With organizations facing economic headwinds, CFOs are likely eyeing costly multiyear contracts like those for software and cloud. Use these tactics to retain the benefits while reducing the burden of such contracts.
“IT sourcing, procurement and vendor management (SPVM) leaders must take immediate action to alleviate financial pressure for a six- to 24-month period,” says Gartner Senior Director Analyst Stephen White. “Leaders need to protect their organizations from financial disruption and build resilience for what may yet be to come.”
If your organization is under pressure to cut costs, consider these three actions to contribute savings or restructure payments in your software and cloud agreements.
To initiate negotiations, set expectations by writing to all of your major vendors indicating that you are taking action to address financial constraints as a result of the economic climate, but that you value your relationship with them.
As you notify vendors, prioritize the potential concessions in relation to contract terms. Modifications could be:
Refer to your vendors’ finances and public statements when entering these negotiations, and be ready to quote their statements on the crisis in order to convince them to negotiate.
To achieve long-term, sustainable IT cost optimization, try to reduce upcoming payments (obtaining refunds or credits related to payments already transacted will be extremely difficult).
SPVM leaders must remain realistic when negotiating with vendors, who will not concede to demands unless they identify a context that benefits themselves. Be prepared to articulate reasons why vendors should concede to demands, and persuade them that cooperation is in their best interest.
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