How often do we face a problem where the solution offers an opportunity to save more money than the cost of the solution? A ticking time bomb lies in every business and government that does not maintain precise control of IT assets. The environment for managing IT assets has changed, presenting increased financial and regulatory risks. You can no longer assume that your processes for managing IT assets are adequate. However, actual experience demonstrates that improving processes for managing IT assets can result in major cost savings. This article explores the nature of the threats and cost saving opportunities, why the finance officer should take the lead, options for addressing the threats, and the benefits and savings that can be achieved.

FINANCIAL AND REGULATORY RISKS TO AN ORGANIZATION The very nature of IT assets makes them difficult to manage, introducing substantial risks. Let's examine the risks associated with inadequately executed IT asset management (ITAM). Non-Compliance with Regulations and Standards The business world faces legislation, including Sarbanes-Oxley and HIPAA, that demands controls to assure that IT assets be precisely managed to assure the privacy and security of information. While governments do not generally face all of the regulations businesses do, they increasingly face many of them. Consider OMB Circular A-123, which requires federal agencies to implement a subset of Sarbanes Oxley requirements. Even without formal regulation, good governance demands precise management of IT assets. Precise management means being in full control and optimizing the return on investment of assets, both hardware and software, throughout their lifecycles. IT assets are notoriously difficult to track and manage. Hardware is widely dispersed and frequently reconfigured, often resulting in inaccurate asset records. Software is even more difficult, existing in non-physical form as computer files. Under-Licensed Software Software can be easily copied, intentionally or unintentionally, and used in excess of licenses purchased, creating substantial risk. Employees can install their own personal software, music, and videos on government computers without the knowledge of management. Such activity became a genuine risk factor when the Business Software Alliance (BSA) instituted aggressive actions to investigate and enforce software license compliance. BSA was formed by leading software vendors to protect their property rights. Those same software vendors empowered the BSA to perform audits in businesses and governments believed to be non-compliant. BSA now offers $50,000 incentives to report non-compliant organizations. What organization does not have employees and others who will search for and potentially find non-compliance for $50,000? Many organizations find themselves in this situation unintentionally. Their procurement, tracking, and deployment controls may not have been adequate; or non-compliant software use took place in separate departments where organization-wide communications on permitted usage was inadequate. Intentional or not, the organization will suffer public embarrassment as well as a significant financial penalty. If you think government is immune or your government is too small, just ask officials of a small city in Washington State. The city settled with BSA for $80,000, nearly $5 for every man, woman, and child living in the city. What's more, their story even appeared on CNN.com. It all happened because city officials did not understand complex licensing requirements and did not exercise adequate control over employee software abuse. None of the failures, including employee software abuse was ill intentioned, but it was expensive. BSA and software vendors also have settled with large governments and school systems for varying amounts. In one case BSA settled with a school system for $300,000 with the total cost, including back payments and legal fees, to the system of an estimated $4.5 million. BSA has collected millions of dollars in the past few years from businesses and governments alike. The common thread in these cases is a failure to establish policies and controls to assure compliance with licensing requirements. Wasted Taxpayer Funds The most common short-term tactic to avoid the risk of under-licensing, chosen by most businesses and governments, is to over-license software. This solution wastes significant amounts of taxpayers' money and is ineffective at managing regulatory risks and risks that arise from individual use of IT assets. In the small city example cited above, it was the actions of individual employees without management controls that created the licensing abuse. Other sources of waste include: * Poor licensing practices--software licensing is complex, with each vendor offering different plans and programs. Few organizations have or can afford the in-house expertise and metrics needed to optimize software purchases. * Insufficient knowledge of how IT assets are used--this results in unutilized and underutilized hardware and software. Insufficient knowledge also leads to inefficient procurement decisions. Eliminating these sources of waste can produce substantial savings. A report in ComputerWorld stated, "U.S. businesses overbuy software licenses for 60 percent of their software portfolios and are noncompliant on another 30 percent of their software assets. It is estimated that seven out of 10 companies cannot identify who uses the software deployed throughout their businesses. U.S. corporations waste $90 billion buying IT assets they already own, buying the wrong technology, and making unnecessary payments for returned IT assets" According to the Gartner Group, "Enterprises that systematically manage the life cycle of their IT assets will reduce cost per asset by as much as 30 percent during the first year and between 5 percent and 10 percent annually during the next five years" We will explore how to achieve precise management of IT assets later in this article.

A NEW ROLE FOR THE FINANCE OFFICER The nature and likelihood of high risk combined with the potential for large cost savings should cause any government to assess its ITAM program and consider implementing a strong and precise ITAM program. Experience shows that ITAM implementations are most successful when they are championed and lead by the finance department. Why should the finance officer take the lead? * The finance officer is responsible for the financial treatment and reporting of assets, including IT assets. To fulfill that responsibility, the finance officer must exercise the authority necessary to assure accurate and complete data. * To achieve the kinds of cost savings described by the Gartner Group, multiple divisions and departments must cooperate. The finance officer is usually well positioned to provide the leadership needed to obtain that cooperation and executive buy-in. * Although the ITAM process is sometimes seen as a function of the IT organization, most other expensive assets are managed by purchasing or independently, as is the case with vehicle fleets. IT management of assets is more often than not ineffective for a variety of reasons. For one thing, IT executives and managers face conflicting priorities. Asset management, not being in the core mission of IT, is a low priority and implementing the processes needed for accurate asset management can expose unsuccessful practices of the past. IT will naturally be sensitive to possible exposure, thereby dulling enthusiasm and even producing hostility. The goal of effective ITAM is far more likely to be achieved when the finance officer leads the charge with active support from IT. Leadership by the finance officer can maintain priority, objectivity, and focus on the goal of a solid IT asset management process. * IT organizations generally serve multiple divisions/departments. An ITAM project will be impacted by the conflicting priorities and internal politics among those divisions/departments. The finance officer is well positioned as a key member of the senior management team to provide the leadership essential for minimizing the impact.

MODELS FOR ASSESSING AND IMPLEMENTING IT ASSET MANAGEMENT So how does the finance officer assess and remediate the organization's IT asset management processes and controls? Three approaches are available: * Perform the assessment and remediation processes internally. While this may appear to be the most attractive approach, it has limitations. The ITAM process is complex and requires expertise in multiple disciplines including legal, tax, accounting, ITAM industry standards, contracts, technical configurations, and environmental disposal. Doing it well requires substantial expertise which is rarely found inside business or government organizations. It is not cost effective to maintain a complete ITAM team in any but the largest organizations. * Collaborate with outside ITAM experts. If a government does not have sufficient internal expertise to conduct a detailed ITAM assessment, it may be beneficial to work with outside professionals. Under this collaborative approach, a team of ITAM experts, with the cooperation and support of IT and finance, performs the assessment and recommends remediation steps for the organization. The finance officer and IT can then act on the recommendations to reduce risk and realize financial savings. The government then assumes the day-to-day management of IT assets following the ITAM consultant's guidelines. The collaboration model balances the organization's structure and resources with the expertise to assure success. * Outsource the process. Outsourcing is an extension of the collaboration model where an outside team assumes the role of actually managing IT assets. The ITAM team still performs the initial assessment and recommends remediation steps. After the assessment the ITAM team takes over the day-to-day processes to manage IT assets.

THE PROCESS OF AN ITAM ASSESSMENT We have looked at why precise management of IT assets is important, and we have seen the importance of correctly organizing an ITAM project. Now it is time to look at what happens during an ITAM project. First, an accurate inventory of software and hardware must be undertaken. The inventory the ITAM team needs is not going to be available from the fixed assets ledger, or from the spreadsheet or database IT may keep. An automated software inventory tool quickly and accurately collects inventory data from each computer on the network. The inventory provides data the ITAM analyst uses to determine what hardware is on the network and what software is deployed, and to determine over/under licensing by reconciling actual deployment and use to purchasing records. However, that is still not enough data. The analyst also needs to know how the software is actually used. Software manufacturers license their products in many different ways, many involving how the software is used and by whom. Furthermore, the analyst would ideally like to know how hardware is used. Good usage metrics can lead the way to major cost savings and productivity improvements. They are also critical to supporting key purchasing decisions, including selecting the most cost-effective hardware/software configurations, quantities, and licensing options. With software and hardware distributed throughout the organization, governments may have difficulty measuring actual usage of IT assets. In the past IT management could easily manage, control, and measure the use of IT assets because software typically resided on a limited number of mainframes in a limited number of locations. That allowed IT and finance to obtain actual usage data to make informed purchasing decisions. With the introduction of the personal computer, software and hardware became dispersed throughout the organization. Obtaining usage data became much more complex. Organizations often are overwhelmed with the volume of IT assets they must manage. They often struggle with inaccurate IT asset records and incomplete usage data when making critical purchasing decisions. The ideal software inventory tool also measures usage. Many inventory tools claim to measure usage, but very few do it thoroughly enough to be useful. The goal is to discover and measure actual software and hardware usage by measuring activity, including keystrokes and mouse clicks on all assets, and then automatically compile the data. An analyst can examine the data to identify valid cost reductions, process improvements, and human resource productivity gains.

BENEFITS OF PRECISE IT ASSET MANAGEMENT Precise ITAM practices can save money, increase control, and improve financial reporting now and over the long run. The first priority is to understand the current condition of the government's IT asset management processes. Understanding begins by assessing a government's current usage and the processes and controls it employs to manage the lifecycle of IT assets. That assessment can begin to uncover hidden savings. Continuing to improve and implement processes and remediate controls also will derive long-term benefits. Major benefits can include: * Immediate savings by renegotiating software agreements and converting to optimum license plans based on actual usage * Immediate savings by retiring unused or under-utilized hardware and software * Reduced future IT asset spending: ** Software upgrades and maintenance agreements to match real license requirements, as identified by usage metrics, instead of over-licensing ** Repurposing of unutilized or underutilized hardware and software * Increased accuracy and completeness of financial reporting due to increased accuracy and completeness of IT asset reporting; and improved treatment/categorization of IT asset expenses made possible by improved IT asset reporting. * Utilizing usage-based decision making: ** Accurate information to support budget decisions; especially when planning technology refresh procurements ** Selecting the most advantageous license options (e.g., whether or not to negotiate concurrent licensing); and for accurately distributing hardware and software to users * Improved controls and risk-based IT governance * Increased human resource productivity using usage information: ** Identify who needs training ** Identify "power users" who are unusually productive and share their knowledge and insight to their coworkers ** Identify and correct individual abuses, such as file sharing of copyrighted materials; excessive gaming, Web surfing, etc. Here are just two examples of large savings from actual ITAM projects: * An asset true-up audit can be multi-dimensional. By not just counting and comparing to what was purchased, but utilizing usage metrics, organizations have saved millions in licensing and maintenance fees being paid on unused assets, and have reduced purchases going forward. One large banking company introduced the usage metric prior to a major IT asset refresh. The information gleaned from that effort led to a change in the hardware configuration and software licensing programs on thousands of devices resulting in savings of more than $30 million. * Millions of dollars of unutilized or under-utilized printers, PCs, and other IT hardware have been discovered during IT asset assessments. In one project hundreds of printers, printing fewer than 30 pages a month, and numerous unused PCs/servers were found.