Expensive software licenses still snare too many agencies

Every federal agency uses software. Too many pay through the nose. Technically, you don’t buy software, you license it. When you end up with more licenses than users, you waste money. The Government Accountability Office (GAO) finds, that is exactly what at least 10 departments do. For more on this, the Federal Drive with Tom Temin spoke with Carol Harris, GAO’s director of information technology and acquisition management.

GAO Report

Interview Transcript:  

Tom Temin And what you found is kind of a perennial problem. It’s not necessarily having the software license, but having information about the extent of your licensing is what you found that is just a shortfall in a lot of places.

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Carol Harris That’s exactly right. So in this study, we looked at the most widely used and costliest software licenses by vendor and product. And we also did a scrub of a subset of nine agencies to see whether they had under or over purchase their top five licenses.

Tom Temin And what did you find? Had they over purchased, I’m guessing?

Carol Harris The results were quite fascinating. So we asked each of the 24 CFO agencies to give us their five most widely used software vendors with the highest quantity of licenses installed. And based on the final tally, we found a total of 36 vendors. Ten of those accounted for 73% of the licenses. And if you go into our report, we’ve got this big prominent pie chart that identifies all the vendors, but those included Microsoft, Adobe, and Salesforce, to name a few. Similarly, when we looked at the highest amounts paid, the costliest, there were 34 vendors that were paid the highest amounts for FY 21, totaling about $5.2 billion governmentwide. Nine of these vendors accounted for 77% of these licenses. Microsoft accounted for about a third of that pie, about 2.4 billion. Other vendors included Adobe, who was reported 12 times, totaling about 63.5 million, and Cisco, another example reported four times, totaling about $1.1 billion.

Tom Temin So that’s all well and good if you are using all the licenses that you have purchased, and that’s what it’s going to cost you. But you found that perhaps there is more licensing hanging around in the agency than they’re actually using, and therefore they’re paying for potential but not actually usage.

Carol Harris Right. And we tried to do that analysis, so as part of it ok, what’s going on at the vendor level. And the second part of what we were tasked to do was to look at it from the product level, what were the most widely used in which were the costliest. But we weren’t able to make that determination because agency software data are inconsistent and incomplete across the government. So for example, we found multiple software products that were bundled within a license agreement with a single vendor, and then agencies were unable to break out any detailed information from there. So, for example, commerce, they had about 140 specific products in their Microsoft agreement, but then they weren’t able to identify, ok, from there, what was the highest installed products and what were the highest amounts paid among them? And so the bottom line here is that the lack of reliable data at this level means we really can’t pursue government wide solutions for volume purchasing and discounts, which is what OMB’s Category Management Initiative is all about. And we have open recommendations to OMB from a prior review that, once implemented should close this gap. But let me go into my second objective, that of our study, because this is really going into the focus of that you’re asking for, which is the under and over purchasing. So there are two practices that agencies really need to do in order to effectively identify the right sizing for their organization. Number one, they need to track software licenses that are currently in use. And number two, they need to regularly compare their license inventories to purchase records to determine over and under purchases. And from that subset of nine that we examined, none of them fully addressed either of these practices, and therefore weren’t able to determine whether or not for their five most widely use licenses, whether they’ve over or under purchase them. And like three agencies weren’t tracking their licenses currently in use, and four didn’t regularly compare their inventories to purchase records. And this really was very disheartening.

Tom Temin We’re speaking with Carol Harris. She’s director of information technology and acquisition management at the GAO. And I guess maybe there’s a couple of things going here. One is you alluded to earlier, there is not necessarily a direct acquisition from the software vendor by the agency. There’s a couple of tiers involved sometimes, and that might be a reseller, or it might be an integrator that is delivering licenses through some other large contract. And therefore maybe the numbers get buried in there. And maybe the second issue is agencies just over buy licenses. So that 101st user doesn’t log on and whoops, you can’t work because we’re at our limit of licenses.

Carol Harris Right. Absolutely. And that under purchasing matters, because ultimately when vendors come in to do their forensic analysis and they see that, ok, agencies are actually using more of our licenses, or there is a gap there and agencies need more, then that’s going to result in additional fees called true up fees, that can actually be quite costly. And what’s really most disheartening about our findings is that there has been a real backslide in federal progress to manage software licenses. So if you recall, back in 2014, we did a comprehensive review of software licenses. Only two of 24 agencies had software license inventories. And then by 2020, all 24 had them. And this better management resulted in a cost savings about $2.1 billion. Ok, fast forward to today, none of the nine selected agencies had such an inventory. And it’s really disappointing for sure. And I think reinforces that old adage of what doesn’t get measured, doesn’t get managed.

Tom Temin Sure. Do you think that the cloud has played a role in this lack of knowledge because people have gone to online accounts, say for, well, for Microsoft, mainly. Office 365, you got to have all your people. Each one of those is a license. And so maybe the fact that it’s somewhere buried in the cloud and there are value added resellers and integrators that come between the agencies and the and Microsoft itself, that might make it fuzzy or just less transparent, than it might be.

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Carol Harris I think that the cloud certainly plays a factor here. But the bottom line is, like when we really dug into the why agencies weren’t tracking their under and over purchasing, it really boiled down to six agencies of the nine hadn’t developed and implemented procedures for these activities. And the remaining three had procedures, but they weren’t consistently executing them. So it really boils down to proper management.

Tom Temin And who are the six truants?

Carol Harris The six truants, those were the nine that we reviewed. They were all doing things that they shouldn’t. But USDA, Energy, HUD, Justice, State, VA, OPM, SSA and USAID.

Tom Temin So it’s impossible then to really tell whether they are overpaying, and if so, by how much without the data.

Carol Harris Correct. And so we made 18 recommendations to the those nine agencies to consistently track software license usage and to compare the inventories with the purchase licenses. And eight of those agencies agreed, one HUD had no comment. So hopefully we’ll see some progress here. But overall, again, to the overall theme of this backslide,  it’s something that we need to keep an eye on and make sure it doesn’t happen again.

Tom Temin And interestingly, the vendors themselves, can’t they be the source. Can you call them up and say, hey, how many licenses have we got with you?

Carol Harris Yeah. And certainly, when we were going through our review, the information that many of the agencies provided came directly from those vendors. And that’s something that I think is a real problem or these agencies need to have their own inventories and their own information, in order to cross-check and ensure that these vendors are working from accurate data.

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Tom Temin Yeah, it’s probably a stretch to think that a vendor that finds they have 25% excess licenses that an agency is paying for are going to call up that agency and give back 25% of their yearly revenue.

Carol Harris Exactly.

Tom Temin I mean, this is the American way here.

Carol Harris Exactly. There’s definitely money on the table here.

Tom Temin All right. So the 18 recommendations are out. Most people agreed with them, HUD had no comment. Sounds like something you’re going to keep track of, because I think there’s members of Congress that have been bird dogging this issue for quite some time, too.

Carol Harris That’s right. Absolutely.

Tom Temin And who is responsible for keeping the state of writing heard on this? Is it the CIO channel, the CFO or somebody else?

Carol Harris The CIOs are the ones that should be responsible for championing and collecting this information for the enterprise.

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