8 Ways to Identify Big IT Contract Savings in Just 30 Days
Is your organization under pressure to cut costs? Are you looking to maximize your IT efficiency without sacrificing your strategic IT goals?
IT Cost Take Out
All organizations are under pressure to cut costs while improving services during the current world economic challenges. Once business growth and the demands on IT to move quickly begin to subside, there comes a time when IT spending will need to be right-sized. This is often referred to as IT Cost Take Out.
There is a finite number of ways to achieve this result, and the table below provides you with some insight into the number of ways your organization can approach cost cutting.
The Challenge: How do organizations fast-forward to find the “low hanging fruit” to realize cost savings in IT?
Pick the “Low Hanging Fruit” for Quick Cost Savings
Your organization needs to be positioned to take advantage of simple-to-implement cost saving strategies. Focusing on the “low hanging fruit” allows you to focus on immediate cost savings through the optimization of existing processes, contracts and outsourcing deals.
However, the reality is that lack of process, ownership, awareness and trust slows down the realization of client savings. R3P leverages a tool-set of best-practice process, policy, target lists, benchmarks & negotiating outcomes to accelerate IT cost savings in 8 key areas:
1. Stop Overcharges & Negotiate Compensation
Why do you have late fees and penalties that no one told you about? We often find the delayed/held payments are an unofficial form of protest/dispute since there was no “client governance process to deal with disputed charges.” R3P will set up a best-practice ownership, validation & dispute process rapidly, stop the over-payment and negotiate compensation.
2. Stop Double-Payments
Audit all IT contracts with pre-payment, minimal commitment or enterprise use. Often procurement/sourcing negotiate bulk discounts within an IT contract for development hours, network bandwidth, or enterprise software/service deals without agreeing on who will “operationalize the new contract.” This relates to all IT contracts from development, testing, networking, and every area of IT. You are likely paying two different providers (double-paying) if you are not fully utilizing pre-paid contracts and minimal commitments.
3. Trigger Outsourcing Benchmark Clause Selectively
Review all outsourcing agreements and break down by tower of service. Selectively choose the service(s) that have dropped significantly in price over the past 2 years. Compare the RU prices against the price/performance curves to confirm over-payment. Trigger the benchmark clause for that service and negotiate the lower market price.
4. Reduce IT Contractor Spending
IT contractors are typically 10-40% of the IT workforce and are needed for contingent workforce and short bursts of specialized skills. However, this spending can sprawl but can be trimmed:
- Step 1: Review IT contractors list with >2 years’ continuous activity and identify key roles that should be performed by employees to achieve both quick savings and reduce operational risk.
- Step 2: Analyze the list to identify groups of contractor activity that can be absorbed by an incumbent outsourcer at a lower cost.
- Step 3: Compare contractor rates against recent benchmarks and negotiate reductions.
5. Realign IT License Counts & Classifications to Eliminate Overage
License models can be complex, various groups are purchasing, and not all architects appreciate the license models and their financial consequences. An experienced sourcing expert in IT licensing models can identify savings by evaluating usage history. This typically leads to a change in usage to fit the current licensing model or changing the licensing model to fit the usage patterns. Interpretation of licensing terms and classifications can create savings and can be negotiated with the IT vendor.
6. Replace Selective IT Maintenance with Lower Cost Solutions
Often, end-of-support agreements are overpriced. R3P can help provide lower cost solutions from 3rd parties.
7. Reduce User Bad Habits
Have you rolled out new technology services to reduce costs and make people more productive? Often, the adoption is not close to 100% because the old service is still available, and certain people don’t want to change.
8. Retire IT-Assets that Are Rarely or Never Used
A review of exception reports will typically highlight software, hardware and services that are out-of-date or past end-of-life. R3P has a typical list from past engagements. These assets can be cross-referenced to maintenance list costs & usage reports.
Interviews should quickly validate which are candidates to retire, and identify the challenges to retire them. A short list can be assessed and retired based on non-linear thinking.
At R3P Consulting, our thought leadership approach leads to IT outsourcing solutions and managed IT services that save money, reduce risk, and improve service. Contact us for a diagnostic assessment and to discuss how to get the most out of your IT providers.
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