How Will Your Software Contracts Be Affected By COVID-19? – Necando

How Will Your Software Contracts Be Affected By COVID-19?

Since March 2020, our work habits have been reshaped possibly permanently. The software industry has a new paradigm to address and our opinion is that we will have a new scrutiny around renewals and audits in 2021.

In these uncertain times, the Software key players have been reluctant to address licensing counts and support fees in 2020. We expect this new norm to inspire an adjustment in their behavior with more pressure to capitalize on uncaptured SW revenue. At Necando Solutions, we would be glad to help you contain this threat and here are some hints on how this can be done.

Areas to Reduce Software Costs during a Crisis

1. Maintenance Contracts
At a time when it is necessary to be wise with our spending, examining your maintenance contracts is a great place to start. If you are running old versions of the software in question, your maintenance is nothing but an expensive support policy. Remember, software publishers make 80% margins on Support/Maintenance, so be sure it is something you need. We have seen more than one customer paying hundreds of thousands of dollars to run a version that is five years old, with no plans to upgrade, and having placed only two or three support calls on the product in a year, as opposed to once per quarter.

2. Subscription Contracts
The devil is in the details, so read your contract over to see how and when you can reduce your license counts. If the timing isn’t right for your contract to be rearranged, brainstorm ways to get your vendor to negotiate with you. It is likely that they will only become more unwilling to reduce counts as the crisis nears the end.

3. Pre-Committed Cloud Spends
Heading to the Cloud? Since being able to work remotely is more important than ever before, it may be tempting to rush any Cloud deployment your company may be planning. However, rushing to the Cloud is how many of our clients wind up with wasted spending, which is the last thing your company needs right now. Since the transition to the Cloud has often resulted in unforeseen spikes in cost, see if you can put off any scheduled Cloud deployment to prevent you from paying for any unforeseen Cloud costs during this time of crisis. Tell the vendor that you would like to move your deployment to next year or the year after, to free up your business to focus on more short-term cash flow. If your company is already situated in the Cloud, make sure you are only paying for what you need, if you discover anything you are not using, shut it off, so that you can stop paying for it.

4. Consider Renewing and/or Extending Your Contracts Now
Contract negotiations are expected to get tougher following this crisis, as software vendors struggle to recover lost sales. Therefore, it’s important to get ahead of this, open-up a negotiation of new terms and conditions with your software vendors as soon as possible to see if they are not willing to renew, or at least extend your contract, given the tumultuous nature of the situation. In order to conduct a successful contract negotiation, you will need to have accurate inventory data and the ability to determine the future needs of your company (as best you can, given the circumstances). This is achieved through following an effective software asset management process.

5. Look at Maintenance Costs Compared to Rebuy Scenarios
Sometimes it is better to rebuy a whole new license compared to paying for upkeep – especially when it comes to old support contracts that have annual increases. After several years, simply rebuying the license can give you greater value.

6. Look for Spots that IT Can Re-Architect to Save License Costs
The internet is currently speckled with articles for how to keep yourself busy at home and organizing is one of them. The same thing can be applied to your IT Infrastructure. Clearing out all the clutter and reorganizing your space to be more cost-effective right after your return to the office is a great way to realize potential savings. See if you cannot create a dev cluster, or group older versions on the same hosts/clusters, for example.

7. Review Contracts and All Clauses that Speak to Licensing or Costs
While you are self-isolating or social distancing, you can review your software contracts. Perhaps you can save money on Disaster Recovery, or on a dev/test product that you’re paying for full production licenses for. There may easily be alternative licensing types that can save you money that you never even thought of before or perhaps you can negotiate a special use clause for this situation.

8. Unneeded Licenses Under Support
If you have licenses that are supported by your company that aren’t needed or used, you can negotiate a one-time trade in. This can get you things you can use or will need in the future.

9. Review Your IT Environment for Duplicate Functionality
Look for areas where you have two products serving the same function such as security software, consider using the Security licenses from MS instead of Symantec/McAfee, for example. Now is a good time to start consolidating vendors to streamline your licensing structure.

10. Review Usage / Metering / Functionality
Now is the time to reclaim licenses and put them back in stock for future needs. See if you can negotiate out unused subscriptions or licenses from maintenance contracts or consider moving employees from Advanced to Standard suites to decrease costs. It’s more important than ever that you pay for only what you need.

BONUS – Annual Price Increase in Support
If you have an annual price increase, try your best to negotiate it out of your contract. If you signed a multi-year deal with increasing year over year prices, negotiate for the current year’s price, given the situation.

Software Asset Management to Save Your Business Money

During this time of crisis and the time of recovery that will be necessary afterwards, software asset management for your business might seem like an expensive luxury, but in fact, it has the potential of granting your company massive Return on Investment. Now is not the time to have an under-licensed or over-licensed software environment, which with any way you tip it, you will risk losing money either through paying heavy auditing fines or through paying for too many licenses. By successfully implementing software asset management you gain the following:

1. Control Over Your Software
Your spending is no longer dictated by what the software publishers tell you, whose primary motivation is for you to spend more and more money with them. Instead your spending is dictated by your company’s needs and growth plans. This means no more wastage as companies without a proper software asset management process implemented are expected to have roughly 30% of their software licensing environment be either wasted or underutilized.

2. Reduced Security Risk
Could you imagine a security breach right in the middle of this chaos? That would be quite the when-it-rains-it-pours situation. Software Asset Management can reduce the risk of your company facing exposure to a software breach, since hackers will often use old, unaccounted for software as a way to wriggle into your environment. Software asset management can be a valuable asset for your IT security by providing visibility into your licensing and usage, exposing any malicious activity.

3. Accuracy and Peace of Mind
These troubled times can lead to a lot of uncertainty and software asset management can at least take your software off of your mind. If you know what is in your software environment, and you know that it is doing its job in the most effective way possible, then you will be ready and capable should you be faced with an audit.

To connect and discuss with our Subject Matter Experts regarding Software Asset Management, contact us for a one-on-one discussion or follow our company page on Linkedin .

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