Global IT spend runs into the hundreds of billions of dollars every year and keeps rising. Gartner Inc. recently revised its Q2 2017 forecast of worldwide dollar-valued IT spend by an additional 1% to a 2.4% increase in global technology spend.1 Enterprise software procurement represents a rapidly increasing portion of this spend. In fact, Gartner also reported that the global enterprise software market is expected to grow by 7.6% in 2017 compared to a growth of 5.3% in 2016.2 All of these numbers speak to the importance of using best-in-class software procurement procedures in your company.
Source: Gartner, Special Report, Worldwide IT Spending Forecast, July 13, 2017
To optimize technology spend in constrained business environments, your procurement team must be aware of the dynamic nature of the IT and software industries. They must be able to negotiate a wide range of software types and understand the complex terms and conditions attached to each licensing agreement. Following these five procurement tips will go a long way to ensuring you have the right software, at the right time, at the right price.
1. Be Flexible & Prepared to Learn
Today’s enterprise software market is dynamic and complex. In order to procure the software that meets your needs, you need to remain flexible and open-minded:
- Give yourself time to consider all of your options and surround yourself with people who have an in-depth knowledge of enterprise software and the vendor landscape, both legacy and emerging.
- Ensure your procurement team not only understands the functionality and benefits of new software but also the implications of deployment timelines and the impact on your budget.
- Investigate the trends in SaaS and cloud software including the various deployment options and how they will affect your bottom line.
- Take into account the impact deployment timelines and speed of implementation will have on your budget and ROI.
- Consider new skills your staff will have to learn or additional resources that will be required.
- Be agile enough to adjust your software criteria to the constant changes you will encounter when entering new markets or changing your business model.
- Adjust your procurement plan with technology solutions that align with your short and long-term business goals.
- Ensure the new software will integrate into your existing systems.
Remain flexible and open-minded during your software procurement negotiations. Best-in-class implies a repeatable process, not just a one-off deal.
2. Determine Your Needs
Establish your software requirements to meet your short and long-term goals, and institute a strategic road map for your technology needs. Points to consider when drawing your map:
- Take the long view and establish your current capacity. Determine whether upgrading your current software is an option or if it is time to buy new.
- Consider your budget restrictions and take into account the CapEx vs OpEx implications to your bottom line.
- Define the features crucial to your IT needs and choose a vendor that can provide the software solution specific to your requirements.
- Investigate the various implementation options available, including perpetual, Software as a Service (SaaS) or cloud based SaaS solutions.
Once you have established your enterprise software needs, ensure you are ready for the implementation and your chosen vendor is able to deliver an optimal solution.
3. Negotiate Terms & Conditions
Negotiating enterprise software contracts is about more than price, there are other points to consider:
- Ensure the licence for the software you are purchasing comes with a full description including the edition/volume.
- Make sure that the software is accessible across all platforms. In a recent survey 83% of respondents insisted that software packages must be useable across multiple devices.3
- Going the RFP route? Remember that the lowest price doesn’t necessarily mean that the package will meet your specific IT requirements or your timeline and budgeting needs. Select a vendor that can be flexible and provide the right solution for you.
- Be aware that software procured on a subscription basis versus a perpetual licence could mean that your existing contract terms and conditions need to be rewritten and reviewed at regular intervals.
- Avoid unexpected price hikes in contract renewals by negotiating the renewal terms in advance.
- Insist on perpetual warranty coverage as opposed to limited coverage that imposes time and event restrictions on what is covered.
In addition, review the service-level agreements (SLAs) to make sure they include effective remedies to any unforeseen problems.
4. Set Deployment & Renewal Schedules
Upgrading older applications, renewing a licensing agreement or installing new software can be a scheduling challenge. Deadlines and fiscal implications must be considered.
- Set a deployment schedule with your vendor to implement the software you need when you need it, and reduce your first-year operating expenses at the same time. Be aware that your deployment schedule might not match the vendor need to complete the transaction within a certain period of time.
- Confirm price renewal protection and rebundling clauses for your subscription-based enterprise software.
- Investigate the options and benefits of decentralizing your software infrastructure with a third party.
Finally, remember to deploy any software updates or new installations across all your devices, simultaneously, to ensure real-time functionality for all users.
5. Choose Your Vendor Wisely
Choosing an enterprise software vendor is like choosing a business partner. They should work with you as a team to help you meet all of your current and future IT and software requirements.
- Make sure they have a thorough understanding of the IT industry and are innovative in their approach to designing software solutions to meet your precise needs.
- Confirm that your vendor is certified to implement the solutions you are considering and has the team to support it.
- Ensure they employ best business practices and provide support and training when you need them.
A good vendor will endeavor to understand your software requirements and deliver a financially viable, flexible and appropriate solution. Central Technology Services is the software industry’s leading financial services partner specializing in assisting Fortune 1000 companies and their vendors manage the financial, operational and budgetary issues associated with acquiring enterprise software and related technology assets. We partner with more than 40 top enterprise technology companies and have structured over a billion dollars in transactions over the last 20 years. We can help you get the technology you need today to grow your business for tomorrow.
Sources:
- Gartner, Special Report, Worldwide IT Spending Forecast, July 13, 2017.
http://www.gartner.com/technology/research/it-spending-forecast/
- Gartner Newsroom, Analysts Discuss Latest IT Spending Outlook Webinar, July 13, 2017.
http://www.gartner.com/newsroom/id/3759763
- Cleverbridge, Blog by Stephanie Duesing, Ecommerce Eye Candy, January 18, 2016.
https://www.cleverbridge.com/corporate/the-state-of-software-monetization/