Software procurement: the unaudited EBITDA lever in PE portfolios

Most private equity portfolio companies have not renegotiated their software estate since the day they were acquired. Vendors renew on autopilot, the MSP earns its margin, and the line item that nobody owns quietly grows. Meanwhile the maths is asymmetric in the fund's favour. A $1M annual software saving at a portfolio company is not $1M to the fund that owns it. It is roughly $5M of run-rate cost-out across a typical five-year hold, and up to $10M of enterprise value at exit on a 10x recurring multiple. This is not an estimate. It is exit maths. So why is it being missed?

The multiplier, in 90 seconds

Three lines of arithmetic that an Operating Partner can carry into the next portfolio review.

Procurement is one of the few cost-out levers that flows directly into recurring EBITDA without touching headcount, customers or operating model. Big 4 and tier-one strategy houses consistently identify procurement and IT cost optimisation as primary value creation plays in the first 24 months of PE ownership. The reason is simple. Software and SaaS spend recurs annually, the contracts are concentrated with a handful of vendors, and the savings compound across the hold period. Nothing else on the EBITDA tree has that profile.

Right now, the Adept Technologies global engagement book runs at a 19.5% average verified saving across 11 enterprise software categories. The upper end is 54% on identity, 35% on enterprise learning, and 24% on virtualisation. The 2025 verified saving total across Donnish and Adept engagements is US$4.6M. Apply that against the multiplier and the same engagement profile reads very differently on a fund balance sheet than on a single company P&L.

Why this gets missed

Three structural reasons, none of them anyone's fault.

The MSP is paid on volume. Most managed services providers and software resellers earn margin on every licence they ship. They are not incentivised to negotiate the spend down because lower spend means lower margin. The advice the PortCo gets at renewal comes from the party whose income depends on the renewal getting bigger.

Internal IT is measured on uptime. The CIO is rewarded for keeping the platform stable, the security posture sound and the roadmap moving. Renegotiating a Splunk renewal or right-sizing a VMware estate is not on the scorecard. It is also not what most IT leaders were hired to do. So it sits.

The CFO tracks the wrong unit of measure. Most PortCo CFOs report on headcount, on AR days, and on capex. Licence SKUs and entitlement utilisation do not show up at that altitude. The software estate sits between IT and finance, which is where gaps always live. Operating Partners are generalists across the portfolio. They cannot also be specialists in Microsoft Enterprise Agreement mechanics, Oracle audit defence, Adobe true-ups and Splunk renewal benchmarking. The expertise required to push back at a renewal table sits with a handful of people globally. Almost none of them work for the buyer.

There is also a regional ceiling. The 2013 Australian Parliamentary Inquiry into IT Pricing found an average 50% premium for software in Australia versus comparable markets. Microsoft was 66% more expensive, Autodesk 51%, Adobe 42%. The market has moved since 2013, but the structural premium has not gone away. A conservative 20% to 40% premium against European pricing is still the working assumption that Adept benchmarks against today.

The renewal landscape just got harder

The bigger problem in 2026 is not whether your PortCo has shelfware. It is that the vendors who supply your software estate have all repriced in the last 18 months. This is no longer a spend-tier negotiation. Five of the biggest enterprise contracts on every PortCo P&L have moved underneath you.

Microsoft. SAMexpert reported in January 2025 that Microsoft is tightening Azure (MACC) discounts in response to AI investment pressure, with renewals at the same commitment level seeing 25% to 50% lower discounts than the prior cycle. Layered on top, Microsoft 365 Copilot lists at US$30 per user per month for enterprise (US$360 per user per year), which lands as a material new line on every Microsoft renewal that touches AI. If your PortCo CFO has not modelled Copilot adoption against the next EA renewal, the price exposure is real.

Oracle Java. The Oracle Java SE Universal Subscription, introduced January 2023, moved Java from per-processor to a per-employee metric. Every employee, contractor and outsourcer counts, regardless of whether they touch Java. List pricing scales by organisation size and audit exposure runs three years retroactive. Many PortCos have not understood the change. Audit letters have.

VMware. Broadcom moved VMware to subscription-only from early 2024 (no new perpetual licence sales), and from April 2025 began sending cease-and-desist letters to customers using post-support-end updates without a current subscription. Reported price increases on the subscription transition range from triple-digit to four-digit percentages depending on prior contract shape. PortCos with a sizeable VMware estate need a plan before renewal, not after.

Splunk. Post-Cisco acquisition, Splunk is migrating customers from GB per day ingest pricing to workload-based pricing. Field reports include 20%-plus uplifts on like-for-like renewals during the transition. Locking favourable ingest rates before migration is now a live negotiation lever.

Adobe. Adobe has stepped up Creative Cloud for Enterprise pricing across the Edition 3 / Edition 4 transition, with VIP and VIP Marketplace renewals catching successive price changes through 2024 and 2025. Existing three-year commits hold to end of term, which is itself a procurement decision worth surfacing at renewal.

The broader signal is the same in the asset management data. The Flexera 2025 State of ITAM Report (Itasca, IL, June 2025) finds that 35% of respondents say SaaS waste has increased over the past year, that 45% of organisations have spent over US$1M on software audits in the last three years (23% spent more than US$5M in 2025 alone), and that 50% of respondents were audited by Microsoft in the past three years (with IBM next at 37%). The Flexera 2025 State of the Cloud Report adds that 84% of organisations struggle to manage cloud spend. None of this is shelfware in the old sense. It is structural pricing and audit pressure against a buyer that has not repriced or re-armed its position.

What a 90-day audit looks like

The audit fits inside the 100-day plan. The PortCo CFO does not lose a quarter to a procurement project. It works in three steps.

First, the audit. Free, no commitment. The PortCo sends contract extracts, licence counts and last year's spend summary. In our exclusive APAC partnership with Adept Technologies, those are benchmarked against thousands of comparable transactions across European pricing and the live vendor pipeline. The output is a prioritised list of savings candidates ranked by quantum and effort.

Second, the optimisation and consolidation review. Before any renegotiation, the licence estate is right-sized. Shelfware, over-provisioned entitlements and duplicate agreements across business units are extremely common, especially after bolt-on M&A. One ASX-listed lender in the Donnish 2025 book consolidated five business units onto a single Cloudflare contract and recovered AUD 950K per year. That is consolidation savings before any negotiation has happened.

Third, the vendor negotiation. With a simple Letter of Authority, the advisor goes to the named vendors as the PortCo's representative, using benchmark pricing data the vendor does not expect the buyer to have. The PortCo is copied on every communication, briefed before and after every call, and nothing is signed without the CFO's sign-off. The MSP keeps running the environment. The implementation partners stay in place. Only the contract changes.

Three scenarios, three different size prizes

The economics shift with the deal type, and each maps to a recognisable cost-out play.

Platform acquisitions are the cleanest target. The estate is usually unaudited, the vendors are fragmented and the contracts are inherited. A 15% to 20% saving on the addressable software base is the common outcome.

Bolt-on M&A is where consolidation pays. Each acquired entity arrived with its own Microsoft tenant, its own Adobe agreement, its own security stack and its own renewal calendar. Unifying those four or five entities under a single global agreement routinely delivers north of 20%. The Donnish Cloudflare case above is the anchor example: five business units, one contract, AUD 950K per year. A Netskope cloud security consolidation in the same book delivered USD 157K per year across four entities at 17.5%.

Exit readiness is the last window. In the 12 months before sale, EBITDA-quality matters as much as EBITDA-quantum. Buyers' diligence teams look for audit-clean contracts, defensible renewal terms and no vendor liability hiding in over-deployed estates. Cleaning the licence book before diligence protects the multiple. It also gives the seller a credible cost story to walk into IM and management presentations with.

The commercial shape

The model is no savings, no fee. If the audit finds nothing, the report is the PortCo's to keep, free, and the fund has an independent external benchmark to show its board. If the audit finds savings, a success fee is charged only on what is verified against the prior pricing baseline. There is also a fixed-fee path for funds that prefer defined scope.

This structure exists because it is defensible to LPs, structurally aligned with how Operating Partners are compensated, and removes risk at the PortCo. There are no reseller targets sitting underneath it and no vendor allegiance to manage. The advisor is on the buyer's side of the table, full stop.

The window

The first 12 months of ownership is the easiest window to take this saving. After that, organisational inertia builds. Renewals get signed at the new vendor pricing, internal teams attach to incumbents, and the audit trail goes stale. New CFOs in particular have political cover and the mandate to challenge incumbent vendor relationships in their first year. It is one of the few cost-out plays that creates a measurable EBITDA win without touching the customer, the people or the operating model. Easy runs on the board. With Microsoft, Oracle, Broadcom, Splunk and Adobe all having moved underneath their customers in the last 18 months, the working assumption that "we negotiated this 18 months ago, we are fine" is no longer safe. If the portfolio has not been benchmarked against the current pricing reality, it is almost certainly worth a look.

Quinn van Heerden has over 20 years of experience delivering software and procurement engagements across Australia, EMEA and APAC. Donnish is the APAC delivery partner for Adept Technologies, a European specialist in independent software procurement advisory. Book a 30-minute portfolio conversation at donnish.com.au/procurement-advisory.

Sources

1. Parliament of Australia, House of Representatives Standing Committee on Infrastructure and Communications, "At what cost? IT pricing and the Australia tax", final report, July 2013. Average 50% software pricing premium versus comparable markets; Microsoft 66%, Autodesk 51%, Adobe 42%. https://www.aph.gov.au/parliamentary_business/committees/house_of_representatives_committees?url=ic/itpricing/report.htm
2. SAMexpert (Daryl Ullman and Stefan Denk), "Effective Microsoft MACC Negotiations in 2025", guide, 13 January 2025. "Microsoft is tightening discounts" in response to AI investment pressure; renewals at constant commitment levels are seeing 25% to 50% lower discounts. https://samexpert.com/microsoft-azure-macc-negotiations-2025/
3. Microsoft, "Microsoft 365 Copilot pricing, Enterprise", official pricing page, 2026. US$30 per user per month with annual commitment for enterprise (US$360 per user per year), add-on to qualifying Microsoft 365 plans (E3, E5 or approved legacy). https://www.microsoft.com/en-us/microsoft-365-copilot/pricing/enterprise
4. Oracle, "Java SE Universal Subscription", official subscription page, announced 23 January 2023. Per-employee licensing metric covers all full-time, part-time, temporary employees and contractors, regardless of Java usage. https://www.oracle.com/java/java-se-subscription/. Global price list PDF: https://www.oracle.com/a/ocom/docs/corporate/pricing/java-se-subscription-pricelist-5028356.pdf
5. Broadcom and Flexera commentary, "Broadcom ends VMware perpetual licence sales; subscription transition", customer communications and ITAM analysis, from late 2023 onward, with cease-and-desist enforcement letters reported from April 2025. https://community.broadcom.com/vmware-cloud-foundation/discussion/what-happens-to-perpetual-licenses-when-you-subscribe and https://www.flexera.com/blog/it-asset-management/broadcom-ends-perpetual-licenses-for-vmware-products/
6. Splunk, "Pricing FAQ" and "Ingest Pricing", official Splunk pricing pages, 2026. Splunk's stated transition from GB-per-day ingest pricing to workload-based pricing models. https://www.splunk.com/en_us/products/pricing.html
7. Adobe, "Creative Cloud for Enterprise VIP and VIP Marketplace offer updates", official enterprise pricing page, last updated March 2026. Documents the Edition 3 / Edition 4 transition, pricing changes, and that existing 3-year commits continue at current pricing until end of commit. https://helpx.adobe.com/enterprise/vip/creative-cloud-for-enterprise-vip-and-vip-marketplace-offer-updates.html
8. Flexera, "Flexera 2025 State of ITAM Report" press release, Itasca, IL, 18 June 2025. 35% of respondents report increased SaaS waste year over year; 45% of organisations spent over US$1M on software audits in last three years, 23% spent more than US$5M in 2025; 50% audited by Microsoft, 37% by IBM, 32% by SAP, 24% by Adobe, 24% by Oracle, 21% by ServiceNow, 20% by Salesforce. Press release: https://www.flexera.com/about-us/press-center/it-teams-losing-visibility-according-to-flexera-2025-state-of-itam-report
9. Flexera, "2025 State of the Cloud Report", annual industry survey, March 2025. 84% of organisations struggle to manage cloud spend; ~27% of cloud spend is wasted. Press release: https://www.flexera.com/about-us/press-center/new-flexera-report-finds-84-percent-of-organizations-struggle-to-manage-cloud-spend
10. Donnish, "Software procurement advisory", service page, 2026. US$4.6M verified savings in 2025; vendor category savings (Okta 54%, Udemy 35%, VMware 24%, Splunk 22%, Elastic 21%, Rubrik 19%, Palo Alto 19%, BigFix 18%, Diffusion Data 17%, Cloudflare 16%, Netskope 15%). https://www.donnish.com.au/procurement-advisory
11. Adept Technologies global engagement benchmarks, 2018 to 2025, aggregated across enterprise software contracts in Europe, Africa and Australia. 19.5% average verified saving across 11 enterprise software categories. Per-engagement evidence available on request under NDA via Donnish.