This article looks at six strategies that successful companies can employ to improve their technology return on investment (ROI). IT supplier organisations make their profits through three channels: services, new products and support. All three channels have served them well in the past and allowed them to plunder corporate and government coffers over many years through booms and recessions. Services encompass consultancy, implementation and support. Products are often constructed so that the customers must purchase specialist knowledge only available from the vendor to undertake the consultancy, implementation or the support.
New products always claim to use the latest technology with the most recent buzzwords because if they didn’t people wouldn’t buy them. We have often seen that although the latest version of a particular product uses the latest technology, it will offer less functionality than the existing outgoing product because it has been rushed out. Furthermore, new products or technologies are not always as new as you might think and their value to the buyer’s bottom line is questionable. You should always ask yourself ‘Does the product help us or the vendor?’ The contract to supply may even state that implementation must be carried out by the vendor. These are a few ways that are used by suppliers to lock in customers, keeping profits high and revenues rolling in. In our experience there are a number of actions that customers can take to improve their ROI in technology on an ongoing basis.
1. Service Arrangements
As the customer, you should review all supplier service arrangements regularly to make sure they are still competitive. Markets are constantly changing, with new vendors replacing uncompetitive ones. Smart buyers let existing suppliers know that they are re-evaluating all supplier arrangements and would like existing suppliers to re-quote for the service or product. At the same time, they contact new/alternative suppliers and ask them to quote for the service or product so they can make an informed choice and decide which supplier to work with.
2. Outsource Options
You could consider outsourcing operations/development to a low cost centre. This can be achieved by working with outsourcing service suppliers to look at the outsourcing options available. Outsourcing suppliers have developed many creative solutions for all types of customers and situations. You can either offshore your entire operation, just the hardware, just the people, or have a managed service onsite in your local area where the staff and equipment belong to the outsourcing company – any combination of these options is possible. All of the options at first sight will appear to save money, but then that is what they are supposed to do. For example, it is cheaper to employ staff in a developing country than it is in Western Europe/US. The cost can be less than a third, clearly a great saving. Then add this to the savings that can be obtained by having the hardware hosted elsewhere. The savings can be huge, but if the service is not as good, or their staff drive your customers away, it could be an expensive mistake. If you select the wrong option, or do not negotiate the right deal for your business, you could be increasing the costs for your business instead of decreasing them.
3. Licence Awareness
Are you maximizing your use of licences? Suppliers are always changing the way they licence their products to customers in order to keep up with the competition. However, the newer more competitive rates are not always passed on to existing customers. The suppliers rely on existing customers contacting them and asking to be put onto the more favorable terms. It should be part of your IT supplier management strategy to regularly review all licence arrangements against the market to make sure you are getting the best deal.
4. Time to Go
Identify ‘end of life’ systems and retire them. Most systems come to a natural end of life because either they have no more new users being added to them, or they are so old that they become too expensive to support and maintain. If a system has no users being added to it, its existence should be questioned. Could the existing users be migrated to another system without this action affecting them? Moving from two systems to one will result in a freeing up of hardware and staff and a consequential budget saving. In these cases, you should develop a plan to merge the data with another more modern system and move both on to a supported technology. End of life systems can have a big impact in terms of budget spend, they should be quickly identified and dealt with.
5. Business Strategy
When considering new systems you need to establish benefits and payback criteria, allocating the responsibility for achieving these to named individuals before purchasing the latest hardware or system. A comprehensive business case should document the need and the expected benefits, stating how the benefits will be achieved. Successful organisations are using this approach with distinction and employing ‘benefits realisation’ managers to ensure the benefits are achieved.
6. Support
On new systems, maintenance and support should be free for 12 months after a system or product has been sold. This approach is standard with any household item, so why should it not be with a GBP50,000 software system? However, be very careful to monitor the service you receive by setting strict service levels and monitoring them closely.
Additionally, if you are considering taking support then you must make sure you know exactly what you are paying for. There should be a clearly defined service level agreement (SLA) between you and the supplier. The support SLA should state, at a minimum, the system availability, the hours the support will be available for, what is included in support and what isn’t, how calls should be raised, the target response time to calls raised, the escalation points and redress when the SLA isn’t achieved. Suppliers will try and minimize the number of staff assigned to support, so make sure you know how many people are assigned and their level of training.
Conclusion
None of these guidelines are new or difficult to do. But your approach has to be thorough and systematic to achieve significant savings. This has been proven over and over again.