How Expensive is the Air in Your IT Contract?

Negotiations and contracts with large IT providers can be intimidating and downright confusing. There are some major concerns that plague large enterprise customers after the deal is inked, namely, are we getting the right price? Was that special one-time discount truly competitive? While price point itself is important and may be the most obvious question, it really should be followed with, what am I paying for? Once you have a clear understanding of the cost implications of your purchase, there is one critical component that is often overlooked or even pushed to the side: Are you using everything that you are paying for?

The answer to this critical question is often “no.”

Are you subscribing to software that your employees aren’t utilizing? Are your employees using only a portion of the functionality within the software or services that you’re paying for? Essentially, do you know how much air you are paying for?

If you don’t know the answer to these questions, you aren’t alone. In fact, we’ve seen organizations who aren’t utilizing over 25% of the spend in their contract. For a large enterprise customer, this can mean millions of dollars spent on air.

The Provider’s Strategy

Conversations with an IT provider can easily go sideways; instead of actually addressing your concerns, the provider might introduce a new product or application and tell you that it is perfect for your organization, while neglecting to give you the transparency you need (i.e., mapping your needs to their solutions on a granular level). This is not uncommon in the world of enterprise IT.  A provider such as Microsoft, Oracle, SAP, Salesforce, ServiceNow or Workday will generally follow their own sales agendas, rather than present you with solutions that fit your organization. Often, they don’t even make the effort to fully understand what your needs are.

Did you purchase a product bundle (such as Microsoft 365 [formerly ECS] or ServiceNow’s IT Operations Management) because the provider positioned it as the best way to address your needs? Were you sold on the technology as it was presented, but found that after attempting to roll out the software that the functionality did not work as advertised? In these types of scenarios, the customer is left paying for a product rather than a solution. Often the customer is left using only a portion of the functionality or not even using the product at all.

Right-Sizing at Renewal

When coming to the table to renew your subscription, it is imperative that you have a clear and organized understanding of your usage on a granular level. It is in situations like these where completing a baseline assessment of your environment may be extremely valuable. Obtaining this information on your own is not as easy as it sounds; it will take a dedicated and detail-oriented process to determine the level of usage you are entitled to and subsequently compare that functionality to what your team is utilizing.

For example, Salesforce has several editions of Sales Cloud subscriptions, each with a different set of functionalities (and prices). If you are a Salesforce customer that is subscribing to Sales Cloud Unlimited edition (the most robust edition), are you utilizing all the premium features that are included (i.e., online training, advanced reporting, workflow and approval automation, etc.)? When you fully understand all the details, you can come to the table more confidently, armed with the knowledge you need to succeed in the negotiation and position your true needs effectively.

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Having a granular understanding of your needs enables you to more effectively drive transparency with regard to the solution set being offered. It is important to note however, that even when you have all the information, the knowledge itself is not enough. What matters most is how that knowledge is communicated and leveraged. Of course, this is only a piece of the puzzle but when used properly, this knowledge can strengthen your leverage and help you achieve a more competitive deal that aligns to your organization’s go-forward needs.