Procurement

How DOD can make sense of its software

Steve Schmidt

Flexera's Stephen Schmidt explains why a little-noticed provision in the Defense Authorization Act could bring big savings through license optimization.

Waste in software license procurement and management is well documented. The recent 2012 Key Trends in Software Pricing and Licensing Survey, prepared by Flexera Software with assistance from IDC, shines a light on some of the true costs of software-spending waste. According to the survey, 38 percent of organizations indicated that 11 percent or more of their application spend was associated with out of compliance use, up from 26 percent one year ago.  Likewise, 56 percent of organizations said that 11 percent or more of their application spend was for under-used software (shelfware), up from 49 percent last year.

The Federal government spent over $9B on software in 2012. Applying the waste figures from the Software Pricing & Licensing Survey report to the Feds – if 11 percent of the software budget was spent on shelfware and/or over-buying licenses because the DOD does not fully understand and apply its license entitlements – a Software License Optimization (SLO) strategy adopted government-wide could net more than $1 billion in savings. And it would do this without cutting any essential services.

In the recently enacted National Defense Authorization Act (NDAA) – a 700-page bill that outlines the budget and authorizes spending by the Department of Defense, a small provision promises to have far-reaching impact on the department’s software license procurement and management practices.

Buried within the NDAA legislation in Section 937 (pp. 256-257) is recognition – now enshrined into law – that Software License Optimization is a prudent framework for managing DOD's software estate.

The Fiscal Year 2013 NDAA includes both statutory and report language requiring the DOD’s CIO to conduct a department-wide software asset inventory – an examination of current license utilization rates, and an assessment of the means by which the DOD can achieve the greatest possible economies of scale and cost savings in the procurement, use, and optimization of selected software licenses.  Based on the results of this assessment, the bill directs the CIO to establish a performance plan to align the number and type of software licenses with the needs of the Department. Upon completion of the inventory and assessment, the CIO will brief the results to the congressional defense committees on an annual basis.

The report language states that Congress expects DOD to effectively and efficiently manage its resources, including the number of software licenses it procures, to eliminate waste and unnecessary duplication to the maximum extent practicable.

Implementing the Software License Optimization Provisions in the NDAA

Practically speaking, the DOD will have to take certain concrete steps to comply with this legislation:

1. Inventory Software Assets: Within 180 days of the legislation’s passage, the DOD must conduct an inventory of “selected” software assets. “Selected” has a special meaning here – those assets that will “maximize the return on investment” resulting from software license optimization efforts. To do this, DOD must select and inventory software from vendors representing the most costly applications the DOD licenses. In most organizations, this includes such high-volume vendors as Oracle, SAP, Symantec, Microsoft, Adobe and IBM, as well as high-cost engineering applications.

2. Compare Licenses Purchased vs. Software Installed:  The process of comparing licenses purchased vs. software installed required in the software inventory process allows the DOD to arrive at a “license position.”  This is an assessment as to whether the DOD is over-using its software (is using more software than it has a right to) and is therefore out of compliance and subject to costly audits and “true-up” fees. The inventory and license reconciliation process may also determine that software is being over-bought – a situation in which the DOD has unused/under-used software or failed to fully leveraged its license entitlements to reduce license consumption – a costly area of waste.

3. Leverage License Entitlements – “Product Use Rights”: In its analysis of purchased vs. installed software, DOD must carefully examine and apply the license entitlements (“product use rights”) provided under the terms of the licensing agreement.  Use rights such as upgrade, downgrade, second use, virtual use, etc., can have a huge impact on the DOD’s license position, and optimized license management can significantly reduce software costs.

For instance, the license may be allocated to a computer that is no longer being used. So can that license be “reclaimed” and reallocated to another device?  Has the software been used in a virtual environment?  If so, what are the vendors’ licensing rules pertaining to virtualization – and how will those rules impact the count when reconciling licenses purchased vs. software installed?  Is the license being hosted on a private cloud?  Is it being deployed as a standalone package, or as part of a suite?  Is there an option to apply licenses to back-level versions?  Can the same license be used on a second machine?  What software is on mobile devices?

In order for the government to accurately arrive at a license position, it must do more than simply count its hardware and the number of applications installed on that hardware. It will need to take full advantage of its license entitlements to minimize license consumption and reduce software costs.

4. Create a Performance Plan: If the inventory results determine that the DOD’s software licenses exceed its needs, then the Secretary of Defense must implement a plan to bring the number of licenses into balance. In most instances, this can be achieved by negotiating process with vendors for new licenses. Once the DOD understands that it has idle licenses in inventory, it can purchase the correct level and mix of licenses moving forward – thus reduce its software procurement costs. The software license optimization process that takes place during the inventory should generate a license position report that can be used as the basis for the performance plan, and future procurement negotiations with software vendors.

5. Create and Implement Full Software Lifecycle Management Program: Achieving full and continuous compliance with this Software License Optimization provision could be managed more efficiently on an ongoing basis if the DOD follows best practices by creating a comprehensive software lifecycle management program. This would include plans for: software rationalization, procurement and classification; creating a technical reference model (TRM) for new software acquisitions; certification and accreditation (C/A) standards for new software being pulled into the environment; and self-service of applications to make agency employees more self-sufficent.

The process and tools used by the Pentagon to conduct this inventory and performance plan are key. Software License Optimization is not new; it has become a best practice imperative in private enterprises, government and educational institutions.  Leading technology analyst firms like Forrester and Gartner recommend a combination of best practice processes and technology to achieve SLO. In developing its implementation strategy, the DOD would be wise to follow their recommendations. It should also look to examples of successful SLO implementations, both within DOD’s own agencies and in private enterprise, for guidance. And once that is underway, the president should direct the Office of Management and Budget to take the appropriate steps to require this practice in all government agencies.

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Reader comments

Fri, Jan 11, 2013 Beltway Bill

A great deal of this presumes the DoD has tools to actually measure deployed software installs & usage. Just adding that capability across the multiple enterprises will cost a good bit of change. But even if i ends up costing the DoD more in the end, such an ability measure/monitor its own networks for processes/apps in use has tremendous other gains. (Think in regards to illegal-ware, malware, etc..)

Fri, Jan 11, 2013 Beltway Bill

If an average of 11% is shelfware and software vendors prices are well competed, one will expect prices to rise an extra 11% if all shelfware (on average) went away. Simple economics. As in most places, you need not outrun the bear, just your friends.

Thu, Jan 10, 2013 utopia27 Beltway

This article makes the gross presumption that the business models promoted by vendors are the best fit for the largest corporate enterprise on the planet. Establishment of an army of bean-counters to hound warfighters in the trenches on behalf of corporate software models strikes me as the best use of government resources. Some sharp negotiators that can leverage large-scale strategic source agreements with these vendors seems a much better investment.

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