6 Ways to Protect Your IT Budget During the Pandemic (and Beyond)
COVID-19 has turned much of the retail world upside down, including IT spending. The full picture of the pandemic’s impact on IT costs is yet to be determined, but there are glimpses. While some retailers are hitting the pause button on some IT projects, other purchases are being fast-tracked — particularly those tied to digital ordering, contactless payment and fulfillment.
Overall, IT sourcing is under more pressure. The stakes are high as requirements rapidly change, purse strings tighten and purchasing decisions must be executed against tighter deadlines. Confidence is in high demand as retailers navigate unknown territory today while trying to prepare the business for post-pandemic fluctuations in demand.
Here are six things retailers can do to identify cost-optimization opportunities across their IT ecosystem now while also protecting the IT budget over the long term.
1. Perform IT price benchmark analysis on all material IT purchases and renewals
There is no “Kelley Blue Book” for IT. A vendor can charge two companies that buy the exact same thing two very different prices and that’s even truer if the vendor senses the customer has a tight deadline.
The cost of overspending is compounded over the term of the agreement, and it waterfalls into future renewals. Performing IT price benchmark analysis will help you validate that you’re getting a good deal.
2. Negotiate flexibility into licensing, discounts and contract terms
It’s best practice to build flexibility into vendor agreements in order to prepare your organization for changing user counts and requirements in the future. That’s even more important today.
Examples include well-negotiated tiered pricing and upgrade structures that allow for changes in demand, renewal protections that remove or cap price increases over a period of time, and price holds.
3. Reexamine current licensing and subscription choices across your software portfolio
What met your requirements two years ago (or even three months ago) may not be the best choice for the next 12 months. Reexamine your options and make adjustments.
4. Get clarity on recourse, especially for outsourcing and professional services agreements
If you haven’t already, review contract terms to see if any recourse is included for force majeure events. Early management of significant labor pools or other professional services in anticipation of a variety of scenarios is wise.
5. Take advantage of lulls to inspect secondary and tertiary purchasing
Eventually IT budgets are going to reflect the scale of financial disruption the pandemic has caused. Projects not directly related to revenue protection will be put on hold.
As a result, there may actually be some breathing room for IT sourcing teams. Take this time to examine other less-critical areas of IT spend for cost-optimization opportunities.
6. Don’t overlook compliance and audit clauses
Prior to the pandemic, some IT vendors were aggressively targeting retailers with software license compliance audits. While the majority of vendors have been empathetic to customers during COVID-19, audits are still a significant revenue stream and retailers will be stuck with the audit clauses they negotiated during this time.
Retailers should make sure their software compliance house is in order as well as ensure contract language is clear about when vendors can perform an audit, who is responsible for costs and the process for disputing vendor-side audit findings.
The IT sourcing decisions retailers make today have the potential to impact cost, revenue and profit once we come out of the other side of this crisis. The time is now to inspect the IT portfolio for savings opportunities that protect your current- and future-state budget.
Jon Winsett is CEO of NPI, an IT sourcing consulting company that helps enterprises identify and eliminate overspending on IT purchases. He has more than 25 years of experience leading IT companies in the US and abroad. Prior to NPI, Jon was VP of North American sales and UK Country Manager at Seagull Software, a publicly-traded enterprise software company. He holds a BS in Industrial Management from Georgia Institute of Technology.