The recession may be over, but the pressure to cut costs still weighs heavily over many CIOs and IT departments. According to Gartner, IT budgets fell by 10% this year. But unlike 2010 when it was all about survival and keeping the lights on, the pressures in 2011 will be about growth without increased spend. There will be an increased focus on improving services while making savings with existing spend in order to balance the books.

IT’s job will be as much financial management as it will be to provide IT services.

Contact Silver Bullet Associates if you want some help identifying software savings opportunities.

#1. Don’t spill the beans. Often, vendors talk to people at buying companies before the negotiations start, then gear the negotiation to the budget. The business ends up thinking they got a good deal, when they may have got another 20% off.

#2. Use your leverage. Let the vendor know it has a credible competitor, but not who it is. It’s also crucial that the negotiator understand the marketplace climate and the relative importance of the deal. Buying a large package from a vendor that’s coming off a poor financial quarter can work to your advantage. A vendor trying to break into your vertical industry may be willing to discount a product to get a foothold in a new area.

#3. Form the negotiating team early. Nothing kills more deals than bringing in the team at the last minute, but that’s what happens about 80% of the time. Too many companies think of contract negotiations in terms of price, when that’s a small component of the deal. Today, people are focused on price, but the risk and investment are a lot higher on the implementation agreement.

#4. Future-proof the deal. What happens if the vendor goes bankrupt, gets acquired, or doesn’t live up to the contract’s terms? Future-proofing a contract gives your business rights. First, escrow the software’s source code. Most times, when a business licenses software, they only get the object code, not the core source code. An escrow clause in the contract lets businesses obtain the core source code should the vendor go bankrupt or sell its assets.

#5. Take advantage of the here and now. Use current negotiations to get better prices on future software purchases. You may be able to get a deal for additional products purchased within the next few years at a pre-specified discount.

#6. Beware of hidden fees. Does your business have the right to relocate the software without penalty? If you need a copy of the software to test a disaster-recovery plan, are you required to pay full price for another license? Such hidden costs can add up to significant extra unbudgeted spend.

#7. Customisation can bite you in the end. Be as specific as possible about what’s being customised and how it should function. If you’re not very clear, the vendor won’t build it right. Vendors often will include a provision that says if a company doesn’t accept or reject the customization within 45 days, the customization is automatically accepted. That shouldn’t be the way it works. A company should have the right to refuse a customization whenever it doesn’t function properly.

#8. Know your definitions. How are you defining a user, a partner, or a customer?

Apple’s iPad has “exploded” on to the enterprise scene, according to industry watchers Forrester. Could this lead a decline in laptop and desktop PC sales? Well it’s certainly giving IT Directors something to think about.

Forrester’s report, called How iPads Enter The Workforce, says that iPads will make an impact at the office and its release has kick-started an “arms race for smart mobile devices,” with similar offerings including the Cisco Cius, Dell Streak, Samsung Galaxy Tab, RIM PlayBook, HP Windows 7 Tablet giving users greater choice than ever before.

Apple’s most recent financial figures revealed that the Cupertino, California-based giant sold 4.19 million iPads during Q4 2010. Added to the 3.2 million sold during its first quarter in the wild, Apple has shifted around 7.5 million iPads in just six months, which is not at all bad considering the iPhone sold between 3.5 – 4 million during its first six months on sale.

It’s been a while since my last batch of top tips for negotiating better software deals. So here are a few more:

1/ Take your time. Don’t be rushed into any decision. A few extra days now to make sure things are right can save you months of wrangling later when things go wrong.

2/ Concede only slowly and in small increments.

3/ Trade off stuff; if I give you X will you give me Y.

4/It’s not just about the price; look for other value that might be worth more.

5/ Listen more effectively. Listen for nuggets and nuances; they all count.

6/ Communicate clearly and confirm everything in writing.

7/ Set the Agenda for every supplier meeting

8/ Know when to stop negotiating

9/ Never negotiate when you’re tired

10/ Enjoy it. Negotiating is fun!

IT cost savings come in many forms and here’s one that caught my eye the other day.

HSBC has saved more than $1m in energy costs after rolling out technology that shuts down 300,000 PCs during evenings and weekends. The bank is implementing the shut-down system across its international network, eventually reaching all 8,000 offices in the 88 countries it operates in.

The technology, called NightWatchman from supplier 1E, saves data and closes applications before shutting down PCs. The bank is one of the biggest in the world and says it keeps costs down through “ruthless” standardisation of its IT across the company.

Matthew O’Neill, head of group communication systems and support, said, “A key part of our desktop strategy to minimise total cost of ownership is through ruthless standardisation of our environment. We deploy a single Windows image to all of our desktops worldwide and ensure that all additional solutions we provide are globally scalable. Within this environment, we are responsible for establishing all of the desktop settings, including our global shutdown policy, to ensure that this is adhered to across the organisation, maximising the energy savings.”

Well done to HSBC; saving the planet and the pennies at the same time!

There’s nothing new under the Sun. Just when we were all starting to wonder what IT Buyers in the USA did between 9 to 5, Gartner has used it’s time wisely and taken the time to find out. 

IT buyers in the USA have a high focus on IT costs, according to Gartner. It would appear that IT buyers in the US pay less attention to business innovation in IT as a driver for using IT services. The survey revealed companies belonging to all sizes, showed a movement away from aggressive adoption, and indicated their top driver is to reduce the operating costs of IT and to ensure IT availability. In addition, 60% of US buyers had renegotiated service contracts in the past two years, while 47% said they had found cost savings by using offshore services delivery, and 40% indicated the use of technology as a service as an IT cost reduction driver.

So now you know; or maybe you knew anyway.

The recession has forced many businesses and public sector organisations to put expenditure of all kinds under close scrutiny, and it was no surprise to see that ‘Reducing IT Costs’ was quickly elevated to the top of many IT department’s strategic priortities. But while IT assets are an easy target fo cost reduction exercises, it’s what those assets do for the business that can have a far greater value than their removal rewards. Information flow is the lifeblood of businesses and cutting back on IT assets can quickly strangle that flow. Keeping the assets requires money but that justification can  be made easier by demonstrating: 1/ the value of the assets, 2/that the assets are being acquired and maintained at rock bottom prices through good negotiation, and 3/ that the assets are being fully sweated prior to retirement or replacement. IT management is no longer simply about running a good IT department, it now includes keeping a canny eye on cost management, ROI and contract negotiation skills. Some of these skills you may already have in-house and the rest you can buy in from such cost management advisors like Silver Bullet Associates.  Instead of stripping assets you should first squeeze your IT suppliers.

According to various sources, the most effective strategies applied by businesses last year to help reduce their IT costs were 1/ encourage remote and mobile working, 2/ deploy more cost effective technology, 3/ negotiate lower IT costs with their incumbent IT suppliers, 4/ deploy open source applications, and 5/ standardise on one application platform. Many businesses were loathe to lose staff or to outsource as a quick fix. Silver Bullet Asociates helped many businesses negotiate cost savings and cost reductions with their IT suppliers last year and we are looking forward to doing the same this year. In fact, we’ve already made a fast start and have saved money for a handful of clients whose IT negotiations had drifted over from December.

The downturn has given organisations the opportunity to revisit their software licences and maintenance contracts to make cost savings. David Chan, City University London’s director for the Centre for Information Leadership, encouraged businesses to use their commercial leverage to negotiate. “Perhaps you are intending to extend a service contract in a year’s time. By offering a longer commitment the supplier may well drop the rates.” He also said that users should seek external advice from the likes of Gartner which helps to renegotiate multi-million pound contracts, and for deals with a ticket value of £2m or below users should use firms like Silver Bullet Associates. You can read the full Computer Weekly article at http://www.computerweekly.com/Articles/2009/08/01/237406/lower-your-software-licence-fees.htm

A leaked document setting out the government’s IT strategy for the next five years is “complacent” and lacks ambition, the Conservatives say. The paper details plans to save billions through greater use of social media and innovations such as an online “apps store” for civil servants. The document, entitled Government ICT Strategy: New World, New Challenges, sets out how the government plans to harness computer technology to save cash and improve public services up to 2015. The bulk of the planned savings – £1.6bn – will come from the development of a government “cloud infrastructure” – a way of pooling computer systems which is meant to cut costs and energy consumption. The government plans to launch a prototype of what it calls the “G cloud” early next year, with a standard model to be introduced by the end of 2010. The document also outlines plans to develop 10 to 12 strategic data centres, which it says will bring together “existing public data centres into highly secure and resilient facilities”, which it claims will save £300m a year and cut power consumption by 75%.

According to the Conservatives, the report fails in its aim of showing how the government can get to grips with the “systemic failures in public sector IT procurement over the past decade,” such as the “calamitous” NHS database. Let’s hope that whoever is in Government over the next 5 years spends our taxes more wisely than has been the case in the last 5 years.