How Effective is Your Digital Supply Chain Management?

As digital transformation increases at a dizzying pace, digital supply chain (DSC) management has become a business necessity. Software estates are ever-increasing, contracts and licences are becoming more complicated, and preventing wastage is more challenging than ever.

Gartner predicts that in 2024, 60% of enterprises will underestimate cloud infrastructure and platform services consumption rates, leading to higher costs and missed opportunities for savings.

Challenges in DSC management

Though many companies will have some form of DSC management in place, these systems are often not centralised or automated, making them almost as complicated as the problems they should be solving.

Marilyn Moodley, Country Leader for South Africa and WECA (West, East, Central Africa) at digital transformation specialist SoftwareONE, says these are the main challenges when it comes to DSC management today:

  • Decentralised purchasing

“One of the most common challenges we see is decentralised purchasing of software. Without a centralised, consolidated view of all software spend across the business, showing approved publishers and their products and clear purchasing workflows, organisations have no clear governance over transactions,” says Moodley. A comprehensive view of the software estate is essential to purchase the right products, limiting software spend wastage, and improving user experiences and delivery times for new software.

  • Managing multiple vendors

Today, most organisations have multiple software vendors and purchasing software from various distributors, resellers, geographies, and publishers is overwhelming. “Vendor consolidation can help lower costs by providing a single accountable agency, which increases buying power through better sourcing and volume,” says Moodley.

  • Uncontrolled tail-end spend

While many businesses spend strategically at larger vendors such as Microsoft, Oracle, IBM and SAP, they have limited resources to manage spend at smaller vendors, which can represent up to 80-90% of transactions (called tail-end spend). “Managing these smaller transactions properly would require thorough knowledge of all publishers, software products, and licence terms. This is often not feasible and contracts are left to auto-renew, contributing to wastage,” says Moodley.

  • Inability to manage licence entitlements

Entitlement information can reside anywhere from publisher portals and invoices to licence certificates, making it complicated to capture and adhere to. “This obviously presents a significant problem should the company be audited,” warns Moodley.

  • Managing wasted and unauthorised software spend

In one study, cloud optimisation tools showed that enterprises waste 35% of cloud spend. Says Moodley: “Lack of visibility into software purchases and renewals and fragmented procurement can lead to wasted software, unauthorised spend, and shadow IT. Having visibility into upcoming renewals with associated data is essential to plan and prepare for negotiations with publishers.”

Benefits of third-party management

According to Gartner, DSC management or software asset management (SAM) managed services employ the providers’ proprietary skills and methodologies to transform and run the necessary disciplines on behalf of the client, augmenting that client’s resources. “Delivered by skilled resources — and leveraging expertise, intellectual property, rigour and best practices — SAM managed services address the gap in available skills, enable scalability and enhance maturity while delivering day-to-day SAM activities across the (software) life cycle.”

For this and many other reasons, the research giant says that by 2025, 40% of organisations will use continuous SAM-managed services from third parties for at least part of their rapidly expanding and increasingly complex software estate.

It has named SoftwareONE a leader in the field for the third year in a row in the 2022 Gartner Magic Quadrant for Software Asset Management Managed Services. Says Moodley: “A third party, as a specialist in the field, should be able to deliver a platform of trustworthy data to ensure transparency and optimisation, better management of usage rights and noncompliance risks, unlock greater value from software investments, and reduce waste. Be sure that this is the case when contracting such services.”