Why should you allocate IT costs?

Software is becoming increasingly available, and organizations are adopting more and more SaaS applications. Acquisitions can be quick, and employees are good at telling about all the new applications they need, but not many are as good at telling when they no longer need them. This represents a challenge for many organizations, where IT budgets continue to grow, making cost control and allocation critical.  

Often there is no easily accessible overview of what is owned, creating complexity. There is a lack of insight into who has purchased a license, who is assigned one, and who is actually using them.

Cost allocation is not just about distributing costs correctly, but by providing necessary insight, companies can create valuable discussions that lead to better decisions about the real need for software. 

Ownership and use of software licenses

The complexity around the ownership of licenses can vary from large to small companies, which can be due to several factors.

Firstly, software purchases and license agreements may be made by different departments or teams, each with their own procedures, budget, and needs. This often leads to fragmented and uncoordinated processes for acquiring and managing software licenses, where there is no central overview of existing licenses.

Secondly, the needs of organizations and the technological landscape change rapidly, which can result in licenses being purchased on an ad-hoc basis without sufficient oversight of existing resources.

The result can be both duplicated licenses and underutilized licenses. Furthermore, it can be challenging to ensure compliance and avoid license violations when there is no clarity on who owns or is responsible for the individual software. 

Better insight through the use of tools

To address these challenges, practice shows that companies can benefit from technological solutions to gain better oversight and control. A cost management tool can automate processes for tracking and allocating costs, and provide transparency as a basis for discussions about software investments.

Questions like “Which licenses do we have?”, “Which departments use which licenses?”, and “Are some departments more expensive than others, and why?” become easier to answer. Today, many companies distribute license costs based on the number of employees, they do it manually, or they do not do it at all.

We have experienced that with a tool, one can save hours each month because the process is automated. 

In conclusion

By establishing a good strategy for cost allocation, companies improve their strategic planning and budgeting. This enables more accurate budgets and better predictability for future costs and revenues.

Cost allocation thus becomes a strategic tool that not only shows the correct costs but also promotes the right discussions that can help shape the company’s direction and success. 

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