How to reduce software and cloud costs?

Businesses experience economic challenges. Leaders in IT sourcing, procurement, and vendor management (SPVM) must reduce financial stress for six to 24 months to safeguard their businesses from financial disruption and create resilience for what may yet be.

The two major challenges organizations using the cloud must overcome are undoubtedly accurate demand forecasting and ensuring that what is purchased is used.

Cost predictability is the toughest hurdle with the cloud. The key questions that CIOs are asked when seeking to build a financial case for moving to the cloud are how much it will cost us yearly, over two years, and other crucial issues. Does a scalable solution indicate that our prices would fluctuate monthly and year to year?

Buying more capacity than a project or business needs greatly contributes to overspending. Forecasting is useful in this circumstance even though it is not an exact science because one of the advantages of the cloud is its ability to add capacity quickly. There are, however, more straightforward approaches to reducing cloud and software costs. Consider utilizing these three steps to achieve savings or restructure payments in your software and cloud agreements if your organization is under pressure to cut costs.

Restructure contracts

Set expectations by writing to all of your major vendors and explaining that you are taking steps to address financial difficulties brought on by the current economic situation but that you appreciate your relationship with them. This will help to start the conversation.

Prioritize any potential compromises concerning the contract conditions when you inform the vendors. Modifications might include:

Change from annual payments to installments, such as quarterly or six-monthly payments.

Change the terms of your regular payments.

Impose price restrictions or caps.

Negotiate for temporary contract extensions.

When starting these conversations, refer to your vendors' finances and public statements, and be prepared to quote their comments on the crisis to persuade them to negotiate.

Shelfware

Try to lower upcoming payments to accomplish long-term, sustainable IT cost optimization since obtaining refunds or credits related to payments already transacted will be extremely difficult.

There are many cost-saving options on the cloud side: You can review SaaS contracts for possible downward flexibility, move to flexible pricing metrics, and ask for free or usage-based licenses for peaks. Leveraging cloud FinOps to eliminate toxic infrastructure and platform services consumption is another option, along with migrating to a product version with fewer features aligned to usage.

Software-related cost-saving options include parking support and maintenance, stopping support and maintenance for shelfware, terminating support and maintenance, moving to third-party support, and demanding to postpone vendor audits.

Negotiation leverage

When negotiating with vendors, SPVM officials must maintain realism. Vendors will only give in to demands once they find a situation in which they could benefit. Be prepared to explain compliance benefits and persuade vendors that collaboration is in everyone's best interests.

Negotiation is an art. You should avoid antagonizing your vendor and explain vendor interests beyond immediate revenue. Researching to evaluate competitors, alternatives, and options could also increase your negotiation leverage.