Mike Austin explains tail-end software spend: hundreds of small subscriptions that pile up because companies focus on big vendors and lack visibility. He maps vendors on a cost-versus-exposure grid, then cuts waste by centralizing purchases through one owner and a simple approval process.
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Mike Austin
April 26, 2021
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It would be a miracle if any corporate whale of a company could get by on running the business just by using Office365 alone. However, in this corporate ocean there are no miracles and there are no types of one stop software suite companies either, especially since the average working professional has to use around four to five software programs on a slow day, which makes it quite difficult for those who are in charge of governing or procuring software for their organization. But what is tail end spend and what causes it in the first place? If you're asking those questions, you're in the right place because we're going to look at tail end spend in the context of a software budget and how you can reel it in. First of all, tail in spend is the long tail of little software purchases on the company's bottom line that accumulate over time. This area of spend accounts for a smaller 20% of the total software spend, but makes up about 80% of vendor diversity. This small but wide spread of software is like a birth of barnacles. If not scraped off over time, it'll create problems like compliance, exposure gaps, budgeting issues and security alerts down the line. But what causes it? The causes of tail end spend in an organization's software budget start with tunnel vision. Let's be real here. There's a tendency to focus on the big vendors like Microsoft, IBM and Oracle as they take the lion's share of the Software budget, usually 80% or more. This causes management to focus on the big boys on the software block, leaving the other applications and subscriptions behind. Like a sleeper cell agent, it's ready to strike down the road. Next on the list is a rigid procurement process. Oftentimes, employees may need to go through a lengthy process to buy anything for their work, especially online purchases. That's why procurement teams have put in processes to stem this type of buying from non professional buyers. But if an employee needs to adopt a new piece of software to get their work done, they will buy it regardless of the procurement protocol in place, leaving open exposures in the purchasing plans. Going beyond that, another tail on spend cause is the infamous free trial. Employees download free trials of software, don't fully read the T's, and C's, sign up with the company credit card and forget that they will be renewed at full price in the next month. This can add up over time if multiple people sign up for the same software, which could lead you ending up with a whole lot of software stack to clean up after that. One of the most vital issues and root causes of this is the lack of data visibility IT managers, procurement professionals and even finance professionals have when it comes to their IT asset inventory, specifically around software. This makes it so the right hand can't see what the left hand's doing, and with no way to dig deep into who's using what, just gets swept under the rug until it becomes a problem. Which is why when savvy IT and procurement pros need to see what's going on in a pinch, they turn to Metrix Data360's health check to sniff out what software titles are hiding where on what servers and devices, and even how much they're costing their budget too. If you'd like to use the MD360 health check to get a handle on your tail end spend, please click the link in the description below, fill out the form and watch the demo video. After that, our experts will be in contact with you to tell you the next steps you need to take to start chopping off the tail end spend from your organization. So now that you know what causes tail end spend, you've got your health check and or you just want to go take it on alone. Here are the next steps you can take to put a stop to tail end spend in your organization. Step number one Analyze, Identify and get an expert. I guess that's three steps, but if you're ready to get to the bottom of the problem, you need all three of them. Firstly, you need to gather your spend data from all sources and then analyze it. Credit card purchases, ERP software, or it could even be a document in a drawer. You can use tools for this. However, if you want to thoroughly vet all exposure, procurement professionals like to consult a third party expert or some sort of guy to uncover all the weirdware vendors hiding in their organization. These people will have many other tricks for finding embedded software that the tools do not after you've got all that, it's time to move to step two Classify Vendor Exposure so this is for you watching this. This is a step you need to take yourself. Now that you have your data sorted and an expert on the line, it's essential to classify which vendors cost the most and have the highest likelihoods of auditing your usage down the line. To do this, draw an X and Y quadrant and map out all the vendors you found and go through the risks with your expert or knowledgeable team members. The X being exposure from left low to right high and the Y being the cost from the bottom low to the top which is the highest cost. Then jot down all the vendors you found in the correct quadrants. Do this with your expert or your knowledgeable team members. Now when you have them all down, you will want to work on quelling the purchasing from the top right quadrant first. Then work your way down through the rest and adjust your procurement policies to suit the three other sections. And finally Step three Work on a New Internal Process for Buying new software Moving forward, you will now want to start planning a new way to track rogue spending easier than before. So to do this you will need to implement a new process which is less friction than the old one. The first part of the process should include purchasing through something simpler such as an eprocurement software for employees to purchase smaller buys of software from. Or if you want to go really old school, you could just do it in an Excel form. Then you need to limit the amount of non professional buyers who are allowed to make these purchasing decisions. Put a lock on that credit card if you know what I'm saying. And finally, to complete your process, you should appoint a knowledgeable team member who knows about these tail end spend vendors and knows how to track and report on the purchases going forward. From here you can take an informed approach on curbing the tail end spend going on on your watch. And that's how you chop off the tail end spend on your organization's ever increasing software stack. If you have any questions, don't hesitate to drop a comment below or even reach out to our software experts. Don't forget to smash that like button and hit subscribe for more Sage Software asset management content and advice. Thanks for watching. Keep your software safe and those assets managed.
