5 Key Strategies to Drive Reductions in OPEX
Over 80% of all maintenance renewals are based on the calendar year. The window for companies to avoid OPEX increases and drive down TCO is in full swing and quickly closing. Merely processing those invoices is a lost opportunity to reduce your run rate costs. Enact these 5 key strategies to contribute 5%, 10%, and even 100% reductions in your costs to renew.
1. Validate your usage
Too often, the exercise employed to renew a maintenance agreement starts and stops with validating that the number of licenses purchased is accurately reflected on the invoice to renew maintenance. Go a step further and deploy readily available tools to see if the software is in fact deployed. For those deployed licenses, leverage the same or complimentary tools to see when the software was last used. There is no value paying for maintenance on a piece of “shelf-ware” (bought but never deployed) or unused licenses (deployed but not used).
2. Consolidate / Co-term your maintenance renewals
In many companies, either through mergers, acquisitions or decentralized purchasing, licenses are purchased under multiple agreements and terms, purchased at different points within the year, and/or purchased with varying term commitments to maintenance. Consolidating all purchasing under one agreement, leveraging the best terms across these agreements, and co-terming your renewals will present a compelling event for your supplier if packaged appropriately.
3. Build your demand forecast
There’s no better way to get the attention of your supplier than to share incremental revenue opportunities. Forecasting your demand for future purchases via organic growth of your base license needs or “net-new” products creates a lever companies can use to either avoid a COLA increase, reduce their maintenance percentage, or entirely waive their annual maintenance fees. The amount of leverage here is proportional to the level of net new license demand and the timing of the commitment to spend.
4. Consider reducing your support level
Reassess the level of support you’re receiving from your software. When software is first purchased and is new to a company, most companies will subscribe to a premium “Gold” or “24/7” maintenance plan to ensure “always on” support. As times goes by, that level of support may no longer be required. Ask your users and their leaders if they fully take advantage of the current support plan. Assess the value received from “Gold” support against the premium you pay. If a lower level of support will suffice, opt for the lower-cost package and the savings will contribute to reducing your OPEX with limited impact on your users or operations.
5. Add a year to your maintenance commitment
Still not at the savings you want to achieve having applied the strategies above? Need something to “seal the deal” or get that last concession? Perhaps the biggest carrot you can dangle (short of accelerating a major software purchase) is adding another year or two of added certainty to the revenue stream of your provider. This is a very powerful card to play in renegotiating your maintenance renewal but should first be validated with your architecture and standards group to ensure the software is a supported technology and not on track to be sunset.
Achieving and even exceeding your 2018 OPEX reduction targets starts now with your maintenance renewals. Prioritize your efforts to your largest providers, assess the strategy best suited to that provider, and take the steps now to harvest these savings opportunities.