COVID-19 has caused unprecedented business disruption, creating extreme operational and financial strain for most organizations. At the onset of the pandemic, companies triggered their business continuity plans, but few strategic plans contemplated a persistent disruption like this, where there is no ability to predict when normal operations will resume. As a result, many enterprises are looking for ways to quickly reduce and optimize costs to not only conserve capital, but simply survive. Here, we explore four potential opportunities within technology third-party spending that can yield immediate IT cost savings during the COVID-19 pandemic.
Contract complexity, the nonrecurring nature of some adjustments and the inherent inefficiency of the billing administration process frequently result in invoicing errors. These errors often go undiscovered and may manifest in various ways, including applying rates that are too high, incorrect quantification of the number of billable units -- e.g., transactions, resources and consumption levels -- or pricing adjustment errors -- e.g., cost-of-living adjustment and wage inflation. Auditing invoices and comparing charges to what is allowed and agreed upon contractually, such as per rate cards and pricing exhibits, may identify previously undiscovered errors, resulting in owed credits and reductions to future charges.
Now is the time to examine your application license and subscription portfolio, both for contracts that can be terminated and those that can be suspended for the time being to ensure cost optimization. Consider terminating maintenance for software that is no longer being used or that is unlikely to require updates in the future. The same can be true for hardware maintenance and service delivery across your computing and storage infrastructure and for network equipment, such as Cisco and IBM. For your Microsoft portfolio, carefully review your software assurance program to identify opportunities for removing applications -- depending on your agreement -- to reduce unnecessary software maintenance expenses.
For real savings, the goal is to use less and only pay for what you are using. The two most promising opportunities for rapid, demand-related IT cost savings are with your cloud provider and software licensing spend. For organizations utilizing cloud-based services, consider the following for cloud spend:
Similarly, for software subscriptions, consider the following:
Ask your strategic partners how they can assist with IT cost savings, and be open to their suggestions. Engaging in collaborative discussions with your suppliers to explore options that deliver mutual potential benefits offers the most compelling opportunity to create meaningful cost savings achievements. While it's unlikely that suppliers will provide "something for nothing" -- i.e., reduce overall costs without a corresponding benefit to them -- we have heard from many suppliers that they want and are often well positioned to help clients drive near-term substantial savings.
If a customer can offer increased commitment, reduced risk or future benefit, suppliers can typically provide mechanisms to reduce overall costs. Levers, such as extending the contractual term, providing service-level relief -- e.g., reduced fees at risk and relaxed performance targets -- increasing the scope of future services or committing to minimum spend thresholds, enable the suppliers to demonstrate pricing flexibility. There may also be opportunities to restructure the overall financial framework, thereby accelerating the realization of productivity or other cost reduction commitments in exchange for longer-term considerations. Current circumstances may cause organizations to become more open to options that they had not seriously considered in the past, such as offshore delivery, captive shared service center acquisition and automation programs.
This article originally appeared in SearchCIO.com.
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