Own the Cloud: Make Your Vendors Work for You

By Michael Heflin

At this point, I reckon the myth of SaaS making SAM obsolete has been if not readily accepted, at least consciously understood. Regardless of the platform, the same rules for license optimization apply – understand what you own, how you are using it, who is using it (for what, when and why) and ensure your contractual rights meet those needs. It sounds simple, though most realize it most definitely is not. Either way, license optimization is needed to maximize the return on your software investment, regardless of platform.

What is unique about SaaS, as opposed to traditional on premise software, is that your goals and your vendors’ goals are much more closely aligned. The simple reason for this is that while many contracts only pretend to be “pay as you go” (a year-long contract paid monthly is still a year-long contract), the simple appearance of “pay as you go” means your vendor has significantly more incentive to care that you are getting value out of your software.

This is not to say that traditional vendors don’t care about you, but the economic incentives are significantly altered. Say you purchase Product X for $1M in year 1 with a (pretty standard) 18% annual 4 year maintenance contract. After that $1M is collected, what is your vendor more interested in – protecting your 18% or finding their next point-in-time purchase of $1M? However, even using the same intended capital investment (5 year agreement, $1M in year 1 and 18% for the subsequent 4 years), a “pay as you go” model would spread the same $1.72M over 5 years in equal installments of $344,000. So, what is your vendor more interested in, economically, in this case? Protecting your go forward of $344,000 per year or finding its next $344,000 per year? While the dollar value is the same, the “cost” of keeping a current customer is significantly less than that of finding a new one, so there is actual financial incentive for them to keep you happy.

But how do you leverage this financial incentive to improve your purchasing decisions? By putting some of the onus on your vendor to help you better rationalize your spend. For instance, if you purchased product X with blade Y, however you aren’t sure if anyone is actually using blade Y and whether you should continue to invest in it, your vendor can, and in fact should, help you answer this question.

Your vendor may be able to help you understand how to appropriately track user activity, logins, etc, as this data is almost always stored by default (and if not, the vendor can instruct you on how to activate logging). Now that you have access to the data, you can see who is using it, when they are using it, and perhaps even how they are using it (some logs go so far as to tell you a user’s actual activity within the software). With this information you become much more powerful.
Now you can address the original inquiry – who is using blade Y, who isn’t using blade Y, why they aren’t using it and what needs to be done if the usage isn’t matching expectations (and hopefully the expectations for usage match your purchased quantity).

If the issue is that the product simply doesn’t meet the needs of the users, now you know and can forego continuing this service and paying for something you don’t need. However, what if the problem is just knowledge and understanding of how to use blade Y? Again, leverage your vendor. Many vendors offer significant training and educational programs on their products and will even go so far as to come in and do additional on-site training with users, especially if they think there is a risk of lost future revenue associated with that component.

This is only a small example of how and where your vendor’s financial incentive to ensure you get the most out of your software can be leveraged. Hopefully it provided some insight into how you can and should leverage your vendor to meet your Software Asset Management needs.

If you’re interested in learning more, I will be diving deeper into this topic during my presentation “Owning the Cloud” at this year’s IAITAM Spring Ace conference in New Orleans.

About the Author

Michael Heflin has over 10 years of professional experience focused on contract compliance, software development & licensing, big data, and business process optimization. As a Vice President at Anglepoint, Michael is focused on business process transformation at the intersection of business processes and IT for both end-user software asset management (SAM) programs and vendor aligned sales enablement programs. Michael has made a career of helping clients and partners leverage data to design more intelligent business processes. Prior to joining Anglepoint Michael was a Director at Orbitz Worldwide. Michael lead the creation of the Hotel Supply Information Management team, a group responsible for end to end data management and business intelligence (BI) solutions leveraging everything from Excel, to SAS, to Hadoop to profile and analyze revenue management trends, website usage trends, new product opportunities and data-driven sales incentive programs. In addition, Michael helped drive a fundamental shift in data storage and management processes at Orbitz as the business lead for the creation of a company-wide data mart used to overlay web log and customer interaction data with internal revenue management and financial data. Michael began his career at Deloitte where he was responsible for providing data analysis leadership across the Contract Risk and Compliance group, leading reviews on everything from software compliance, to OEM, to consumer goods licensing at customers from Mexico to Shanghai resulting in hundreds of millions of dollars in contract non-compliance. Michael holds dual bachelor’s degrees from Miami University in Marketing and Decision Sciences as well as an MBA from Northwestern’s Kellogg School of Management.