Companies have put all kinds of costs under the microscope during the past couple of years, but one expense that is frequently missed involves software usage — or, more exactly, nonusage.
According to Kathleen Brush, a turnaround professional, even software companies overlook opportunities to cut subscription costs for applications they no longer use, or fail to notice they are paying for more software licenses than they need. Since the mid-1990s, she has led or participated in turnarounds of about 20 software companies, and almost all of them were able to reduce software costs by at least 15% and as much as 35%, she says, just by eliminating such waste.
“I’d rather cut costs other than heads, and software is the first place I look,” says Brush. “It’s a pot of gold. I guarantee that if companies analyze all their software invoices, most will come up with significant savings.”
Far from making a case for her services, Brush says it is “not at all difficult” for companies to find software cost savings. For a customer-service application, say, she advises finance managers to go to that department and ask how many people are using the app. “It’s simple detective work,” she says.
In most cases, superfluous software is created by employee turnover, says Brush. When someone who championed an application leaves, the software may be used less. And companies may not take into account that a downsizing usually results in a need for fewer licenses. Invoices that have been paid for years tend to get rubber-stamped. Most likely to be overlooked is software with subscription terms that call for automatic renewal.
Also, companies are more likely to have software that is not a good fit for its intended users — and thus is underutilized — when the finance department drives purchase decisions, contends Brush. That’s because when finance is in control, the decision often comes down to price, not utility, she says.
Ironically, two of her turnaround clients inadvertently helped their customers uncover unnecessary software, recalls Brush. One vendor desperately needed a revenue boost and decided to canvass its customers to find out whether some had more employees using its software than they were paying for. The result: 2 customers were invoiced for additional usage — and 12 customers canceled their licenses. “We really shot ourselves in the foot,” says Brush.
In the second case, Brush unsuccessfully argued against a software vendor’s plan to hire a telemarketing firm to reach out to customers after few responded to satisfaction surveys: she thought the tactic would spur the customers to reassess their software usage. Sure enough, 20 canceled their annual maintenance subscriptions, and 2 asked for refunds because they hadn’t used the product in years.