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Software Savings? You Can Do It!

Software Is  A Key Source Of IT Spend… And Savings

We’re focusing on software savings over the next couple of months – starting with the contract review process, then looking at how to define savings targets, build a software savings plan, and how negotiate with the vendors. We’ll round it off with a workshop taking a detailed look at the software procurement process.

The introduction of Software-as-a-Service (SaaS) and subscription licenses means that software contract renewals are increasing as a proportion of IT spend and optimising and controlling your software subscription and support & renewal costs is a must in ‘these difficult times’. If you need to save money fast, ITAM can play a key role achieving this, as well as implementing an effective business as usual contract renewal process to minimise future spend (cost avoidance).

However, here at ITAM Accelerate we like being a bit controversial. So here are our ‘top 3 things you should know about software savings… hopefully they will surprise you!

1. Ignore your SAM Suite!

This will undoubtedly raise eyebrows, but it’s true! The key to the contract renewal process – and indeed to saving cash – is understanding your spend, and the SAM suite does not tell you this!!

The true picture of your spend, including how much, to whom and out of which budget is found in your finance systems, which combined with your budget information, provides the key to identifying savings opportunities and building a savings plan.

You need to interrogate your ERP system to identify all software related operating expense (OpEx) spend and match it to your budgets. Bear in mind that budgets aren’t as accurate as the data from your ERP system, but they provide useful additional information such as what the spend is for and who approves it from a business or IT perspective (who is often different from the budget owner) that complements the data in your ERP system.

If you can’t access the ERP spend for some reason, then the budgets are better than nothing. 

Focusing on your ERP and budget data is the only way you will identify ALL your recurring spend (including so-called grey or shadow IT) and consolidate all the spend with each vendor so you can identify savings targets and prioritise your activities.

2. IT Asset Managers don’t save money!

A good IT Asset Manager is focused on making sure the organisation has the data and information it needs to optimise its estate and minimise future spend… but neither of these save cold hard cash – they just avoid spending it in the future.

If, as an organisation, you really need to save money, then don’t ask ITAM to do it! We can’t. The reason is very simple… if we’ve been in post a while, we will already have achieved the easy stuff, the ‘low hanging fruit’ through our business as usual contract review process. This means that saving money is going to be hard. It’s going to take a lot of bashing of heads together to make it clear that project X isn’t really as important as we thought it was, so those resources need to be diverted to project Y, which will save us some money.

Real, genuine cost savings against budgets can only be achieved with strong senior management sponsorship to beat heads together to make things happen. All the spend analysis in the world won’t make savings happen unless someone senior is willing to force people to do the hard work involved and make the sacrifices required.

3. The toughest negotiations are internal!

Sure, negotiating with a vendor can be tough, but getting internal agreement about how to distribute the costs and savings from the deal can be really, really tough! Make sure all stakeholders are agreed what the negotiating budget should be, and what they are willing to pay for. Agree with your stakeholders the ‘deal principles’ or ‘want list’ up front and get commitment from everyone that this is indeed the right thing to do. Don’t forget (and don’t hesitate to remind people) that the deal is the deal, but how the final cost is split between internal budgets and profit and loss (P&L centres) is simply a decision about where to spend ‘wooden dollars’ – an important decision, and one with consequences, but fundamentally it’s the company’s money rather than the individual business units.

Be flexible in finding solutions to tricky political conflicts – if one part of the business really wants the deal, but another part doesn’t so much, then perhaps you can split the cost savings to reflect this by giving the reluctant part of the business a larger cut of the saving, even if it doesn’t reflect actual real-world usage. Treating internal politics as an integral part of the deal itself avoids last minute issues where part of the business refuses to sign off on the deal, while giving you additional confidence when negotiating the deal itself with the vendor.

You’ve banked the savings, what next?

A lot of ITAM teams are under pressure at the moment to achieve significant software savings. Sometimes the pressure is existential (if we don’t save money, the business may go under!) and other times the ITAM team is under the cosh to make software savings as a way to demonstrate the value they add to the organisation.

Of course, once the deal is done and the savings are banked, we emerge into the realm of ITAM. Imagine your contract to be a canvas; and IT architects to be the next Picasso! The method by which they take the line items in that contract and deploy them with their own “artistic interpretation” means that circling back to those bespoke terms and conditions you negotiated is vital to avoid large penalties in future.

But driving real cost savings (as opposed to avoiding future costs) is really hard, particularly if you’ve been in place for a long time and run a tight contracts renewal process.

If you need help, you’re in luck!  Our software savings course will help YOU identify those tough savings opportunities, get the right level of sponsorship and build the right governance structures to drive success.