Talking tough to IT suppliers

UK business spends £25 billion with its IT suppliers every year. And according to Alex Sandercock, director at IT contract negotiation specialist Turnstone, as much of 30% of that might be unnecessary expenditure.

And this overspend could be avoided, she says, if organisations managed their relationships with technology providers in a more sophisticated manner.

As staggering as that statistic may sound, it was not dissonant with the views of attendees at the Effective IT 2008 Summit. In a straw poll of delegates, 80% said they believed they could be getting greater value from their IT suppliers.

The current economic climate is causing greater pressure to be exerted upon IT departments to cut costs. By squeezing greater value from existing contracts, argues Sandercock, IT organisations can curb spending with no commensurate reduction in business value.

Techniques for optimising supplier relationships vary depending on the type of technology being sourced. For hardware and telecommunications devices, Sandercock advocates using a reverse auction when provisioning equipment.

Software tools are available that allow organisations to line up various vendors and make them simultaneously bid for business. Sandercock provides the example of one organisation that cut hundreds of thousands of pounds from quotes for a company-wide laptop purchase in three quarters of an hour in this fashion.

The highly customised nature of software implementations mean that the opportunities for overspend are numerous.

It is important that organisations consider how their requirements might change over time, and ensure that their contracts allow for renegotiation at a later date. Otherwise, she said, they can end up paying for software licences and support contracts they do not need for many years. “If you can future-proof your contracts, your pain-points disappear dramatically,” she explains.

But if an organisation does find itself in a situation where it is being held to ransom by contract terms agreed years ago, says Sandercock, it is important that it does not simply accept its fate.

“It is not in any supplier’s interest to jeopardise their relationship with a customer by annoying them,” she says. “Usually a frank and open discussion with the account manager at the supplier will work wonders.”

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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