my experiences in dealing with software vendor contracts, I've come to several conclusions. First, I can't emphasize enough the need for competitive bids. A well-prepared bid, although costly and time-consuming to prepare, will more than pay for itself in terms of cost avoidance or invoice reduction. Another key factor is having good T's and C's. Vendors had burned us on more than one occasion from not having adequate contract protections.
There are many other items to watch as well. Scrutinize those invoices; it's remarkable how many errors occur (and most favor the vendor). Develop a standard RFP process to streamline proposal preparation. Look closely at software usage -- if it's just one user, bill them for the costs. Also, check to see if the software you're licensed for can be more cost-effectively used on another platform.
We had a situation where our license fees went from six figures a year to under $300! The road to software cost reduction is neither smooth nor easy. You need to constantly sell the concept to Executive Management and trumpet your successes. And you'll get plenty of resistance from both employees who resist change and vendors faced with losing contracts.
To succeed, you must have a long-range plan for software and a firm resolve to cut costs. Innovate E-Commerce proved to me that outside consultants can provide tremendous value. Just be sure you get consultants, as I did, with significant experience and a solid track record.
So where did we go from here? I ensured our program pressed on, as we knew we'd only seen the "tip of the iceberg." Our follow-on targets were further cost reduction or avoidance of $5 million a year in costs. That target was met by stepping up our competitive bid activity using standard RFP processes, and increasingly displacing vendors whose software products were not cost effective.
We also did more in the planning area to ensure that our contracts didn't expire concurrently. And we strengthened our T's and C's significantly. Since initiating our Software Asset Management program, I've taken the opportunity to carry over my appetite for cost improvements with a move to another technology user in the public sector as the Director of Administration and Business Ventures for UNC-TV (North Carolina's public television network). I hope you can benefit by what I've shared pertaining to software asset management. And I wish you every success in your endeavors.
Pat LaBarbera is the former CFO of North Carolina.