Run and Grow, Grow and Run. Many, if not all IT organizations, are faced with “KTLO” or keeping the lights on (running the business) AND digitizing the enterprise to fuel innovation (driving new revenue).
Seems simple, but often the business as usual activities consume the required time, resources and thought leadership needed to propel an enterprise into the future, while still being able to tend to the existing farm. System or application upgrades are sometimes prioritized over new initiatives to address “burning systems” or compliance requirements. Funds are scarce or limited and the business wants IT to do more, be agile, and deliver with less budget. Sound familiar?! It’s a common dilemma for most CIOs or IT executive teams. Not to mention, strategic consulting firms (e.g., Accenture) are aggressively advising company boards and leaders to go digital and migrate to the cloud (rapidly) or they’ll be “eating their competitors’ dust.”
IT vendors understand and appreciate that there’s a tsunami of enterprises going digital and migrating countless workloads or applications to the public cloud. In fact, Forrester Research predicts that the global cloud computing market will hit $241B by 2020. As a result, IT suppliers are adapting their sales and revenue models to account for customers that were mostly purchasing on-premise solutions, but now moving to providers such as Amazon, Microsoft and Google. Rationale behind “cloud first” or “cloud only” isn’t to save money or operate cheaper, but in many cases, it’s to improve reliability, scalability and speed to market. IT vendors can sell you technology and services to maintain what you have onsite, but would rather entice you to move to one of their latest cloud platforms, “saving money” and simplifying IT operations as part of the shift.
The obvious challenge is IT budgets are not infinite or unlimited and CIO priorities are set, but must remain nimble enough to consistently align with the changing needs and strategy of the business. Current allotted IT funds cannot effectively accommodate running and growing your operation, without compromising or delaying a key upgrade or new project. In order to keep up with the rapid fire of incremental requests while KTLO, current IT leaders need to be able to peel back the onion on their existing spend and unravel the possible redundancies of their technology agreements. For each mega vendor and certain mid-sized ones, there are typically multiple contracts in place, and usually, several distinct run rates which make up a material number. Many of these agreements were authored without cloud in mind, so you are potentially subject to excessive unbudgeted fees once you migrate or renew these supplier contracts.
How can IT executives take cost divots out of their current vendor contracts without impacting operations and increasing risk?! IT agreements needs to be inventoried, inspected and assessed to identify opportunities for supplier rationalization and cost optimization. While it may sound like a trivial task, IT vendor management and procurement teams don’t have sufficient bandwidth to take a deep look at existing contracts, unless a renewal is underway or coming due. A risk matrix for each supplier should be created mapping the master agreements and unlimited license agreements (ULAs) to the supporting addenda and exhibits. The fees (one-time and ongoing) should be identified and tied to the product(s) or IP being licensed through the vendor. Key provisions should be reviewed and commercial terms revisited to see if there are any opportunities to reduce spend immediately or in the near future. License optimization may be feasible, but without knowing what’s deployed and what you own from a software & support perspective, it’s an impossible goal to achieve. Don’t wait 3-6 months before your technology agreements term or you’ll leave money on the table and lose your competitive advantage with IT suppliers. Start proactively assessing them today so you can uncover savings, which can help protect IT innovation and digital funds for the enterprise, keeping the CIO and C-suite aligned. For more information regarding the above or to learn more about how companies are successfully optimizing IT spend while balancing against operational risk, contact Connor Consulting at https://www.connor-consulting.com/software-advisory/.
Connor Consulting has global teams with an average experience of 10+ years that specialize in contract & license compliance, software asset management & IT vendor optimization, IP royalty audits and 3rd party reviews.
About The Author
Rich Reyes is an Executive Vice President (EVP) for the global Software Advisory practice at Connor Consulting. He brings 20 years of thought leadership around software licensing & compliance, technology asset management and IT sourcing. Rich has performed hundreds of software audits on behalf of major vendors, established an ITAM/SAM practice for a Fortune 100 retailer and continues to advise companies on practical ways to mitigate IT supplier risks, reduce software total cost of ownership (TCO) and optimize licensing environments. He’s also a frequent speaker at industry events.
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