Sponsored By:
Produced By:
Nicholas Evans
Head of Technology Procurement
Battling the Tech Vendors: Optimizing License Spend and Avoiding Audit Risk
In your experience, what are the main factors that hinder organizations from maximizing the value of their software?
One major factor is inefficient license management. Many organizations face issues when license management falls under the responsibility of contract owners who may not prioritize it effectively. Additionally, the shift towards cloud-based software and software-as-a-service (SaaS) models has changed the landscape. Organizations need to rethink how they optimize licenses and maintain control. Some suppliers make it challenging to reduce the number of licenses once a certain level has been reached, which poses a further obstacle. Another significant factor is the mindset of contract owners who are accustomed to the old ways of purchasing perpetual licenses. In the past, they had lifetime ownership and didn't need to worry about maximizing usage potential. With the move towards the cloud and software-as-a-service, organizations need to adapt and ensure they optimize licenses effectively. This requires a shift in thinking and a focus on maximizing value in a different licensing environment.
To what extent are you able to visualize software spend across an enterprise, and what steps need to be put in place to achieve that?
The ability to visualize software spend depends on the maturity of the procurement function. In mature setups, license management is integrated into solutions, allowing for live visual export of usage data within the system. However, in cases where there is no procurement management system in place, it becomes more challenging. In such situations, it's important to push contract owners to focus on optimizing usage and creating a culture of control. Stakeholders internally should be constantly aware of and focused on managing software spend.
In the past, contract owners had lifetime ownership and didn't need to worry about maximising usage potential. With the move towards the cloud and software-as-a-service, organisations need to adapt and ensure they optimise licences effectively.
What strategies would you recommend for organizations to maintain control over software spend and how do you suggest forecasting software consumption and mitigating unforeseen costs?
It's crucial to negotiate actively with suppliers and explore strategies for optimizing licenses. By engaging in pipeline planning and aligning with upcoming business needs, organizations can take advantage of opportunities and negotiate the best possible terms. Clear communication and negotiation play a key role in managing costs and risks effectively.
Forecasting software consumption can be challenging, but it's essential to plan ahead and structure the organization for the next several months or years. Pipeline planning can help mitigate potential risks. Effective communication between application or IT managers and procurement is crucial. It's also important to manage cloud services through good planning and clear communication during negotiations. Starting small with the option to scale up without extensive renegotiations can be beneficial, preventing excessive costs due to poor planning.
So what are the major challenges organizations face in managing their software and cloud estates effectively?
One of the major challenges is the lack of flexibility provided by major infrastructure providers like Microsoft, AWS and Google. They often make it seemingly impossible to downscale or adjust usage. The current structure revolves around growth and increasing revenue, which benefits the suppliers. However, there is a significant need to improve and allow for more flexibility in usage. It's essential to have the right tools and terms within the contract to create a comfortable relationship between organizations and suppliers. Balancing the intentions of suppliers and the needs of organizations is a challenge that needs to be addressed.
Can you share an example of a successful optimisation initiative, particularly in the realm of software or cloud contracts, how did you approach negotiations?
In a previous role, we focused on CRM optimisation, collaborating with multiple operations globally. To approach negotiations, we conducted a comprehensive analysis of demand management to understand our future licensing needs better. By leveraging this knowledge during negotiations, we successfully secured more favorable terms across 11 companies in Europe and Asia, resulting in significant cost savings and expanded product access. Dealing with major vendors required creative strategies, and our approach of predicting future requirements and highlighting specific licensing needs allowed us to negotiate better deals, ultimately reducing costs in the long run and enhancing our overall operational efficiency.
The ability to visualize software spend depends on the maturity of the procurement function. In mature setups, license management is integrated into solutions, allowing for live visual export of usage data within the system.
Were there any other areas where you were able to reduce costs or uncover hidden value?
Absolutely. While cost reduction was our primary objective, it also led to additional value. By optimizing our licenses, we gained access to more products and features offered by the vendors. This not only improved our overall software capabilities but also provided us with the opportunity to explore new functionalities and enhance our operations. So, in addition to reducing costs, optimisation opened up avenues for greater value realization.
What, in your opinion, are the biggest risks and opportunities associated with adopting cloud services?
One risk is the lack of visibility and control over data stored on the supplier's websites. Organizations must remain vigilant and address frequent changes to ensure consistent security and privacy measures. However, cloud services offer opportunities to simplify infrastructure and operations, particularly for businesses with minimal privacy or security concerns. They can outsource tasks, focus on core operations, and gain scalability and flexibility. By complying with local laws, organizations can revolutionize operations, access advanced technologies, and level the playing field, enhancing their overall competitiveness.
It's essential to have the right tools and terms within the contract to create a comfortable relationship between organizations and suppliers.
