How much is that software in the window? If it's just sitting there, a lot. According to a new study, U.S. organizations wasted $30 billion — yes, billion — on unused software over the course of a four-year study.
That's the conclusion reached by 1E, which recently released its "The Real Cost of Unused Software" report. The study looked at data on about how 1,800 software titles were installed on 3.6 million desktops in 129 companies across 14 different industry sectors, all over a four-year period. The global average came to 37 percent waste per company. The cost: $259 per desktop.
This isn't a problem that's getting better, either. That 37 percent number hasn't really moved since they started tracking the data, says Buffi Neal, senior IT financial analyst at 1E. "That really surprised us," she says, because it means companies are still out there throwing money away.
Of the countries included in the study, those in the U.K. were least wasteful at 26 percent. The U.S. clocked in right at that 37 percent global average. Canada was in between at 34 percent.
1E also found that education companies were the most wasteful at 47 percent. That's probably because "education is used to having a one-sized-fits all approach," Neal says. The least wasteful: pharmaceutical at 18 percent.
The study also found that small companies weren't necessarily the worst offenders. Companies with under 2,000 employees had 41 percent waste, but companies with 50,000 employees were lowest of all with 32 percent waste. As growth continued, though, so did waste: 37 percent for companies with more than 100,000 employees.
The wasteful disconnect
Why the gap? Sometimes it's a poor software asset management program (i.e. where, as Neal says with education, a company will take a one-size-fits-all approach. In others, it's people just not talking to each other.
"Companies buy software they don't need because of lack of communication and alignment between decision makers," says J. Lance Reese, chief operating officer at The LIMU Company, who has previously held the CIO position and overseen software purchases — some that worked, and some that didn't, he says.
A big part of the problem is how departments approach finding a solution to a problem through software. "When a business unit outside of IT evaluates software, they evaluate software based on what it will do for them," he says. "When IT evaluates software, they don't really care what it does. They care how it does it."
So while the business unit may like how something works on its end to meet its needs, if IT doesn't like the database or the APIs, they might fight against the software purchase. That can lead to big money burn.
Let's say the business unit buys the software anyway. It might not work with the systems IT already has in place. If they install it themselves, they may do it wrong. If IT doesn't want to support it, then it's not used right. On the flip side, how about if IT chooses software based on the back-end? Then it may not fit the business unit's needs, or it might be too complicated for them to understand, so they don't use it. Either way, money goes out the door on something that doesn't address the problem it was supposed to solve.
They key, says Reese, is communication and compromise, led at the CIO level, because while your IT department might understand what a business unit needs to do, the business unit isn't going to understand the technical aspect of their software choices, and why what they think looks nice to them might be a disaster. If not, "it's a lot of wasted money, time, frustration and 'I told you so's,'" he says.
Buy and use better
Doing an evaluation of how software and licenses are being used can also help you reallocate or cut back. "That's a purchase avoidance opportunity," says Neal of 1E. "You reclaim money in cutting your future purchase budget."
Understanding what a business unit needs, so the company makes the right purchases, can save in the long run too, even if it means making a less technically worthy program work, for the sake of the business unit.
"It's incumbent on IT to understand how this software is going to be used and how it is going to meet the business needs of the company," Reese says. Besides, he adds, no matter what the reason for a wrong purchase, IT's going to get blamed anyway. Better to save money — and frustration — up front.