License Consolidation Strategy During Mergers & Acquisitions

[0:02] Nix: Good morning, good afternoon, or good evening, wherever you’re joining us from. Welcome. This is Open iT’s webinar, license consolidation strategy during mergers and acquisitions. I’m Nix, your host for today. Mergers and acquisitions are already complex, but when it comes to software licenses, they can get downright messy. Overlapping contracts, duplicate tools, siloed data, it adds up quickly. In the next 20 minutes, we’ll walk you through how to build a smart data-driven license consolidation strategy to bring order to that chaos. As always, we invite you to send in your questions via the Q&A panel at the top of your screen. We’ll get to as many as we can during the live session and follow up afterward if we need it.

[0:41] Nix: Now, let’s meet our speaker for today. David brings 25 years of oil and gas leadership experience from ConocoPhillips and BP combining deep industry knowledge with expertise in digital product and strategic asset management. He has also worked with organizations through major transitions guiding them in using data to drive smarter IT decisions especially during times of change like M&A. Everybody let’s welcome David to the session.

[1:17] David: Thank you. Thank you, Nix, and greetings from Scotland. And I’m just going to assume that you can hear me. I did a webinar last week and we had one of those lovely moments where my microphone failed. So, I’m assuming that you can hear me. Greetings from Scotland from where I’m speaking to you now. It’s a lovely autumn day here.

[1:35] David: So, today I’m going to talk about mergers and acquisitions and a little bit about joint ventures. So mergers and acquisitions, people kind of know what they are, but joint ventures are almost like in between those two things. It’s where like two companies overlap to do some activity or other, but many of the challenges and strategies are in common. So I’ll probably throw in a little bit of joint venture stuff as well. So within that background, I’m going to go on to talk about how Open iT can underpin some really good decision-making on software asset management and building what you want to do going forward either with a divested company or a new merged company. Talk about a couple of examples and just go through some kind of tactical strategies about how to get it done.

[2:24] David: I did want to touch on mergers though, mergers and acquisitions from a wider perspective and I’ve been through a few. I was part of the ConocoPhillips merger that happened in the early 2000s and that really was the kind of merging of two behemoths and with some different cultural changes as well. You know, company cultures clash. There’s always decisions about who’s managing what’s going to be. It’s a time of great uncertainty. People get uncertain and they’re nervous and rightly so. Mergers often mean people losing their roles. And so anything I say is kind of against that background. And I’ve been in the situation where you’re talking to people about their software or about their data or IT use. But the forefront of their mind is do I still have a role in the new organization? So I think always bear that in mind. But at least when you are having those discussions, if you’ve got the best possible data, you can be rational to try and provide some sort of clarity with what was quite an uncertain and can be an unsettling time and everybody’s looking forward to kind of being resolved.

[3:36] David: So why do you want to do it in mergers and acquisitions? It’s fairly obvious. You know sort of licenses are a major cost for organizations to IT particularly in engineering or in the verticals like your oil and gas automotive aerospace that kind of it’s a big cost and any cost that is common always looking for efficiencies when a merger happens you want to avoid overspend you also want to avoid being uncompliant. So you don’t want to bust your limit and lay yourself open to potential legal action as well. That’s a key point. So you’re always balancing. You don’t want to be over-licensed. You don’t want to be underlicensed either. You want to eliminate waste as well. Driving efficiency is the key factor.

[4:35] David: So this is a complicated diagram and in a way that tells you everything because what this is describing is the different sorts of licensing methods and the different sorts of challenges that we’re faced with perpetual versus time based. This is consumption based. Do you have you invested in licenses that you have in perpetuity? Are you paying maintenance on or is it a subscription contract that will end after a particular amount of time? Are you paying by users? Are you paying by devices? Are you node locked? Is it floating? Is it global? Is it regional? Are you delivering your applications through SaaS? Are you doing it locally? It’s pretty complicated. So, I’m not going to go into a lot of detail here. And I think that the fact that this diagram is complex says it all because there’s a lot of different layers there.

[5:23] David: Typically, an application is not just an application, particularly in the engineering space. It’s a suite of applications. It’s a suite of tools for different functions. Experts use certain amounts of the tool but people who are supporting them don’t. So you need to understand that you might have a lot of base licenses but fewer of those more complex and more expensive specialist licenses. Are you paying by the time hour day monthly quarter yearly a lot of complexity for which Open iT can help you do it.

[5:54] David: Quick summary of what Open iT does and why it helps underpin these decisions. Open iT is based on three levels. The simplest is that it can go out. It looks at your license servers. It tells you who’s using your applications, tells you when they’re using them and for how long and where they sit and how much it’s costing you. That basic level looks at license servers.

[6:22] David: However, in addition, you can have an agent which will run on desktops cloud. It’s kind of agnostic that way. And it’ll tell you utilization. You might think an application is being used. The license is being checked out, but is it being used? This agent will tell you that.

[6:43] David: And this strategy can be very valuable in a merger situation because kind of by definition you’re looking at an unknown IT real estate and getting that kind of quickly can be extremely valuable even if it’s done before day one. I mean always with any of these there’s a legal definition of when the new entity starts. However much of the groundwork is often done for that before systems and processes can be officially joined.

[7:15] David: On top of that true active usage i.e. idle time versus inactive time. You can actually manage that and that means that if licenses are being checked out but not being used, you can actually harvest them and bring them back into the pool. And that can be very powerful across a big organization, a dispersed organization and in a merger. That often happens. You might be managing assets or your responsibility to manage assets that are in locations and areas that you’re unfamiliar with. So this kind of discovery can be very valuable and that kind of harvesting can give you a great deal of efficiency.

[7:53] David: So it’s giving you the answers you need. Who is using the application? Who’s using it now? And what’s their user profile in the past? What are their accumulated hours? Who are those users? Where do they sit? And what is their function? What’s their job title? Integration with Active Directory will tell you much of that. Clearly modular detail across the suite as well. You might have a wide profile on the simplest type of application but are more specialized and nuanced within the greater complexity. Great to understand that understanding where you have idle time, understanding where you can reclaim licenses to give that flexibility and freedom to users when you embark on a merger.

[8:38] David: You know who’s going to manage that? Who’s responsible for that? It’s the management of change. It’s not business as usual. It’s a project. It’s management of change. Who’s going to do that? Whether it’s a product team, a change management team, a transition team, they have a responsibility.

[8:54] David: And this triangle I’m showing now, and this is my new favorite diagram. And I actually have to confess I borrowed this from a colleague of mine, Mark Hessa from EVC Enterprise Value Consulting. We did a webinar last week about how you engage in an organization to get buy in and authority to make product management changes. And we talked about this about how you’ve got the business which drives the change are your core users. They set the strategy. They’re the people that do the work. You’ve got your finance who have their eye on the bottom line and on the coffers. And then you’ve got IT who are the how they need to do it. They need somewhere to run your stuff. So between those three, you’re balancing what it is you’re going to provide, you know, and how can you provide it to keep all those three people. And typically the product team in the middle may not have the authority. They don’t have the budget on their name. They’re not setting the business strategy. they don’t they’re not there to buy computing resources however they are responsible to manage that transitional change and to provide the right tools for the business going forward.

[10:12] David: So that’s why I really like this diagram because we aim in Open iT to empower those people with the responsibility in the middle that have to balance all those three parts of the triangle. The product optimization workflow that you go through to transition to a new setup really has the same steps as when you’re doing a renewal. You need to what do you what are you been asked to spend? What’s your license monitor? Do you have denials? What’s your capacity? Who is using them? What’s your top users? Getting agreement and then making it so.

[10:47] David: Ask yourself these questions about who the decision makers are, who the best vendors are to go forward because a merger or an acquisition is an opportunity for change and it might well be that the acquired entity actually has better practices, better contractual terms than the company doing the acquiring. And it would always be normal to think that the company doing the acquiring would be more likely to set the standard, set the policy, but that needn’t be the case. And providing good information is key to those decisions which might be better for the organization going forward. The license monitoring, the denials, capacity, the top users are very much aspects of this process that Open iT really specializes in helping with.

[11:42] David: Your other key piece of information to bring into this mix. You’re in the middle of the triangle there. You’ve got to manage this transition. You need to look at your contracts and that can be quite daunting because you’re looking at the contracts from both entities and you need to look in a lot of detail. Are those contracts with the local entity of that company? Are they regional? Are they regionally enabled? So you might have a contract with a regional entity, but there is a restriction about how you can use it. You may only be allowed to use it locally. And you might think we can globalize these licenses is great. We can put it across a big merged organization but that may not be the case and you need to look closely at contracts to understand that there may be heritage contracts and vendors go through different ownership, different branding and it’s quite possible that one or the other contracts might have preferential rates due to historical reasoning the relationship the company had back in the day. And that’s really important to root that out. Renewal dates, when the contract renews, can it be changed now? It can be a difficult one. We need to be very cognizant of that. Also if there’s any change penalties in there. And another one that’s key and I’ll touch upon this again with joint ventures is that ideally there would be wording within the contract to allow the divested organization to take advantage of the same terms and conditions as the parent company. Now a vendor may not want to publicize that or they may not want to mention that in negotiation. So knowing your contract and finding those little contracts that say if a wholly owned subsidiary were to take on this product these conditions can be applied.

[13:34] David: Okay. So Open iT is providing how many licenses might be needed after a merger or divestment. See who’s using it, identify which projects are going to be using it. So determining how many licenses are needed after a merger or divestment is the kind of the basic piece of work that needs to be done. What can you do across your organization to get the best and I’m just going to go through a kind of pretty simple example and if you think about the first slide with the licensing complexity you can in the real world you would kind of ramp this up of its complexity and look at a lot of modules but in simple terms this is the kind of process that you go through.

[14:18] David: So this company had gone through a merger so you’ve got a US entity and you’ve got a Bangalore entity in India and you’re looking to share those licenses. So if you were to simply look at what’s my peak usage in the US entity what’s my peak usage in the Indian entity you would get an answer in this case 166 but that’s not your true usage if you pull the two of them together and look at that usage the check-in and checkouts across time zones it’s a lot less only 108 if you look at your peak that you need to pay attention to to allow you to make that decision. So 93 fewer licenses that would be a result and that would be exactly the kind of efficiency that you would want to look for. But this is very simplistic and you would be looking at multiplying this up many times for all the modules and different aspects of a software that you might need to be using.

[15:17] David: This is an Open iT heat map. One of my favorite views and really this helps you with the planning for that consolidation because you can immediately see where you have so this view you’ve got a big lump of usage in the early hours of the morning. So the users for this are in a separate geographical location probably from where the license servers but immediately you can see that’s where all my usage is when you have two peaks you would see that extremely clearly.

[15:49] David: So that’s when you can see what software is being used at each company and then you also need to identify we can see what the software is and we can see who’s using it but what are they using it for and are they using it for the right reasons and an example of this is I worked on when ConocoPhillips acquired Burlington Resources. ConocoPhillips multinational oil and gas company back then with assets all around the world. Burlington Resources primarily had its core asset base onshore US and obviously they’re both oil and gas companies you think that’s going to be great.

[16:39] David: ConocoPhillips much of its technology was set up for deep water exploration, complicated geological and geophysical scenarios. The challenges of working in the Gulf of Mexico or in the North Sea, Alaska. But Burlington was an onshore company and they were using much simpler software. So it would have been the wrong thing to apply the ConocoPhillips technology to the Burlington Resources people because it was wildly overengineered. What the Burlington people were using for their interpretation was absolutely perfect for the job that they needed. So knowing what they’re using their applications for is crucial and it would have been a big mistake to apply everything to all and they went forward with a blended role a blended solution which was much more sensible. It’s a real kind of gotcha that one.

[17:48] David: So divestment again is a little bit different. Divestments can happen for many reasons. Company strategy, wanting to pull out of different areas, work with others. In a more recent example, an oil and gas operator I worked for recently wanted to divest its North African operation, but it wanted to also merge that operation with another operator to have a wholly owned subsidiary by the two parents. But it was very keen to understand what the resourcing was required to do that and Open iT was perfect for that.

[18:33] David: Looking across regions, you could run a report to see okay here’s all my users in a particular area. In this case Gulf of Mexico, North Sea, Caspian, Lower 48. In that case, it was North Africa. You would just get their location and you could get a hierarchy of the applications they used from the biggest and the most expensive and you could do it extremely quickly. And that made the financial corner of the triangle very happy because they had solid information and they could predict exactly what the costs were going to be for that divested organization.

[19:12] David: We could move forward with the contractual negotiations with the vendors which actually much of which was dear vendor can you give us an outline cost for this many licenses for that divested organization and please can we have the same terms and conditions of the parent organization and then of course you’re doing a similar thing to remove those from the pool from the core one. So having this data is absolutely vital and really helps you out when before day one because all this work is done before day one of the divestment to move away.

[19:59] David: This is just a different view of the similar kind of information. The previous one was for a geoscience application. This is for Bentley which is a more widely used engineering application. But you can see across a great number of time zones. You can see what the usage is and you can tell which area is using it. Basically the same information.

[20:22] David: This is a little bit again a simple example of what you can do with the divestment. This company was looking to divest its Lagos operation out of Nigeria. Lagos so had a big European base already. Lagos and it had Houston. So it was looking at overlap for that divestment in the European time zone. So you need to you know just looking at the peak usage wouldn’t be enough. You need to bring in the location as well. And again you could see by picking out by drawing out that usage from Lagos you could get a proportion of licenses out of the pool and have them attributed to that divestment. So that’s a relatively small example, but if you extrapolate it across all your products, it could be a considerable saving from the parent company, but most importantly give a lot of clarity about what the divested organization wants to use.

[21:28] David: Similarly, you could do the same slicing and dicing of information for technical teams. Who are they? You can say well not where they’re sitting. You can say what job title or job function do they have? And you might want to use this for a joint venture. So, if you think of a joint venture as being something similar to a divestment, except that the people, the workers on the project will stay with the parent company, but they’re doing work for that separate commercial entity. So, you need to know exactly what they’re doing and when they’re doing it.

[22:08] David: An example of why you would want to do this is that oil and gas companies obviously exist within a particular fiscal regime. They have taxation based upon that production effort. However, the production of renewables, carbon capture, wind power and geothermal has a different tax regime. So companies really want to understand when they have hybrid workers who are doing some of their time on core business, but then they’re doing another set of their time working on a joint venture and they can be able to charge those costs under a different fiscal regime. So a joint venture is like a little merging where the company is not spun off as a separate company but it has a legal status separate from the parent that you need to account for and provide the right information for.

[23:06] David: So, Open iT can help with all these situations. And again, I touched upon this at the beginning about what Open iT does is that you can have your agent tell you active versus inactive time, which can be very valuable because it lets you then harvest applications if they’re being checked out but not being actively utilized. So you can set a criteria and say okay if the license has not been used after this amount of time please can you bring it back into the pool.

[23:50] David: And this diagram is showing you usage but it’s also showing you all the sessions that are checked out at any given time but it’s showing you how many of those are active but how many are suspended. So a merged operation, a merged company is typically a lot bigger, harder to control because it’s so disparate. So being able to harvest applications from anywhere in the world and reapply them to a pool is a very powerful method of managing a big pool of licenses within an organization and gaining some efficiencies.

[24:23] David: So to kind of wrap up and I’m back to my favorite triangle again is that you’re empowering that team in the middle who are managing this transition. It allows them to inform the business, finance and IT of what their strategies should and could be. They’re able to take that power and really give the best result for the company. So in summary, deploying Open iT is obviously a fantastic tactical choice to give you that information that you need. You absolutely need to read your contracts and make sure you have all the details from both sides of what the contract says and how you can move forward. You’re engaging your users. You’re discussing them like that the situation I mentioned with Burlington and ConocoPhillips. If you didn’t go to the users and ask them why they were using that tool or understanding their business, you would come to a wrong conclusion. So you must bring that in as well. So you make a supported decision to then go forward and renew those contract, renew those discussions with the vendor and come up with the best solution. So they’re the key takeaways for mergers, acquisitions and divestments, pooling, data-driven clarity, and ideally lower costs and a higher compliance.

[25:53] Nix: Thank you for that insightful presentation, David. We have some great questions come in. So let’s dive into the Q&A portion. So first question we have here is, will these strategies work with user-based licenses?

[26:10] David: Yes. I focused on concurrent licensing, but there’s no reason why Open iT can’t give you all the details that you need for named user licensing and more complex license setups or user-based setups where you might have a pay as you go where some users have greater number of access to functionality than others. Absolutely.

[26:46] Nix: Great. Thanks for that David. Next we have this question. What other parts of an organization can give valuable supporting information?

[27:01] David: An area that is often overlooked and is really handy here is data management because you might know what people are using, the tools they’re using, but if you can bring in the data they’re accessing, that can be really powerful. So, if you have a big SQL database that everybody is accessing to run their engineering software, I have done this is you just you know you’re combining your usage. We say oh can I have a simple query to say tell me the location of the users and the data they’re accessing. So that’s when you know where you have users in one geographical location, but they’re accessing data in another because they’re an expert and they’re applying knowledge to other places. So that’s a missing piece of the jigsaw that you might because you don’t want to cut those people off or allocate them incorrectly. So data management getting your data management colleagues to run some SQL scripts about where people sit and the types of data they’re accessing can be absolutely invaluable supporting information.

[28:10] Nix: Good points. Thank you, David. And lastly, we have here another question. What’s the best way to deal with vendor discussions?

[28:15] David: Be well prepared. Read those contracts, understand what the company is doing and also give the vendor company articulate to them that it’s a partnership and I think many vendor companies even though they might need to accept some lower revenue if you present to them solid information about who is using their product and why you can say well it’s better to have this partnership that is solid going forward that we understand even if it’s slightly less than not progressing at all. So I think good information and to show that you understand how their tools are being used is invaluable when it comes to speaking to vendors as well as having your contract nicely highlighted and with stickies in it ready for that chat.

[29:12] Nix: Great advice, David. Also we have a follow-up question here. In a time when software vendors offer their SaaS environments, how does Open iT face that and how does Open iT tools help the license users over that SaaS environments?

[29:34] David: All right, excellent question. So, technically speaking, there’s no barriers there. Open iT tools can work on a SaaS environment assuming that contractual hurdles are overcome Open iT doesn’t actually care where the information comes from. It doesn’t actually care where the application runs. So we can often get hung up on a SaaS environment or an on-premises environment but as long as the contractual barriers of monitoring it with Open iT technology there is no technical barriers why you don’t have the same level of analysis and the same level of conclusions that you can draw if you’re utilizing a SaaS or a cloud environment for your technical computing.

[30:28] Nix: Thank you, David. And that wraps up our Q&A. Thank you again for those helpful responses. Before we close, a quick reminder. This session was recorded and you’ll receive the replay via email soon. You can also find it on our webinars on demand page at openit.com. Alongside the webinar recordings is a link to our survey. Send us your feedback and any topic you’d like for us to cover. We also have another webinar upcoming driving license efficiency with ServiceNow SAM Pro and Open iT. Just scan the QR code on your screen or visit resources webinars on our site. And if you’re planning or already going through an M&A and need help consolidating your license environment, we’re offering a free 30-minute consultation with one of our business solution consultants. Already a customer? Reach out to your account manager for tailored support. Thanks again for joining us today. I’m Nix and we’ll see you at the next webinar.