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How to Optimize ROI from Cloud and Reduce Software License Costs

Cloud Services were born with a “Pay as you go” (PAYG) Business model, purchasing just the needed services with “zero waste of resources”. To reduce the global costs associated with PAYG, many companies decided to opt for long-term commitments instead of the existing pricing model.

But what has really happened?

We noticed two effects:

  1. Under Normal Circumstances: 20% or more of the “acquired consumption” such as licenses or virtual hardware resources are wasted due to poor service management including unused accounts, servers not stopped when unused, and other forms of waste.
  2. During “exceptional” circumstances: these effects broke out: zombie accounts for collaborative solutions blocked rights for real users (incurring in license leak and urgent purchases), unused processing (CPU) continued working because IT operational teams have “more important tasks to carry out” and any “exceptional” contract clause has not been negotiated. Thus, it had been impossible to reduce the bill for resources booked in advance under a long-term commitment.

Therefore, organizations have to focus on creating a remediation plan in both the short and long term. To reduce the waste in the short term, the below solutions have been identified as potential options:

  1. Verifying, analyzing and removing “zombie" accounts and assets (for instances, VMs, Elastic IP Addresses, etc.), documenting the real usage of software and resources, and canceling unused licenses and/or subscriptions;
  2. Purchasing from / asking software vendors for temporary licenses (which are only needed during the cleaning activities);
  3. Delaying some payments to postpone cash outflows and asking vendors to reduce fees since many resources/licenses remain dormant; 
  4. Reviewing contracts to explore the possibility of reducing the software’s perimeter and bills; 
  5. Preparing to negotiate contract renewals (for example, by preparing a “multi-vendor” strategy, gathering all contracts per single vendor in order to create greater “volumes” which leads to better discounts, etc.); 
  6. Reviewing forecasts under current circumstances in order to pressure vendors to be supported, in order to return to previous forecast levels.

But that’s not enough: what are the lessons learned and the best practices we can no longer ignore?

It’s “compulsory” to monitor real consumption of both services and user licenses. It's not particularly hard, but how many organizations have a robust governance and toolset to effectively monitor real usage?  

Once the real utilization rate is known, it is important to adopt automatic real-time monitoring solutions. Fortunately, there is a wide range of available tools. It may take some "focus" to design an efficient governance… but it really is worth it!

Finally, since we are now aware that we cannot ignore “disaster” situations, we suggest performing a full risk analysis when renewing contracts, including ICT Risk-Analysis methodologies. Risk analyses can identify “what-if” scenarios and define a mitigation plan in order to protect your business against exceptional events and preserve long-term savings from shiny quick wins. 

These difficult circumstances will give you the opportunity to introduce and negotiate some clauses during your next contract renewal and it may save you later when you face harder times.