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Tips on reducing IT expenditure

There is constant pressure for IT to reduce cost and do more with less. Computer Weekly explores how this is being achieved in practice

Two surveys published this month have highlighted the gap between what customers want from their software suppliers and suppliers’ commercial drivers.

First, a study based on a survey of 450 IT decision-makers and 450 financial decision-makers from Vanson Bourne, sponsored by third-party support provider Rimini Street, reported that 74% of the executives surveyed said innovation in their organisations is hampered because they are spending too much on keeping the lights on.

Only 37% of the people surveyed said the value of enhancement packs delivered by suppliers had increased in the past five years, while 56% said they felt pressured to adopt a supplier’s cloud strategy, rather than have the flexibility to explore the best ways to use their IT assets.

Ilan Oshri, a professor at Auckland University Business School, suggested that IT decision-makers and software providers should move away from transactional relationship to more of a partnership. “There is some sort of tension relationship between the  client and service provider,” he said.

Oshri said the people who took part in the study said they felt locked in and were dissatisfied with suppliers. “If you are locked in, you cannot re-engineer your contract and the cost of switching is fairly high,” he added.

Meanwhile, a survey by the ITAM Review of 100 its members found a strong link between software maintenance and supplier relationships, and businesses can pay 20% or more of the original contract value per year on support.  

One respondent commented: “Software support and maintenance is the dominant issue determining the success or failure of a relationship with a supplier. A relationship built on the best product on the best terms can still be easily destroyed by bad practice in support and maintenance, which is seen by some software suppliers as the source of most revenue and margin from a captive audience.”

Cutting the number of licences that are being used reduces the ongoing maintenance costs.

Cutting licence costs

Speaking at the ITAM Review’s 2018 conference, Matt Turner, IT software transformation (technical business management) at BT Group, discussed the company’s plans to reduce IT licence spending by 50% by March 2020.

“I understood total spend, but not the detail behind the spend, what the software was meant to do and what revenue it supported,” he said.

Turner said he built a small team that had a real focus on transformation. “We positioned ourselves to have conversations proactively with the IT team,” he said.

BT selected Origina to provide third-party support for its IBM systems. Turner said this helped the company to modernise its mainframe.

Livingston was used to provide licence support while Aspera’s software asset management (SAM) tool was used to avoid paying extra licence costs on Microsoft and Adobe software.

All IT spending now goes through Turner’s team. “We look at whether third-party is better value, going unsupported, rationalisation and convergence. Anything goes,” he said.

The Technology Business Management Council recently established a European committee to support CIOs as they align IT spending with business outcomes.

Computer Weekly recently spoke to Debra Bailey, former CIO at Nationwide Building Society and a member of the European Technology Business Management (TBM) Executive Committee (Etec). When she was Nationwide, said Bailey, much of the IT savings the company made were from identifying underutilised software licences.

Convincing IT architecture teams that their approach may not be the most cost-effective requires the IT leadership team to understand the constituent parts of the architecture and how data flows between these, she said.

Focus on managing audits

Targeting areas of over-spending needs to build on strong supplier relationship management. Delegates at the ITAM Review conference were told how software providers set sales targets, and the account managers in these software firms then try to upsell new products and services to existing customers.

If a customer is going through the process of reducing its expenditure with a supplier, there is a chance that the software company will look to trigger a licence audit to identify under-licensing.

As Computer Weekly reported recently, SAP has revamped its indirect access licence. Along with a new digital access licence, the supplier has separate its software audit team with its own key performance indicators, a move that some industry commentators believe could lead to more licence auditing.

One of the areas the ITAM Review conference focused on was how users can negotiate successfully with their software providers.

Read more about maximising IT budgets

  • Small IT shops adopt some of the same trends as large enterprises, but with much caution and attention to priorities. And mistakes are felt acutely.
  • In this guest blog post, Sebastian Grady, president of Rimini Street, says that while technology has been a disruptive enabler that has helped companies improve their customer service, vendors need to improve.

Software companies generally set sales targets based on the number of customers they can migrate onto the latest platform or their cloud offering. In a talk at the ITAM Review conference, Jochen Hagenlocher, global head of software asset management at a Fortune 100 company, discussed some of the strategies he has used to negotiate with software companies that want to audit the business for under-licensed software.

Hagenlocher said that “90% of audits can be avoided through smart contracting, relationship management or if you purchase early”.

Among the options that businesses have when negotiating with their supplier are industry-specific regulations and the General Data Protection Regulation (GDPR), which can be used to limit the scope of a software audit, said Hagenlocher. “Data privacy with GDPR is a great gift. If anyone is asking for personal information, we throw GDPR on them.”

Software companies often try to run their own scripts on their customers’ networks to detect misuse of software, said Hagenlocher, and unless this was set out in the original licence terms and conditions, he urged businesses to resist any attempt to run these scripts, which pose an IT security risk and could damage delicate equipment.

Hagenlocher said businesses should request an unlimited liability agreement with their software provider, so that the software company takes on full responsibility for any damage arising from their script.

Read more on IT supplier relationship management

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