Managing Assets

BOSTON (05/23/2000) - You recently completed a major network upgrade to support an enterprise resource planning software rollout that streamlined your company's operations and made it a fiercer competitor.

Now you're a key player in building an e-commerce infrastructure that the company hopes will generate tons of revenue. So it's not surprising that a decidedly unsexy project like asset management remains on the back burner.

You're certainly not alone. Gartner Group Inc. of Stamford, Connecticut, estimates only 20 percent of Fortune 1000 companies are running specialized software designed to monitor IT and telecom costs, software contracts, maintenance and lease agreements.

Peregrine Systems, an asset management software company in San Diego, estimates less than 5 percent of companies with 2,500 or more employees have implemented full-blown asset management projects. "Asset management is still an early adopter market," says Susan Siljander, product manager for Peregrine's AssetCenter tool.

Many companies think they have some form of asset management software running, usually bearing the names Tivoli or Hewlett-Packard OpenView. But those products track assets to monitor the health of a network.

End-to-end asset management tools offer a central repository, automated desktop and network discovery, software license detection, management of lease, and maintenance contracts. These tools do more than just track desktop and network information: They can be applied to laptops, handheld devices, mobile phones and in-house phone equipment.

The software will send you e-mail alerts when a software license is up for renewal or when a scheduled hardware delivery is missed. In addition, the system can produce all sorts of end-of-the-month reports, including software licenses by type, monthly costs by vendor and asset status reports.

Having this knowledge at your fingertips is what saves your company money immediately and in the long run. Savings occur right away because you'll discard or redeploy unused equipment. Any outlandish maintenance contracts can be put in proper perspective. You'll determine whether your company has unwittingly overpaid vendors for software licenses, and will be able to rectify any discrepancies. You'll also find out whether users operate the software according to the special terms or entitlements you negotiated with a vendor.

Companies can save long term by watching trends such as product breakage, says John Warne, a program director at the Stamford, Connecticut, consulting firm Meta Group. For example, a company might pay several hundred dollars less for laptops for its salespeople in the field, only to have many of the laptops break down. A tracking tool will alert you to the problem, which may lead to you switching vendors.

"Enterprises that initiate asset management experience up to a 30 percent reduction in cost per asset in the first year," says Patricia Adams, a research analyst at Gartner Group. Those assets include people, process and technology costs. "There is continued annual savings of 5 to 10 percent over the next five years," she adds.

Global IT sourcing and acquisitions group American Home Products in Madison, New Jersey, spent $300,000 installing Tally Systems' NetCensus desktop inventory agent and Janus Technology's Argis asset repository tool. As a result, the company estimates it has saved $1 million in the past three years.

Derek Bluestone, a manager at American Home Products, says cost savings weren't the main reason for adopting asset management software. "Our senior information systems management supported the position that asset management is a critical component to being technologically agile."

Bluestone said his team wanted the software to tell them more than how many PCs were at company sites. "We also wanted to know who had them and when they got there," he says. The same information needed to be gathered for the mainframes, LAN and WAN equipment, and software licenses. He says the real challenge was validating the collected information and putting in the right install, move, add and change processes.

Combined, Argis and NetCensus allow Bluestone's group to instantly compare the Argis asset record to the latest scan of a desktop, and run consistent reconciliation reports against Argis and NetCensus data, he says.

"It's a difficult discipline and difficult process to undertake, especially in a global environment," Bluestone says. "More of the challenge is in IT culture and organizational change. We spend lots of time with our IT operations teams designing IT workflow processes to include asset management."

Many companies are simply not willing to make that commitment, not only setting up asset management but also sticking with it for the long haul. "It's the ongoing expense to keep this stuff up-to-date that scares them off," says Kevin Burden, a senior analyst at IDC, a market research firm in Framingham, Massachusetts. The budget for IT asset management is typically 1 percent of a company's total budget, and Burden's research indicates unwillingness among many executives to up the ante.

However, many companies will be forced into some form of asset management if they become part of a merger or acquisition.

For example, Bluestone's group has also found that asset management helps facilitate the pharmaceutical giant's mergers, acquisitions and divestitures.

The group is busy preparing reports for the divestiture of American Home Products' Cyanamid Agricultural Products business, which is being sold to BASF for $3.8 billion.

Diane Grabauskas, a project manager at United HealthGroup in Minneapolis, went through the painful process of moving to computerized asset management more than four years ago when United HealthCare merged with MetroHealth.

Not only did the IT department have to merge the assets of two health insurance companies, but it also had to complete the separation of MetroHealth from its parent companies, The Travelers Insurance and Metropolitan Life Insurance.

At the time, rolling out Janus Technology's Argis tools cost United HealthGroup about $250,000, according to Grabauskas. Savings were noticed immediately. "We know in the first year maintenance alone saved $900,000," she says. "It certainly paid for the system - well over the cost of the system."

At the outset, United HealthGroup's IT department made some basic assumptions to estimate the value of each company's computer hardware, software licenses, lease and maintenance contracts.

"We estimated that the number of PCs we'd find would equal the number of people we had, which was about 30,000," Grabauskas says. "We wound up with well over 40,000 PCs. The extra 10,000 were mostly in closets and under desks."

In the years United HealthGroup has been tracking its assets, the company has used the information as leverage in negotiations with software and hardware vendors, to prepare for divestitures, and to bring a new IT department into compliance when an acquisition is made, Grabauskas says.

The merger angle

Through 2003, IT asset management programs will be one of the top chief information officer initiatives in 70 percent of global enterprises, according to Gartner Group. "We're seeing [mergers and acquisitions] driving asset management projects now, especially in the pharmaceutical area and banking industry," Adams says.

Many analysts maintain that asset management is critical to companies that are planning acquisitions. "Companies acquiring others are driving blind if they are proceeding without asset management," says Ron Exler, principal analyst at The Robert Frances Group in Westport, Connecticut. "How can they value the company if they don't have an accurate accounting of IT assets that are typically one of the top three budget categories in a modern company?"

Asset management is a long-term project, Adams says. "It's something that should begin well before an acquisition takes place," she says.

Kimberly Caisse is a freelance writer living in Massachusetts. She can be reached at Kcaisse@net1plus.com.

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