Optimize & Re-Negotiate Contracts

Optimize & Re-Negotiate Contracts

100% job satisfaction in IT is rare – each day brings new headaches. At best you get the usual suspects: excessive demands from business that recall the old Queen song, ornery suppliers, understaffed teams, budget cuts, etc. At worst you have delayed deployments, outages, failed upgrades, and contentious internal politics.

So why, in a world of things that need mending, would you ever go after the ones that aren’t broken? Why would you antagonize a supplier that isn’t falling over? Why would you renegotiate a contract that’s come in under budget already? Let sleeping dogs lie.

But fixing your seemingly successful supplier relationships is precisely the key to solving your intractable headaches – provided you can get finance to reinvest the savings in the right place as opposed to just cutting your budget.

The root cause of IT problems is the same as the fundamental economic problem – scarcity.

You have only so much time, money, and people to solve your users’ infinite wants and needs. But in many cases, it’s hard to see the forest for the trees – that if you had more resources, your problems would turn into expenses. Your budget for any given project is not a fixed constraint – if you can transfer money into it from other sources. And the sources most likely to have the requisite fat are the unexamined ones.

We’ve seen suppliers that have cut costs each year by 5% – in markets that have gone down by 15%-20% per year. Their customers are happy, but the magic of uncompounded discounts means that after only a few years, their services are at twice market. And these same CIOs are wracking their brains with how to find the financing for the next major platform upgrade or the features the business needs. The answer is simple – fix that which you don’t think is broken.

However, it takes two to tango – and in this case the other party is not the vendor. Good market intelligence, knowledge of their sales incentives, and a reputational engine that ensures that their next customer knows how well they treated you is generally enough to get them in line – provided you line up the right advisor.

The other party to bring to the table is finance. Cutting a deal with the CFO to reinvest a chunk of the savings into other projects, new staff, or other IT uses is imperative. Unfortunately many budgets are unnecessarily compartmentalized – with funding dedicated to a specific contract or function rather than allocated across all of IT. CFOs need to understand that IT needs flexibility and an incentive to not just avoid failures, but also to control costs.

Once you’ve got the CIO agreeing to optimize deals that are not failing and the CFO to let IT keep the fruits of that optimization, your job is done. The rest is ours – from identifying the right targets out of your A/P list through negotiations, right-sizing, and the occasional reallocation of capacity to better qualified suppliers.

Any questions? Don't hesitate to ask us.

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