Commentary: Agencies spend billions on IT, but many can't track their software

Anywhere from 10 percent to 30 percent of the federal government's software expenditures could be eliminated through better software asset management. The legislation I introduced in the House to rein in software spending at the Homeland Security Department is as good a place as any to start eliminating that waste.

On Oct. 13, 2011, the Homeland Security Committee passed my amendment to the House version of the DHS authorization bill that would eliminate wasteful software license spending. The legislation would require DHS' chief information officer to:

-- Conduct a departmentwide inventory of existing software licenses, including those that aren't in use.

-- Assess the department's needs for software licenses during the next two fiscal years.

-- Examine how DHS can achieve the greatest possible economies of scale and cost-savings in the procurement of software licenses.

This bill brings into clear focus something that private enterprises have struggled with for years. The complexity surrounding enterprise software licenses is mind-boggling, making it difficult for agencies to understand how much software they need, how much software they have and how much software they're actually using. This produces two wasteful consequences: endemic over purchasing of certain software packages and endemic under purchasing of others.

Over Purchasing

Over-purchased software -- commonly known in the technology industry as "shelfware" -- typically occurs when large organizations negotiate discount rates on software when they purchase licenses in bulk. But they often don't use all of the licenses they purchased. The negotiated discount is illusory when an organization has paid for more licenses than it needs.

Under Purchasing

When an agency doesn't purchase enough licenses there often are more employees using the software than authorized. It's easy for users to access licenses they haven't paid for -- it happens all the time in government as well as private enterprise. The result is that the organization is out of compliance with the software vendors' terms of use. Vendors frequently audit their customers to determine whether they are in compliance. If an agency is not, it can be saddled with bills for software that has been used and not purchased. Those charges, known as "true ups," can run into the millions of dollars -- costs that haven't been budgeted or anticipated.

In the private sector, companies are increasingly aware of software asset management and enterprise license optimization as a means to bring costs under control. Technology analysis firms, such as Gartner and IDC, see software asset management as a means for tracking inconsistent software licensing and bringing organizations into compliance.

In a recent report on government information technology, Gartner calls out the following challenges for government as it reins in technology spending:

-- Cost optimization remains top of mind for most government agencies, but there is a growing realization that what is at stake is their ability to continue operating and delivering services at the same or better levels while being asked to deliver unprecedented levels of efficiency.

-- The key challenge for governments will no longer be to transform to improve their services, but to be able to fulfill their statutory obligations. While technology investments could favorably affect productivity and help with sustainability, cost containment remains a top concern, forcing IT executives and their organizations to embrace more agile and evolutionary development approaches, as well as more radical sourcing options.

Some software vendors, such as Flexera Software, are tackling the issue with solutions that are widely adopted in the private sector to ensure compliance and license optimization. And corporations such as Rentokil, one of the largest business services companies in the world, are achieving savings by bringing their software license spending under control.

Given the federal government's critical need to reduce spending, focusing on software license optimization is a no-brainer. According to IDC, agencies spent more than $40 billion on software in 2010. If they could optimize those expenditures, the savings could amount to billions. Passing the amendment to eliminate wasteful software licenses would bring agencies one step closer to realizing those savings.

The message is clear: Cost containment will continue to be dominant theme in government IT. But even more important will be cost containment strategies that deliver more capability and productivity. This is one of the primary objectives of software asset management and license optimization, and the reason I introduced the DHS amendment. It helps answer the question: How can you boost productivity through software while optimizing procurement, reducing audit cost and risk, and improving IT efficiency?

There is a tremendous amount of waste institutionalized in the government's system, or lack thereof, for procuring and using software. Adopting best practices in software asset management and license optimization from the private sector is a relatively painless and efficient way to eliminate wasteful spending, while increasing value for government employees. I'm hopeful that by voting this amendment into law government will have taken some significant strides in eliminating that waste.

Rep. Joe Walsh, R-Ill., is a member of the Homeland Security, and Oversight and Government Reform committees, as well as chairman of the Small Business Subcommittee on Economic Growth, Tax and Capital Access.