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ISAMMar 22, 2024 11:39:31 AM2 min read

Navigating the Risks of Enterprise License Agreements (ELAs)

Three decades ago, the introduction of Enterprise License Agreements (ELAs) revolutionized software procurement, primarily in mainframe environments.

At the time, IBM accounted for approximately 50% of total software costs on mainframes, with the remaining five largest Independent Software Vendors (ISVs) representing about 80% of the remaining budget. ELAs typically covered 20-40 products across two to five mainframes, with the typical environment containing 200-300 total software licenses. These agreements were characterized by centralized management, with a limited number of individuals overseeing software installations.

While initially focused on mainframes, ELAs later expanded to include non-mainframe environments, albeit with restrictions on the number of unique software titles and hardware. Approximately 15 years after their introduction, distributed software ELAs began to gain traction in the market.

Whereas original mainframe software ELAs focused on a limited number of products and hardware, enabling centralized financial management, ELAs in distributed environments now span hundreds of products, purchased by various users across multiple locations and hardware platforms.

As technology evolved, the proliferation of distributed software applications and the introduction of Internet and mobile computing exacerbated decentralized mismanagement. This decentralization of software acquisition, coupled with a lack of centralized software asset management, has allowed vendors to exploit overspending through Enterprise License Agreements (ELAs). Consequently, ELAs have fostered complacency and hindered real-time software management, evident in the rise of software audits and associated compliance fees.


Mitigating ELA Risks

To mitigate the risks associated with ELAs, organizations must adopt proactive strategies:

Real-Time Usage Analysis
Implement systems and processes to maintain real-time tracking of software usage and deployments covered under ELAs. This ensures that organizations can identify and address instances of overspending or non-compliance promptly.

Control New Purchases
Establish controls and governance mechanisms to govern new product installations and purchases associated with ELAs. By implementing clear guidelines and approval processes, organizations can prevent unnecessary expenditures and ensure compliance with licensing terms.

Understand ELA Terms and Conditions
Thoroughly review and understand the terms and conditions of ELAs to avoid costly surprises during software audits. Organizations must pay particular attention to complex clauses related to usage rights, renewal terms, and audit procedures to minimize compliance risks.

Create an Audit Plan
Develop a comprehensive audit preparedness plan to proactively manage software usage and maintain accurate license positions. Regularly review and update the plan to ensure alignment with evolving business needs and changes in licensing agreements.

Manage ELAs Effectively
Instead of letting ELAs dictate management practices, organizations should ensure that these agreements align with their technology needs and strategic objectives. By taking a proactive approach to ELA management, organizations can maximize the value derived from these agreements while minimizing associated risks.

Navigating the risks associated with Enterprise License Agreements (ELAs) requires a proactive approach and careful consideration of evolving technology landscapes. With proactive management, organizations can navigate the complexities of ELAs while safeguarding against potential pitfalls and maximizing the benefits of centralized software procurement.


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