Software Use Exposes Firms to Unforeseen Risks in the Millions
Research Reveals Ignorance of Software Costs and Use
Utrecht, 14th of March 2017 – Since 2001 the software spend of companies has risen with 80 percent, according to recent numbers of Statistics Netherlands CBS. Despite this, most businesses are not aware of the costs involved, nor do they have a handle on how much or how little their software is being used. The upshot of this is that large organizations, i.e. those with a workforce of over 250, are exposed to unforeseen risks running into the millions. This state of affairs has been uncovered by a survey of 500 finance and IT decision-makers.
The research, conducted by research firm No Ties, commissioned by software licence specialist B-lay, has confirmed an unrelenting rise in the importance of software to organizations. Software is increasingly often an integral part of the business model and is indeed deemed to be the most important asset after staff and knowledge. Despite this, organizations often fail to keep comprehensive software-related records and only in half of the organizations surveyed was someone responsible for monitoring adherence to software publishers’ contracts. Paradoxically, these matters are often handled correctly when it comes to less important assets, such as hardware and office buildings.
Scant Knowledge of Software Costs and Use
Owing to this deficit in record-keeping and management, only one third of companies with a staff of over 250 know how much they actually spend on software each year. The proportion is even 21% in organisations with 1000+ employees. What is more, half of the managers surveyed admitted that they did not know whether all the software the company was paying for was actually being used. That is a logical consequence when only 49% of businesses conduct internal checks on software use.
Ignorance of software contract obligations, costs and use open the door to considerable financial risks. Mark van Wolferen, Director of B-lay, states that this research provides real incentive for organizations to take these risks seriously. “Given the growing role of software, not only are the financial stakes higher, but the risks are too. Failing to take control of those risks is like writing a blank cheque.”
Contract Infringement and Squandered Euros
The fact that money is being wasted hand over fist on paying for software that is not used is one thing, but exposing the business to the risk of infringing software provider contracts is another. For instance, organizations may, often unwittingly, be allowing more employees to use a software product than the relevant contract permits. Software providers such as SAP, Oracle, IBM and Microsoft proactively check up on compliance, above all at larger companies. This research has brought to light that firms with more than 250 employees are audited several times a year and face hefty additional payment demands as a result.
The study reports that it is the large organizations which suffer the brunt of these levies. Van Wolferen states that “these companies have the biggest software budgets, but owing to their complex software infrastructures and the huge quantity of products and licences involved, they also have the least firm grasp of exact expenditure and use. Moreover, contract infringement by big companies is spotted more often, as they are more likely to be audited than small businesses. We’ve frequently seen such audits result in bills running into the millions of euros, bills that have not been budgeted for. In this way software causes damage to companies’ business models, instead of contributing in a positive way.”
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The Financial Risks of Software Use