Managing your IT infrastructure is a vital part of being a successful entrepreneur in 2023. With an ever-increasing variety of software applications at your disposal, it can be challenging to keep your business streamlined and organized. If you are not careful, systems can become muddled, and you can start to go backward when it comes to productivity.

What’s more, when you are using so many software applications within your company, costs can quickly spiral out of control, even if the individual subscription costs are not particularly steep.

Everyone can relate to the feeling of checking the bank balance at the end of each month, only to be shocked by the sheer number of subscriptions you have for services. When it comes to a full-blown business, this problem intensifies considerably.

A key element of this is related to software licensing. If you don’t identify and negotiate a good deal with your software vendors, you are going to end up paying well above the odds for software that you aren’t even using.

To help you understand how software licensing can impact your business, here is a guide that examines some of software licensing’s core principles and strategies.

Here is everything you need to know:

Last week, Salesforce CEO Marc Benioff promised he had received expert advice in tackling the company’s problems – ones that have seen it resort to cutting around 10 percent of its workforce – by committing to following the Oracle playbook.

In a move designed to reassure investors, he told analysts he had been in conversation with Larry Ellison, the tech industry legend who founded Oracle, where Benioff cut his teeth during the early part of his career. But the question for Benioff in his effort to court investors remains: what should Salesforce expect to experience from its adoption of the Oracle playbook?

Those with long memories and tight budgets might be concerned the strategy will adopt Oracle’s propensity for practices around software licensing that – although legal – have attracted a great deal of criticism. In July last year, the plaintiff in a case alleging aggressive cloud sales tactics to artificially inflate its share price requested a $17.5 million settlement to the four-year row, although discussions are still ongoing. More recently, Gartner has warned that Oracle “actively targets organizations” on Java compliance after introducing new contractual terms for the code.

Benioff gave away little in terms of detail on a recent call with analysts, aside from platitudes to his former boss.

“Huge call-out to my mentor, Larry Ellison, who has spent a lot of time with me, giving me the Oracle playbook. And I’m very grateful to him. He was the first person who texted me after the earnings came out today… He’s been a great friend, and we’re executing that playbook to increase our margins. They obviously have best-of-class margins. So it’s great to have someone on your side like that… so thank you so much for everything,” Benioff said.

And Salesforce’s financial results were reasonably good – the CRM giant scored Q4 revenue of $8.4 billion, up 14 percent year-on-year. Full-year revenue for 2023 was $31.4 billion – up 18 percent over the same period. All this, as the US CEO likes to point out, against currency headwinds.

However, circling activist investors want to see the company up its game, and specifically push margins close to the software industry’s gold standard of just over 40 percent, as set by Microsoft and Oracle. Salesforce’s margins stand at around 22 percent. Quite why the software industry has such high margins – General Motors has around 7 percent while pharma company GSK has around 19 percent operating margin – is perhaps discussion for another time.

Nonetheless, Oracle has long employed techniques for maintaining high margins that Salesforce customers might be keen to hear about.

Craig Guarente, a former Oracle executive responsible for contracts and license management, told The Register that Big Red was forensically focused on margins because they were different depending on the business unit.

“In Oracle’s transition to becoming more cloud focused than on prem, it really looked at the margins carefully. The margins on support are much higher than the margins on cloud. So Oracle can’t just turn all their support customers into cloud customers because they would lose margin,” said Guarente, founder and CEO of software licensing advisor Palisade Compliance.

Instead, Oracle employs a range of techniques that more or less ensure customer spending with Oracle never goes down, and margins remain optimal. For example, vendors can redefine the number of users who count under the licensing agreement, as Oracle has with Java, licensing the language and development environment on a per-employee rather than a per-user or per-processor basis as the old model allowed.

The proliferation of “as a Service” technologies and public cloud infrastructure services poses a significant challenge for IT asset management teams tasked with cutting wasteful spending and reaping value from sourcing decisions, the report said.

The complexity of software vendor use rights was similarly cited as the major cost management challenge by nearly one-third of respondents.

Eliminating redundancy and waste isn’t always the easiest path to trimming budgets, but it’s often the best way to get the most out of each dollar spent.

While IT budgets have so far escaped major cutbacks, inflation has taken a bite and belts are tightening. Finding ways to reduce IT costs without eliminating tech capabilities is the target organizations are aiming at.

Companies have realigned reporting structures as pressures to meet demands for more efficient software spending.

The number of IT asset management teams reporting directly to a CIO or CTO has nearly doubled since last year, up to 43% from 22%, according to Flexera.

And teams are finding ways to cut waste. The most successful software asset management teams were able to avoid purchasing new software licenses through the reuse of existing ones, the report said. Negotiating better vendor contracts and reducing maintenance spending on unused software were two other effective ways to realize savings.

IT Asset Management (ITAM) ensures valuable items, both tangible and intangible, are being tracked and used within an organisation. These include such assets as hardware, software, or critical information that holds value to a business. In an IT department, some of the most important assets are the computers, software licenses and hosting servers.

According to Pamela Wheelwright, Senior Director Analyst at Gartner, “Most organisations do not have a formal IT asset management (ITAM) programme but recognise the need to implement one in support of their digital business objectives.” Awareness seems to be one thing, but implementation is quite another when it comes to ITAM and software asset management (SAM). As Deloitte’s Global ITAM survey report in 2021 showed, organisations are rethinking how they invest in governing IT assets and license their hardware and software.

Nerys Mutlow, Evangelist in the Chief Innovation Office at ServiceNow, states that the problem lies in manual working: “When software assets are tracked manually by using spreadsheets, for example, it can result in the inventory being incomplete, inaccurate and out of date. This makes it incredibly hard to challenge vendor audits, exposing businesses to compliance risk and significant fines. ITAM provides visibility and control over software assets, allowing organisations to get a complete view of IT resources across on-premises and cloud environments. Ultimately, this makes ITAM an important element in the strategic decision-making process, by providing valuable data to help businesses make good technology choices and improve their returns on investments over time.”

IT assets have a finite period that they can be used, so the lifecycle must be proactively managed at all stages. According to Atlassian, who develop software and collaboration tools, these stages usually include: planning, procurement, deployment, maintenance, and retirement. Having an overlying ITAM strategy is vital to understanding the total cost of ownership and optimising the use of assets.

IT departments must also be agile to deal with subscription-based software and employees’ expectation to customise the tools they work with, which are typically accessed through app stores or marketplaces.

PwC insists that if an organisation has a considerable software spend, they may be spending too much or under-utilising these assets. They list these initiatives as the most common part of ITAM strategy: