There are various small commercial changes that, if applied in a timely manner, can produce a significant effect on end IT costs. Here are some tips and pointers for IT sourcing professionals to make reductions.
- Audit the software that you use. You might be paying maintenance on software that you no longer use.
- Review your software licence numbers. If you have more than you need, shelve some and renegotiate the maintenance costs.
- Check the level of support that you need. You may be paying for platinum level support when you only need bronze, allowing you to negotiate a cost reduction.
- Move to third party support for ERP systems, if you don’t need to upgrade, as this can drop maintenance costs by 50 per cent.
- Negotiate extended warranty for hardware equipment for a further year. This will allow you to delay the purchase of new hardware for a further year while. This will also potentially save costs on the purchase price as technology costs traditionally reduce over time.
- For a mobile organisation, ensure one PC per user and not a desktop and laptop for mobile users.
- Approach your suppliers to see what options are available to you in reducing your costs, particularly in a downturn (for example, challenge your suppliers to reduce costs by 10 per cent)
- Track maintenance contract renewal dates, so if you wish to terminate you cancel within the required notice period. Otherwise you may be forced to pay another year’s maintenance for something you are no longer using. Alternatively, negotiate maintenance contracts to auto-terminate annually so suppliers chase for renewal.
- Ensure suppliers can only increase pricing by a limited amount each year – usually tied to the retail price index (RPI) or Computer Economic Ltd (CEL) – this stops massive price rises mid-contract.
- Lease rather than buy. This gives easily budgeted costs to cover all services associated with the item over it’s life and avoids unpredictable fix costs.
- Reverse e-auction. When sourcing hardware and telecommunication devices use e-auctions to drive down the purchase costs.
- Embed in contracts the ability to get bigger discounts for extra volumes.
- Hold regular reviews of support use. Support requirements may change over time. Traditionally, support calls are high in the first year, dropping off as bugs are fixed.
- Ensure software contracts are flexible enough to accommodate a changing environment over time considering things such as: Increase/reduction of head count, partial termination of licenses and requirements, and so on.
- Ensure major upgrades are included in maintenance costs for software.
☛ Mike Hardy is a consultant at Turnstone, and has 20 years’ experience as an IT sourcing manager.