Our clients in the tourism industry are in a very challenging financial situation, practically overnight. For hotels, revenue per available room fell 32.5% during the week of March 8-14, and, last week, the largest hotel chains (e.g., Hyatt and Marriott) furloughed tens of thousands of employees and the AHLA estimates that nearly 44% of all hotel employees in every state are projected to lose their jobs in the coming months. This means massive budget cuts, which will undoubtedly
include IT and force them to pare down to bare bones "keeping the lights on" provisions.
The Silver Lining
In good times, nearly three-quarters (76%) of large companies overspend on unnecessary software licensing to avoid audits or because they are unable to accurately codify and centralize their software contracts. They also struggle to measure software license consumption, which can be extremely complex depending on how the software publisher/vendor licenses their product. According to Gartner, if a company does not have a robust software asset management (SAM) program, they can save 30% on average by implementing one. However, many companies are only able to provide minimal software asset management resources and the responsibility tends to be the part time job of different people across departments: is this you? If so, there is a good chance your company can save 30% on software licenses right now....and you can be the one that comes through in these tough times. Even if you don't have budget for professional consulting, there are ways to get external help for free (more on this later).
What are the top 4 methods of saving 30% with Software Asset Management?
Renegotiating Due to the Economy
If you are in the tourism industry, there is another opportunity to save beyond the 30% you would reap with good SAM practices. You can go to your software publishers and tell them that you need to renegotiate your software contract(s) given the severe economic strain Covid-19 has placed on your industry. Even if a particular software contract isn't up for renewal, you can make this request to rightsize contract values based on current or flex users counts during the ebb and flow of the the employee base. Most manufacturer partnerships would jump at the opportunity to support their customers during these unprecedented times.
Software Asset Contract Negotiation: It's easy, right?
IT departments directed to renegotiate existing software contracts will require deep publisher/domain knowledge (see graphic below), enough technical and architecture knowledge to understand the variety of ways licenses can be applied and software contract negotiation experience. Possessing all of these traits is a rare combination because the delivery models change so rapidly.
When we've done talent searches for SAM experts for our clients, we've found very few who can navigate the above challenges. Software negotiation not only requires an intimate knowledge of how the software can be used and creative ways to reconfigure them, but must also possess a win for both parties which requires experience in negotiation from both the customer and supplier. Without possessing both in a negotiation, the vendor risks having an unrealized product leading to customer satisfaction concerns and the customer will result in over-provisioning of licenses never achieving the proper ROI. "Shelfware" is dangerous to both parties of the transaction.
Getting Started and what if I don't have time or budget?
The first thing you must do is engage external stakeholders on the vendor side, find out who the key account executive is and identify members of your account team and their roles. Then look under every rock for fully executed contracts. In many cases, software vendors won't have the systems to make this easy and produce every contract they have with your company. Manufacturer acquisitions with consolidation of disparate systems, changing of distribution relationships, and multiple means of supplying around the world all make it difficult for the vendor to maintain assets for a particular company.
Once you have a confirmed baseline by both parties you are able to begin negotiation. There's the soft approach (see the example above about the economy) and the difficult approach (threatening to take business elsewhere or away completely). Below are examples of how we did this for our clients using both approaches.
At Mystic River Consulting we have the benefit of team members from both the customer and the supplier side of managing and negotiating a large complex software asset portfolio. There are a number of approaches that continue to evolve as the supplier consumption models change, FASB rules change and the way clients leverage technology. Without the benefit of volume of different negotiations per entitlement, it often makes sense to leverage an outside firm to assist with structuring these transactions. Mystic River Consulting is helping our customers adapt quickly to the present state consumption models and how that reflects in contracts today so clients can adjust there Technology expense budget as they adjust their personnel during Covid-19.
Trying to implement a Software Asset Management strategy but don't know where to start?