IT Spend: How to Cut Costs, Not Impact

Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom, transportation and energy.

Enterprise IT leaders are feeling the uncertainty in the market. In years past, the mandate was "do more with less." Today, the demands are greater. For many companies, system upgrades and new investments aren't optional; they're required in order to keep the business relevant and/or compliant. Everyone in IT, from the CIO to sourcing, is being asked: how can we reduce spending without sacrificing our impact on business?

Before companies cut their budget and initiatives for 2012 (a tricky process that inevitably sacrifices impact), they should identify ways that they can reduce IT costs in the purchasing process. Here are ten things you can do to achieve just that:

  1. Arm yourself with pricing insight. If you don't know if you're paying fair market value, then you're paying too much.
  2. Don't assume the incumbent is the best choice. Explore other options! In the very least, you'll gain leverage.
  3. Beware of the bundle. It's a great way to overbuy functionality and services you don't actually need.
  4. Create a level playing field for top bidders. Once you shortlist vendors, put each of them through a rigorous benchmarking process.
  5. Don't rush the purchase. Any gains made in the vendor selection process can be easily lost if you rush the benchmarking phase.
  6. Refuse "usual" annual maintenance increases. If your maintenance fees increase every year, you're overspending.
  7. Scale back support. Do you really need premier support on that non-critical software solution?
  8. Buy with mid-2013 in mind. The purchases you need now should be pushing you towards your 12-18 month IT goals.
  9. Understand alternative licensing options. Vendors like Microsoft and VMware have new license options -- some of which can save you money.
  10. Beware of fixed-fee implementations. Fixed-fee implementation costs are rarely fixed. Ask your vendor to bid implementation costs on a time and materials basis to understand true cost-to-serve.

-- Jeff Muscarella, EVP of IT, NPI

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