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As international M&A activity continues over the next few years, we will see an increasing number of major acquisitions such as HSBC Holding's acquisition of Household International. There are often many opportunities to save on IT costs during such activities. IT departments of merged companies can often do a better job of managing the integration of potentially disparate licensing schemes.
Instead of outright cancelling a license with one vendor in order to standardize on another, IT managers should discuss the integration with the dominant vendor. Often vendors will honor pieces of an agreement with another vendor because they may gain additional users.
IT managers should also closely study the question of using multiple vendors versus standardizing on one. Rather than spending time and money trying to integrate applications from multiple vendors, it's often more efficient to consolidate under one. In addition to saving integration costs, which usually are significant, using one vendor can deliver other benefits.
Many software vendors offer attractively priced bundles for customers that standardize on their products. Instead of buying three applications, enterprises may find that buying a bundle that includes those three will cost less and offer additional functionality as compared to buying the three separate applications.
Cost analysis
Once IT managers understand all the costs involved, including those involved with internal workers, considering outsourcing some IT functions is often another way to streamline expenses. You'll recall, years ago many enterprises found that it was more cost effective to outsource functions, like human resources and payroll, as compared to managing those teams and functions internally.
Today companies are also finding other non-core functions can be handled outside of the company to gain operating efficiencies. As a result, many enterprises have found that outsourcing major software-based functions, such as customer relationship management functions, procurement or financial programs can significantly reduce their overall operating costs.
To maximize your opportunity to reduce IT costs, outsourcing should always be evaluated as part of the standard procurement process. The cost savings to be gained in this area on both personnel and software licenses will pleasantly surprise most organizations.
Other fees
Licensing fees aren't the only cost to consider when comparing software products and companies. One of the biggest ongoing costs is a maintenance program, which often varies dramatically depending on the vendor.
Maintenance contracts can be invaluable if they allow the customer to call the vendor for help with problems or bugs. Without a support contract, customers are stuck spending time solving the problem themselves or hiring a potentially expensive outside consultant to do it.
Some maintenance agreements will include software upgrades or updates, another invaluable component. The costs for updates and upgrades in addition to the base support fees that cover bug fixes, etc. These programs are often worth the expenditure but the fees and what's included vary by vendor so it's important to closely scrutinize the agreement.
While historically it's been difficult to understand the pricing schemes of various software vendors, a number of vendors have made concerted efforts to simplify pricing structures. Fundamentally, much of the onus of studying existing software programs and potential cost-cutting changes is on the enterprise.
Software vendors are increasingly working to make sure their customers understand exactly what uses are acceptable. For example, last year Oracle released the same pricing materials to the public that its sales people draw on.
Equipped with the facts, IT managers can do their own research on the potential fees associated with whichever software package they choose. That makes it easier for customers to understand their licensing agreements and manage these assets more effectively.
Oracle Middle East
