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$1.2 Trillion spent on Cloud, scoring vendors & too many metrics!

Written by David Foxen On the 0 Comments

Snow Software is a Premier sponsor at Gartner IT Financial, Procurement & Asset Management summit for 2016. Tuesday’s focus at the Gartner IT Financial, Procurement and Asset Management Summit was an interesting blend of vendor management importance, third party support tactics and real-life challenges organizations are facing with Cloud and SaaS technologies.

Here are the takeaways from Day Two.

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SCORING VENDORS

First, Gartner analyst Joanne Spencer introduced the concept of vendor scorecards.

Scorecards should be the foundation for any successful vendor management function and subsequent vendor relationships. There needs to be a tactical, strategic drive for the scorecards, that reviews the performance of your key software and Cloud vendors to see if they are providing the best service for your organization.

You should use realistic metrics, such as services and support delivered in the past month, the number of support engagements and wait times for technical issues to be resolved. The scorecard should be captured and compared on a monthly basis to see how the relationship and vendor is improving or declining.

Communication with key stakeholders to get their thoughts and feedback on existing relationships is your first step. Understand what the relationship has been like in the past, and flag any positives and negatives from previous experiences. Spencer suggests that this is the best way for you to define your vendor scorecard metrics to improve the relationship.

You then need to create a scorecard with performance related metrics for your vendors that you have agreed with your key stakeholders. They should be realistic and a motivation for both your organization and the vendor to take the relationship to the next level. Joanne Spencer mentioned that you need to think about the vendor’s objectives – are they looking at a financial target, selling you support days or wanting you to migrate to new technologies.

Understanding their motives will help you get the best deal and services as you can use the information to your advantage. Regular reviews with vendors is the next step. This should be a regular meeting with a 360-degree spin on proceedings – ask the vendor for feedback on your organization!

Whilst this may be uncomfortable for some, Spencer believes that this will help improve the relationship with your vendor and build strong levels of trust. You should use these meetings to plan for future changes and track how both parties will improve negative aspects of the relationship moving forward.

Spencer emphasized that the reviews should not be complicated in nature, but simple and effective with the overall goal to drive the best behavior from your vendors as possible. Spencer reiterated that your scorecard needs to be the solid foundation for managing your software vendors.

Scorecards need to be practical, timely, relevant and actionable, making sure that it actually means something to your organization and your key vendors, otherwise it is just another ITAM document on a piece of paper that no-one will read.

In conclusion, Joanne Spencer’s recommendations for vendor scorecards were as follows:

  • Align business objectives to the vendor management scorecard
  • Create priority measures that are meaningful and actionable
  • Understand how data adds value to the measures you have chosen to improve your vendor relationships
  • Weight scorecard to enable meaningful performance metrics that are achievable

THIRD PARTY SUPPORT

An energy group shared their experiences in moving from vendor support towards a cheaper, third party resource. The organization faced a massive challenge; to cut software costs as the organization was going through challenging times from a cash flow perspective.

They identified that they were paying over $1.2 million per year on support with mega-vendor Oracle.

They were unhappy with the service provided by Oracle and the amount of money they spent with them. They tried to negotiate their Oracle contract by 25-30 percent to help cut costs but found Oracle would not negotiate.

An immediate cost reduction was required, so they decided to look around to find a cheaper alternative. The organization waited until the end of their existing Oracle contract and decided to move support to another vendor.

A third party was found and they realized savings of 60 percent on their Oracle software maintenance costs in the first year, which freed valuable funds to help the business stay in the black.

The Software Asset Manager admitted that they had a few concerns that they needed to be addressed before they moved to a third party, but once the organization was satisfied with the responses to the below questions they took the plunge and moved away from Oracle’s support and maintenance:

  1. Do you have the technical capabilities to support the Oracle applications we have installed within our estate?
  2. Do you have the licensing knowledge to help us optimize our Oracle contracts?
  3. Do you have a track record of supporting other organizations with their Oracle estates?

 

Switching to a third party for support isn’t uncommon as organizations get frustrated with the costs and seeming lack of support from the vendor.

However, after listening to the presentation it is clear that you need to find the right third party that has the knowledge, understanding and technical resource to support your organization, otherwise you could end up out of pocket, with a lack of support and in a worse place than you were with the vendors support services.

Remember, you can find third party support but you cannot outsource risks.

SaaS

The Software as a Service focus in Day Two was provided by a large, global postal service who explained the challenges they are facing with SaaS and Cloud technologies. They have a ‘cloud first’ strategy, so want to take full advantage of the Cloud offerings provided by vendors. However, they quickly identified a number of challenges.

Firstly, Cloud contracts are tougher to negotiate with smaller margins for cost savings. We mentioned in yesterday’s blog that Cloud services are far less customizable, and this organization quickly found that out when trying to negotiate certain services and Cloud software. One comment was that “Cloud services, licenses, and agreements should be more flexible and customizable, however, we quickly found out that this is not the case.”

What they did do, however, was identify that the team responsible for the management of Cloud services and software was, in fact, the License Management team. They commented that SaaS and Cloud has been a hard transition, especially because it does not want automatic upgrades.

Due to the fact that a number of systems and services rely on older versions of software, it wanted to disable the automatic updates that come with SaaS – but found this challenging. Cloud and SaaS vendors ended up providing it with a bill for running legacy software, something that did not seem fair. In a later presentation, Victoria Barber identified that it is not unique in its struggles.

Gartner suggested that $1.2trillion will be spent on Cloud services over the next five years, with a further $61billion spent on SaaS. Huge amounts of money, but Barber predicts a lot of that will be wasted. Continuous monitoring of Cloud services and SaaS is required on a daily basis as the environment is constantly changing.

Gartner has witnessed a lot of financial damage being done on a daily/weekly/monthly basis by wasted Cloud services and ongoing SaaS costs, with organizations branding the management of such services on a regular basis as unimportant ‘admin’ work. That ‘unimportant admin work’ is actually an important new challenge for the Software Asset Management industry as, quite clearly, there is a lot of money in Cloud and SaaS.

Mismanagement or a lack of management and optimization will result in your organization wasting thousands in services that you are not using – no organization can afford to waste money in the current climate.

ARE YOU REPORTING TOO MANY ITAM METRICS?

Victoria Barber, Research Analyst at Gartner suggests that C-Level Executives are actually only interested in seeing ITAM reports with six to eight metrics. They want ITAM information that relates to the organization's revenue, market share, business risks and customer impacts. The six to eight metrics should impact on the above points.

However, Victoria stated that they are seeing organizations provide C-Level staff with over 50 ITAM metrics – far too many and a lot of data noise! C-Levels are not interested in entitlement volumes, usage data, undocumented changes or even policy compliance, according to Barber. Any risks related to usage, policies, changes or entitlement volumes should be added to the risk register and dealt with by the appropriate stakeholders.

Senior management also needs to be ‘sold’ the ITAM story, so be clear and concise on what the metrics are telling them. Definitions of phrases like ‘servers’, ‘assets’ and a basic explanation of what ITAM numbers actually mean is required for them to understand the full story. Also, come to the table with solutions to any problems and highlight the value ITAM is having on the business.

So, think about the ITAM metrics you currently provide senior management.

They should:

  1. Link to business objectives
  2. Select the correct metrics
  3. Understand how metrics are calculated
  4. Weight the metrics by importance
  5. Schedule regular reviews with stakeholders to ensure ITAM metrics are still relevant

Finally, Victoria Barber commented on how the ITAM industry needs to remove itself from the financial bubble, look forward not backward and realize the benefits and impact ITAM has on the whole of the organization. It was a fantastic few days, with lots of lessons learned!

Thank you to everyone that took the time to visit the Snow booth to either see product demos or have a chat with our experts!  Next stop Texas!   We presented our new e-Books at the Gartner event which proved to be very popular.

You can download the Oracle and Microsoft savings e-Books today!