2018 is set to be another year of record-breaking IT spend. Gartner estimates suggest that global spend will top $3.7 trillion for the first time ever this year. But despite there being more money available to spend on IT, the CIO is under increasingly pressure to demonstrate value for money.
Importantly, the average IT budget increase is just 4.3%, so the CIO will still need to extract maximum returns. Otherwise the strategic IT projects that drive digital transformation may still be under-funded, threatening the long-term outcomes of these projects.
The issue of dead money
Perhaps the biggest threat to future IT projects is the issue of legacy IT. According to Gartner, 80% of all IT spend is “dead money” – keeping the lights on, rather than driving strategic IT projects. In this scenario, just 20% of IT budget can be invested in the new developments that will keep the business moving forwards.There are plenty of factors involved in keeping the lights on, but IBM® support contracts are a significant contributing factor for their clients. The issue is even more pronounced when dealing with ancillary applications – those that are not truly line-of-business, but which must be maintained for operational reasons.For IBM®, support contracts represent a significant revenue stream, and they will often over-specify your requirements to maximise income. There are two key areas where you could be paying more than is required.
1. Too many licenses
When preparing maintenance contract quotes, IBM® will always estimate according to total license purchases made in the past. For line-of-business applications, there’s a very good chance that all of those licenses are in use – but the same is not necessarily of older applications.Accurate software license management is critical to obtaining the most competitive quotes – and ensuring you don’t overpay for support or maintenance you don’t use. Always ensure that you have a completely accurate count of how many licenses are in use so that you can approach IBM® (or an IBM® third party support provider) for a more accurate quote that avoids overspend.
2. Support over-provisioning
IBM® support agreements are frequently inflexible, aimed at enterprise-class coverage. Clearly this level of coverage is highly desirable for line-of-business operations where outages can have a significant impact. But do you really need 4 hour on-site support for a legacy/archive application?By all means try and negotiate a better deal with IBM® – but their inflexible contract terms are unlikely to accommodate the specific needs of your business. If anything, Big Blue strenuously avoid custom agreements because the increased overheads eat into their own profit margins.
Time to think outside the traditional IBM® support box
IBM® support is clearly geared against your business – particularly if you have no intention of carrying out an unwanted upgrade to the latest version of your software. At every renewal negotiation you will be encouraged to purchase support coverage you don’t need, for licenses you don’t use.An IBM® third party support provider will even help to audit the application licenses you own, and how many are in use. Software license management remains a significant administrative overhead for your business, so outsourcing responsibility – even if that’s nothing more than the discovery process – allows your IT team to focus on other tasks.The third party provider can then tailor the support coverage your business needs to ensure applications are properly maintained and protected. Most importantly, custom IBM® support agreements significantly reduce the risk of overspend, freeing up cash for investment in other strategic projects.
To learn more about how your business can stop overpaying for IBM® support without compromising the quality of coverage received, please get in touch.