By John Lipsey
On August 7, the Inspector General for the Department of Defense issued a report entitled “The Navy’s Management of Software Licenses Needs Improvement,” in which it detailed instances of unacceptable Navy software contract licensing terms unfavorable to the Department of Defense (DoD). The report found, among other things, that the unacceptable licensing terms occurred because “…no established requirements existed to guide contracting personnel…” during the negotiation process, and contracting officers did not receive the necessary training. The report concluded with recommendations requiring the Department of the Navy (DON) CIO to, among other things, require inclusion of favorable language in all contracts going forward, and issue a memo identifying types of training available for contracting officers to determine appropriate language to include and avoid in software contracts.
The overall stated objective of the IG’s audit was to determine whether the Navy was effectively managing software licenses. However the report only specifically covered whether the Navy included appropriate clauses in software procurement contracts.
While investigating and ensuring favorable contract language is a good first step, it only reflects a small, limited area of opportunity to affect significant software spend reductions in the Navy through better software license management. Accordingly, the DoD IG’s findings do not adequately advance its overall objective of determining whether the Navy was effectively managing software licenses.
To minimize software spend through better license management, the Navy would need to implement a Software License Optimization program. Using industry best practice processes and technology, Software License Optimization would provide visibility into:
- How much software the Navy has
- Whether it is fully utilizing the software it already has
- Whether the Navy is fully leveraging all of its software license entitlements to minimize the number of licenses it needs
- Whether it is non-compliant with its licensing terms and therefore subject to significant vendor audit penalties, and
- Whether it has unused software – shelfware – which could be reclaimed and reissued, in lieu of the Navy having to unnecessarily purchase new licenses.
It is surprising that given the overall objective of the audit report, that the DoD IG does not even address the subject of Software License Optimization. Especially in light of a June 25, 2013 Report by the Inspector General for Tax Administration entitled, “Desktop and Laptop Software License Management Is Not Being Adequately Performed,” which outlines a broader savings opportunity at the IRS through centralized software management and software license optimization.
Flexera Software estimates the US Government is annually wasting as much as $2 billion, based on annual software spend of about $8 billion. This savings estimate is based on its experience that organizations failing to implement agency-wide Software License Optimization programs waste between 10%-25% of that spend on shelfware, poor utilization of license entitlements known as product use rights, and unnecessary maintenance costs.
Indeed the Navy, too, is aware of the advantages of implementing a Software License Optimization program. In 2008, the Department of the Navy’s Naval Facilities Engineering Command (NAVFAC) began tracking software usage in an effort to save money. To do this, NAVFAC used a Software License Optimization solution to analyze how many copies of its Autodesk engineering applications it had bought, deployed and used. NAVFAC realized they were not using as many Autodesk licenses as they had bought and as a result were able to cut back on associated operations and maintenance expenses. Over a five year period, NAVFAC was able to realize maintenance savings in excess of $15 million between 2008 and 2013 for just a single software vendor.
In response to the NAVFAC success and with the expectation of garnering significant software savings across the entire department, on August, 2013 the Navy posted a Request for Quotation (RFQ) #N00104-13-Q-Q628, entitled “ITAM and SAM“ to the General Services Administration (GSA) E-BUY program. The purpose of this program is to acquire the necessary technology to implement a Software License Optimization program. In November, 2013 however, this RFQ was tabled, and the Navy has put off its plans to implement a full-scale Software License Optimization program.
The DoD IG report published on the Navy’s software license management practices fails to focus on one of the most significant areas for better management and cost savings –the area of Software License Optimization. Moreover, the Navy is aware of Software License Optimization and, in fact, has already achieved significant savings in a pilot license optimization project.
The DoD IG should re-open its investigation and expand its analysis to answer the following questions:
- To what extent is the Navy using software licenses exceeding licensing terms and conditions, and what software vendor audit “true-up” penalties is it paying annually as a result?
- To what extent is the Navy over-purchasing software licenses, either as a result of poor understanding of its license entitlements or because it doesn’t track software usage to uncover shelfware?
- How much money is the government wasting on software maintenance fees for software that it is not using?
- What cost optimization programs has the Navy successfully piloted to ensure that it is only buying the software it needs and using what it has?
- Why isn’t the Navy adopting these successful programs department-wide?
To learn more about the benefits of a mature Software License Optimization program, please read our white paper: What Does it Take to Achieve Software License Optimization?