Apply the Pareto Analysis to Software Efficiency

  • Apply the Pareto Analysis to Software Efficiency

    Apply the Pareto Analysis to Software Efficiency

    “The seldom used technique that guarantees software efficiencies”

    There is an easy way to reduce costs and improve software efficiency yet IT professionals and Software Asset Managers don’t seem to apply it to their activities. It delivers cost savings and efficiency improvements time and time again and manufacturers and production engineers have used this simple analysis technique for many years. The method is Pareto Analysis and its principle is more commonly known as the 80:20 Rule.

    Pareto Analysis takes its name from Vilfredo Pareto, an economist studying the distribution of wealth in 19th century Italy. He found that 80% of the wealth was held by 20% of the population – a rule that still holds true for modern economies. Over time, the technique was applied to other disciplines and the 80:20 Rule was found to be true in a wide variety of environments. For example, in sales, 20% of customers usually account for 80% of revenue and in manufacturing, 20% of the components account for 80% of the cost.

    The same rule applies in the area of software management where 80% of cost efficiencies can be achieved by concentrating on 20% your organisation.

    To implement Pareto Analysis for software efficiency you should follow these steps:
    1. Measure the usage of the software applications you have deployed to users. You need to know what is being used and what is not. Ideally you should know how much is used in total and how much is used concurrently as you will need to compare this data to the number you are licensed to use. Gathering this information is quick and easy with a metering tool like Rentsoft Meter™ which is simple to deploy and measures the usage of a list of software titles you specify rather than everything running on your network.
    2. Then compare the usage data to the number of software licenses you have to show the variance between what you actually use and what you are licensed to use. Subtracting usage levels from licensed amounts will give you the variance. Positive amounts mean you are over-licensed and negative figures mean you are under-licensed.
    3. Next calculate the annual cost of the software including upgrade and support costs and multiply these by the variances you identified in step 2. You will now have the value of the variances between what you are licensed to use and what you are using.
    4. The final step is to rank the software titles by the value of the license variations in step 3. At the top will be the titles where you have unused software and are wasting money and at the bottom, if there are negative values, the ones where you are under-licensed. You will generally find that the top 20% of the software titles will account for 80% of your cost savings. Focus on these software titles first to start reducing your costs and deliver cost savings to your organisation.

    There are a number of ways to reduce the costs of over-licensing but generally, the objective should be to drive towards 100% usage of whatever software you license and deploy. Treat your usage levels as a key indicator of your software efficiency and review it every three months to track how effective your actions have been in reducing software waste.

    Pareto Analysis is the best way to identify cost saving opportunities from software over-licensing. Anyone can do it but if you need some help, complete our enquiry form at https://businesssoftwarecentre.com/contact-us/ and we will arrange a free online demonstration of the Rentsoft Meter software usage metering tool with in-built Pareto analysis.

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