Mark Lack, who's in charge of business and financial reporting at Mueller, a manufacturing firm in Texas, is only half-joking when he says the water cooler is his best source of information on what reporting software his company owns.
Lack oversees Mueller's deployment of Cognos Performance Applications, a suite that's supposed to be the standard for analysis and reporting for the entire company. But sometimes he finds that competing products are being used instead.
"Someone will say, 'Hey, did you know this department just bought that package?' So I go look at it, and it's not got even the same level of capability ours could provide," says Lack, manager of planning and financial analysis at Mueller.
"We recently found out that our manufacturing department had bought a piece of reporting software right under our nose," he says. "They bought what they thought was a great software package without realizing we already had that capability in-house."
Redundant applications, unused functions in ERP and CRM suites, and just plain old shelfware -- applications that were purchased and then forgotten -- are common and expensive. Costs related to the excess software add up: There are software license fees, maintenance fees and the cost of the IT labor needed to support the applications. On top of that, there's a lack of integration and consistency among systems. Eliminating redundant or excess software can go a long way toward freeing up funds in an IT budget.
Sniffing out shelfware
There are several ways shelfware can accumulate, says John Schick, a consultant at Compass America, an IT consulting firm. "One way is mergers and acquisitions," Schick says. "Another is through decentralized purchasing. That's when one department funds a suite of tools, then another department funds a similar project and buys a second suite that does essentially the same thing."
In Mueller's case, lack of interdepartmental communication has been one of the chief causes. Like in many large organizations, departments don't always coordinate their IT projects.
"We work constantly to communicate what this [Cognos software] can do. But there's still a lot of duplication of effort with different departments, with different software systems, all trying to achieve the same thing," says Lack.
Fortunately, there are a number of other ways that IT managers try to keep waste out of their software budgets. Here are some of their best suggestions:
 Beware of suite discounts. Software suites often wind up as shelfware, or partial shelfware. Jane Disbrow, an analyst at Gartner, says plenty of CIOs complain that they're not fully using large enterprise suites, such as multimodule ERP or CRM packages. She estimates that 25 percent to 30 percent of the capabilities within enterprise software suites go unused.
"Vendors really want to sell the complete suite of products, and they do that by offering very aggressive discounts," Disbrow says. While that's not initially a huge problem, given the large savings from discounts that can run as high as 75 percent, it can become one when the customer realizes that he's paying annual maintenance fees on unused software.
"The vendors don't want to remove those licenses [from the contract] because the revenue stream from maintenance is very, very profitable," she says.
Lack says he, too, has seen managers unwittingly buy more software than they need. "Often, [the vendor] will throw in a sweetener, give them something extra. Maybe they'll take them to lunch. Then [the managers] find themselves buying a new piece of software whether they need it or not," he says. "It happens all the time."
Steffani Lomax, an analyst at Software Success Partners, a consulting firm specializing in IT asset management, previously worked for an IBM organization devoted to helping customers with shelfware issues.
"Some large enterprise customers were complaining that they'd spent all this money on software but weren't using a half of it," says Lomax. "It wasn't just IBM, but all vendors who sold the large, all-you-can-eat agreements. These agreements usually involve a huge discount, but they can also be three years long. Plans and priorities can change in that time."