Service-based software signals the end of shelfware

Analysts have shown that most large organisations devote a considerable amount of time, money and human resources to purchasing, renewing and supporting contracts for "shelfware" - software bought on a whim, or in accordance with policy, but not actually required for any particular use, so it ends up on a shelf somewhere. Rick Parry, MD of Progress Software South Africa, says service-based software, based on the premise that users should regard software not as a product, but as a service, is the answer to eliminating shelfware once and for all.

Almost all companies at some point or another pay for software that just gathers dust on a shelf, and many aren`t even aware they`re doing it. According to a recent survey by IDC, most customers aren`t taking full advantage of the software they`ve purchased. The survey showed that only 14% of executives of large companies said they were maximising the software they had licensed.

Asset and service management software company Peregrine estimates that 25% of all software is bought but never used, remaining in the shrink-wrap it came in.

Morgan Stanley has recently found that 20% of ERP licences were not implemented, while the figure rises to 40% when it comes to CRM applications.

Shelfware comes in four forms:

* Products that are acquired but never used;
* Products that are bought as part of a suite, and though these "extras" are never used they still require licence and maintenance fees;
* Products that were bought to fulfil a function that no longer exists in the business; and
* Solutions that have become redundant as they are replaced by new software applications

Given that software accounts for approximately 40% of total IT spend in an organisation, eliminating shelfware provides a very real opportunity for major cost saving. But the reality is that many companies are simply not able to develop or maintain and accurate inventory of their software assets. They spend time and money managing scores of contracts with numerous vendors, without ever really gaining a "big picture" overview of their software portfolio. The problem is exacerbated by the fact that contracts often lock clients into software products for seemingly all eternity. And when contracts do come up for review, they are often renewed without requiring a business case to demonstrate ongoing need.

Lack of accountability further compounds the problem of shelfware. The general rule out there seems to be that nothing happens to you if you buy software that is not actually used by your organisation. It`s the old "you can`t get fired for buying IBM" adage. Think for a moment of the impact this has on IT budgets. Furthermore, how many companies are not reaping the benefits of IT tools, and how long can they go on like this without suffering competitively as a result?

The benefits of SaaS over licensed software

The shelfware dilemma has naturally not gone unnoticed, and organisations everywhere are being advised to conduct high-level assessments of all their software licences, whether implemented or not. This is a daunting task. The good news is that service-based software can eradicate this problem. Software as a service (SaaS) is delivered to organisations as a componentised, subscription model.

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This means it is billed on a resource usage or per-user basis, rather than a fixed monthly fee or enormous annual licence fee. Because it is a subscription model, the customer does not have to make the massive up-front investment necessary for all the hardware, operating systems, databases, licences, IT staff, and ongoing overheads. It requires no client-owned or managed infrastructure other than Web access, and can be entirely supported on an infrastructure provided by the independent third party software provider.

One of the major benefits of SaaS is that it is ideally suited to the agile business that is becoming the norm of our economy. Because service-based software is delivered through an on-demand business model, it enables companies to respond with speed to customer demands and market opportunities.

According to the SaaS model, a software application is delivered to multiple customers, and can be monitored and adapted to changing customer usage on demand - whether that customer needs to up or down their requirement.

Compared to licensed software, SaaS offers many benefits. Firstly, the company pays only for the software it uses, such as number of seats deployed, for example. This goes a long way in eliminating wasted software spending.

Because companies are not tied into complex contracts, it is much easier for them to switch to other software providers. This forces providers to ensure that they keep their users satisfied and that they continually strive to deliver high product functionality.

With a low cost of entry - start-up costs are relatively small - SaaS is also suitable for small or departmental level deployments, and does not impact other IT resources.

Service-based software also makes excruciating upgrades a thing of the past. The software automatically remains current, while users themselves expend no effort on upgrading.

With SaaS, there is no talk of product, users, or price; there is no up-front payment, and no annual maintenance fee. The focus is on value, which is defined upfront and measured, in agreement with both customer and service provider. Service-based software shares the risk between customer and IT provider, introducing the concept of fairness into the IT arena for the first time. The customer is billed for a software service based on an agreed metric that measures the success of the customer`s business.

The risk here is that if a customer`s business goes through a bad patch, then the software supplier is paid less, but the converse applies when business is good. It makes sense, therefore, that the software service provider will make every effort to ensure that the software works in the interests of the business. The model ensures that both parties win when technology behaves as it should, and that both feel the pain when it does not.