Savings as a Service

Savings as a Service: I was recently at a BCS Software Asset Management Networking event, and the time-honoured spectre of cost-savings raised its head. Paul Davis of Merlin Corp Ltd raised the question during a presentation given by Greg Holmes of Flexera: Why don’t Software Asset Management Consultancies/Vendors lead with a “Savings as a Service” delivery model?

Due to the ensuing heated debate, the phrase “light at arm’s length and stand well back” did spring to mind! (God bless ya, Paul!) But it is a point worth discussing further…

Paul’s argument being, that if you enter into an engagement with a client and potentially save a client £1M in liability, then seeking a gain-share fee of 20% (as an example) would net the Software Asset Management provider a tidy £200K.

However, let’s consider the current state of the Software Asset Management market: Many Software Asset Management tool providers are realising that there is great value in making a sale of a product based on the number of devices being managed; so license fees will always be healthy in the enterprise space. Further capital can be generated by offering consultancy around installing and tailoring the suite to integrate with existing tools, and to provide the reports that best serve the business. Finally, if a client is suitably impressed with all efforts gone before, they may even hand over the Software Asset Management function to the Software Asset Management provider to be run on the client’s behalf.

Software Asset Management providers worth their salt should be driving towards the top tier, but equally offer a jigsaw-piece approach to drop in elements of their offerings as and when the client calls upon them, but for guaranteeing accuracy of information, it is preferable if an established managed service is in place so that source data can be validated in good time, rather than rushed through.

So to return to Paul’s question: does gain-share have a place in the market, at least as it is described above? Probably not, no – as consultancies/practitioners would prefer to aim for a mutually beneficial/longer-term relationship.

Another problem with gain-share lies in the long-term assessment of fees to be charged. Hopefully in a Software Asset Management service any solution offered won’t be “point in time”; underlying fault-finding will correct the errors that led to liabilities being found in the first place – how do you leverage fees against improved installation and change management processes that don’t permit flawed deployments?

A point to note though: Not everyone is after a touchy-feely Software Asset Management service; plenty of companies require “a shot of Software Asset Management” and no more – so perhaps gain-share might be a rarely offered arrow in your Software Asset Management armoury; I guess it’s down to what sort of a relationship you believe is to be had out of the engagement.

For those at the other end of the spectrum who wish to implement SAM for yourselves, please head over to “SAM and the Bigger Picture” and download your free copy today – the final chapter will open up your eyes!

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  1. Anybody can chop into costs.

    Whilst the ‘Shared Savings’ model is good for catching attention, it usually gets dropped as an idea by the time that actual engagement takes place and swapped to a straight forward project engagement.

    a) Who saved what? Who is to say the company did the saving or the solution provider? Companies end up arguing over the details.

    b) If you primary motivation is cutting cost, it might not be in the best interests of the long term benefit of the company. e.g. Disposing of certain items in a contract might be good for short term savings but may end up costing the company more in the longer run due to planned infrastructure changes.

  2. I agree with Martin. It sure is a way to grasp attention, especially within the C-suite. The disadvantage is that the solution provider and the end user would have to enlist every single detail of what they consider would be a saving.

    In that time, a lot of contracts and licenses could be processed by the solution (and provider), as well as millions of records of raw installation data.

    If it’s hesitation towards an investment that is the issue, I think that the SAM solution provider can assist in coming up with a plan that works for both parties. There are so many reasons to invest in SAM and so many risks when you don’t.

  3. There are many elements that drive a SAM programme, where a customer wants the “shot of SAM”, this is generally reactive against either an audit or a short.medum cost savings target. In this instance, using GainShare can work. However its only one commercial model available – and may not be the most efficient model for a customer. If you can save a customer £1M and you make £200k, it leaves sour tastes with customers. A good SAM consultancy/practise should provide the options and be clear as to the metrics and savings potential invovled. Gainshare also tends to get procurement folk excited, mainly because they dont have the budget/pot to pay for services. The first rule of SAM engagements is to get executive sponsorship, people that have budget. CxO’s very rarely talk about commercial models, thet want to reduce Opex, out-task etc.

    However, when customers want to conduct a longer term service with a SAM partner, Gainshare doesn’t fit well. SAM is not purely about savings – how do you measure and baseline “soft” benefits such as strategy planning, portfolio rationalisation? Who retains the savings in a centralised budget? Again, a decent SAM organisation will present all commercial options right up to a CFO level to make sure they understand the risks and benefits of each model

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