When it comes to software license management, moving to the cloud is a big challenge for
organizations. There’s a lack of consistency from the software publishers themselves around how
they want their software to be managed in the cloud, and therefore, there is an increase in risk.
One example is ‘bring your own software license ( BYOSL)’, where companies take on-premises
software and load them into cloud instances. Publishers are still considering the license and
consumption measurement implications of this concept and not all have defined policies to
address it. Software as a Service (SaaS) is another cloud model, one that is flexible, subscription
based, and in theory, has the benefit of not needing to worry about being in compliance. The
reality though is that there is significant risk of overspending on SaaS products. In addition to an
accurate count of users that are actually utilizing the software, organizations need to understand
the usage levels of each user relative to the type of license they are consuming. It’s not uncommon
for organizations to start by assigning users a higher level license assuming they’re going to take full
advantage of the software product, and then later finding that those users are just using a portion
of the product and could be put down to a lower and less expensive level.”
- Ed Rossi, Vice President of Product Managment, Flexera

7
5%
14%
On a scale of 1-5, 5 being fully visible, what is the level of visibility you have over your
organization’s cost and utilization of cloud IaaS services?
What is your projected growth in cloud services spend over the next 2 years?
1
2
3
4
5
0-5%
5-10%
10-20%
20%
As IaaS spending grows, so too does the need for IT procurement to effectively centralize and
monitor the costs and utilization of their purchased infrastructure. However, currently only 8%
of respondents gave themselves the highest possible marks regarding their visibility around
these solutions. While a third of respondents placed their levels of visibility at a four out of five,
another 32% only had a medium level of visibility into their cloud based infrastructure, and 21%
felt that their visibility was generally poor. For procurement, outside of controlling upfront costs
through negotiation, monitoring usage and costs across multiple accounts is critical to optimizing
utilization and making the right business decisions on cloud services going forward.
The need for this visibility is only set to increase. Within the next two years, 27% of respondents
predict that their cloud services spend will grow by more then 20%. Another 26% place their
predicted growth in cloud spending between 10% and 20%. With over half of respondents
predicting double-digit growth in their cloud spending, it’s clear that they will need to aggressively
build out their cloud management capabilities as well.
“Regarding our involvement in
Cloud, the vendor management
office (VMO) has a seat at the
table regarding what cloud
providers we are using. Cloud
is a complex category because
the market is constantly
maturing, and security and
technical requirements often
outweigh price. However, in
our environment, we are
engaged early so our sourcing
process takes into account both
technology and price. From
MetLife’s perspective, gaining
visibility into your cloud spend
is all about building your value
statement with your business
partners. You earn a seat at the
table once you can demonstrate
you accelerate the sourcing
process, while adding value
from a risk and cost mitigation
perspective.”
MetLife
21%
33%
32%
33%
26%
9%
27%
“For SaaS solutions, as well as Infrastructure as a Service (IaaS), we’re still in
the early days and in some cases organizations are just getting started with
deploying more SaaS applications and/or purchasing a significant amount of
cloud infrastructure services through a third-party like Amazon Web Services, for
example. Obviously, there are some SaaS applications which have been out for
quite a while now, like Salesforce, but in terms of a significant percentage of IT
spending on SaaS and cloud infrastructure, we’re still pretty early in that transition.
I think with that being the case, many organizations really don’t have good
processes and tools in place to help them manage their cloud spend and utilization.
We’re seeing that there’s definitely a need for solutions that let these businesses
get their arms around their cloud based spend, and as more of their total spend
becomes cloud based, it will be critical to have mature cloud management
processes in place to control costs.”
- John Emmitt, Senior Marketing Manager, Flexera

8
“MetLife uses a center-led model for
IT procurement. We’ve designed a
Vendor Management Office (VMO)
within IT that’s maximized the success
of our central-led procurement
practice. Our centralized VMO
creates proactive category plans that
are aligned with IT’s demand. These
category plans include sourcing wave
plans that highlight our needs for the
coming year, along with contracts
coming up for renewal. Using
these, we create vendor/category
negotiation plans and augment
market data to support our strategy.
We’ve received many benefits from
this approach, for instance, if we
identify we have 3 new programs and
4 existing renewals with Microsoft,
we can highlight the areas where
we have leverage to offset the areas
where we do not. This effort moved us
from a reactive to proactive sourcing
model which allowed us to leverage
our spend at a holistic level and
prepared us to understand what we
should be paying prior to entering the
negotiation.”
MetLife
27%
41%
What best describes your visibility and management of enterprise software license
entitlements and license position?
What are your greatest challenges around enterprise software licensing?
(select all that apply)
Consolidated in a central asset
management database or solution
Managed centrally by
procurement using spreadsheets
Managed on an ad-hoc basis by
procurement and/or IT
Unsure
Negotiating a contract that best
meets the organization’s needs
Controlling software costs
Determining the best solution
between on-premises and cloud
based options
Understanding and leveraging
software license entitlements
Avoiding software vendor audits
Other
Enterprise software license management requires best practice processes and next generation
tools to enable the organization to achieve the greatest return on investment from its software
portfolio while minimizing license compliance risk. In a distributed environment, there is potential
for different groups to purchase software in ways that are not optimal for the enterprise as a
whole. And complex license entitlements make if difficult for business units to fully understand
and leverage them across the enterprise. Though 27% of respondents now use a central asset
management database or solution to help them keep track of their enterprise software licenses,
44% manage them on an ad-hoc basis, or leave it to IT to account for those that they own. For
15%, a centrally managed spreadsheet is the extent of the technology they use to keep track of
their enterprise software licenses.
When it comes to the most challenging aspects of sourcing enterprise software, 68% of IT
procurement practitioners cite controlling software costs as their greatest obstacle. In an
environment where major software vendors can exert a lot of leverage, it takes more than just
strong negotiation skills to win concessions. Understanding and leveraging software license
entitlements is one of the techniques that can have the greatest positive effects on costs, and yet
42% cite this area as a problem for their organizations. Negotiating the most appropriate contract
for the organization’s needs, and then determining the relative merits of on-site versus cloud
based technologies are challenges for 41% of teams. Ultimately, creating a more mature approach
to license management is the primary way that procurement can avoid paying for redundant or
unnecessary features and maintain leverage going in to the sourcing or renewal process.
15%
68%
44%
41%
14%
42%
27%
8%
The challenges of sourcing major
enterprise solutions
“The number of procurement teams managing their license entitlements on an ad-hoc basis is a
telling number in this survey. The challenge is that when you are only looking occasionally at
licenses, you’re also likely only preparing to respond to vendor requests or vendor audits as they
occur. Audits are a very painful process within an organization, both in terms of the manpower
required, the potential for a negative financial result, and the emotional impact it has on an
IT team. The best way to minimize all of that is to implement a program that allows proactive
management of your primary software entitlements. It’s something that not only gives you the
visibility that you need when you need it, but allows you to then start moving from managing risk
to managing cost, which is the next opportunity for an organization.”
- Ed Rossi, Vice President of Product Management, Flexera

9
Make the case for increased centralization of
procurement processes, adopting a center-led
framework where necessary.
While the majority of procurement groups are operating out of either a centralized or
center-led structure, increasing the consolidation of procurement’s authority within
a centralized apparatus has several benefits, including the ability to centrally track
spending and become more strategic as a result.
Similarly, in many cases software licenses are being managed in a siloed capacity,
without the benefit of a central viewpoint. The information around theses licenses
is often still stored in Excel spreadsheets or owned by individuals within the IT or
procurement organization, taking away the ability for a team to fluidly share license
information and hampering coordination between business units.
Adopt solutions that can provide visibility into
both SaaS and on-premises software, as well as
cloud infrastructure services.
Enterprises should seek out technologies that provide 360 degree visibility across
their entire IT environment, from traditional on-premises software to cloud based
software and infrastructure services. This will enable them to control costs, mitigate
risk and drive higher ROI.
Leverage software license entitlements to reduce
license consumption and leverage software usage
data and trends in negotiations with vendors.
A benefit of license management aided by automated software license optimization
solutions is the ability for procurement to use their knowledge of the organization’s
license position and software usage as leverage in software negotiations.
Procurement also needs to ensure that the organization is fully leveraging its
license entitlements to reduce license consumption. For example, in datacenter
environments, backup rights may allow the backup server to be covered under the
same license as the production server. License management tools can automate
the process of understanding and applying these license entitlements, and help the
IT team to rationalize and consolidate the software portfolio so that procurement
isn’t buying redundant software. The tools can also provide insights to help reduce
ongoing software maintenance costs and gain trade-in credits based on visibility into
usage data.
Key Recommendations
“Iwouldencourageorganizationstothinkholisticallyastheylookthroughtheiruseof
softwareandtoreallyunderstandtheircorporatevisionintermsofhowthey’regoing
todeliverservicestotheirstakeholders.Softwarehasgonefrombeinghostedinsimple
on-premisesenvironments,tovirtualcontainers,andnowtotheCloudanditsmany
variations.ThetransitionacrossthesedeliverymodelswillresultinHybridenvironments
wheresoftwareismanagedinallthreeareasatonce,causingasignificantincreasein
environmentalcomplexity.Definingacorporatevisionofanorganizationssoftware
deliverystrategyisanimportantstepinmanagingthesetransitions.”
- Ed Rossi, Vice President of Product Management, WFlexera

10
Appendix A: Methodology
12%
Retail/Consumer Products
7%
Energy, Oil Gas, Utilities
12%
Other
1%
Public, University, Non-profit
3%
Media, Publihing, Travel,
Tourism, Entertainment
12%
Telecom, Electronics, Hi-Tech, Software
7%
Aerospace, Defense, Automotive,
Transportation
16%
Chemical, Construction, Engineering,
Industrial Manufacturing
13%
Pharmaceutical, Healthcare, Medical Devices
17%
Financial Services, Insurance, Real Estate
What industry does your company represent?
The results analyzed in this report were gathered from responses to an on-site benchmarking
survey delivered at ProcureCon IT 2016, and prepared by report author Andrew Greissman. 75
executives responded to the survey. Interviews with sources were conducted after survey data
was compiled, and centered on discussion of benchmark results.
Flexera Software helps application producers and enterprises manage application usage and
increase the value they derive from their software. Our next-generation software licensing,
compliance, security and installation solutions are essential to ensure continuous licensing
compliance, optimize software investments and future-proof businesses against the risks and
costs of constantly changing technology. Over 80,000 customers turn to Flexera Software as a
trusted and neutral source for the knowledge and expertise we have gained as the marketplace
leader for over 20 years and for the automation and intelligence designed into our products.
WBR Digital connects solution providers to their target audiences with year-round online
branding and engagement lead generation campaigns. We are a team of content specialists,
marketers, and advisors with a passion for powerful marketing. We believe in demand generation
with a creative twist. We believe in the power of content to engage audiences. And we believe in
campaigns that deliver results.
WBR is proud to be virtually paperless. Together, we’re saving trees, helping the environment
and are looking to improve every single day.
Appendices
About
Appendix B: Who Responded to the Survey

Gaining Visibility Over Licensing in a Diverse Technology Market

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