One of the most common ways businesses waste money is buying software that will never be used, but how much money exactly is being thrown down the drain in this manner?
The vendor 1E polled IT managers in an attempt to answer this question, and the number produced is a big one: $15.3 billion in the United States and United Kingdom, including $12.3 billion in the United States alone. That number is the amount of money spent annually on maintenance for unused software and shelfware.
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The study comes with the caveat that 1E is trying to sell new software called AppClarity that helps companies identify and eliminate software waste. You could also argue that $15.3 billion isn't much compared to the $3.6 trillion in worldwide IT spending forecasted by Gartner for 2011.
But it's still worth taking a look at how 1E says IT shops are wasting money. The "Software Efficiency Report" was performed by market research agency Opinion Matters and commissioned by 1E as well as the International Association of Information Technology Asset Managers and the Federation Against Software Theft. More than 500 IT pros from companies with at least 500 employees were surveyed.
Four out of five respondents "agree that there is more than $100 worth of installed but unused software per PC," and an even greater number of respondents "have undeployed software licenses, more commonly known as shelfware," 1E said in a company blog post this week. Although 80% admit to $100 of unused software per PC, the report says the average amount of unused software on a user's PC is much higher: $414.50. That doesn't include sheflware.
"On average, at least 10 percent of all software purchased is destined to become shelfware - at a cost of between $145-$155 per user per year for each organization," 1E said.
The report arrives at the estimate of $12.3 billion wasted in the United States by assuming that organizations pay 20% of the cost of software to vendors for annual maintenance services. If you take 20% of the $414.50 worth of unused software on a user's PC, and 20% of the $155.09 spent on new licenses that become shelfware each year per user, that adds up to $113.92 in "total maintenance cost on wasted software licenses per year."
Multiply $113.92 by the 108 million "regular business PC users in the United States," and that comes out to $12.3 billion.
Since this figure just accounts for ongoing annual costs, and not the original cost of the software, the report further claims "the software sitting unused on PCs in the United States could have historically cost those organizations $45 billion."
One potential flaw in this assumption is that enterprises often buy in bulk, and it could be cheaper to buy software for everyone even if not every person uses it. While the report mentions that one factor boosting the amount of unused software is that licenses "may be bundled together by the vendor," it doesn't seem to factor bulk discounts into the final amount of wasted money.
Still, it's clear a lot of money is being wasted, and the survey findings indicate that enterprises are lax in their attempts to minimize cost. Despite the high stakes, half of enterprises polled said they still use spreadsheets to record software licenses, and another quarter use paper-based filing systems or no process at all. Negotiating with vendors can help "reclaim" unused software licenses in exchange for refunds or new services, but more than three-quarters of organizations have never done so, the study found.
For businesses, there seem to be at least two solutions. Either create new manual processes to better manage software licenses, or purchase software that automates the process of identifying software license waste. (1E isn't the only vendor that sells this kind of thing; others include Flexera and HP.) If you opt for the latter, remember that buying the software isn't enough - you actually have to use it.
Read more about software in Network World's Software section.