Software and IT services renewals present a minefield of risk, making expert support crucial for avoiding massive overspend and unexpected penalties.
So says Leon Steyn, CEO of boutique IT sourcing and procurement firm Dante Deo, which recently launched its IT Renewals service manned by an expert team of legal, project management, IT asset management and procurement specialists.
Steyn says software and IT services procurement and renewals are highly complex processes, requiring diligent planning, demand forecasting, negotiation and legal analysis.
“One of the main challenges most organisations face is a lack of time and resources to properly evaluate procurement and renewals,” Steyn says.
“We find there are typically three areas where organisations fall short in managing licence renewals – skills, legal knowledge and processes – which is why we commoditised IT Renewals as a service,” he says.
Skills lacking
Steyn says even though organisations may attempt to properly evaluate licence renewals, they often lack an understanding of the licensing model and how it applies within the business.
He says: “We see licensing changes annually and there is a knowledge gap in understanding the impact of changes to the terms and metrics in the agreement. For example, vendors change the definition of a user. Twenty years ago, it was a person. Now it’s a person, process or anything else that pulls data. Therefore, it is important to understand how agreements are structured as well as the products and services and how the software is being used.”
Another area where skills are lacking is in knowing what the market-related pricing is for a product or service, he says. “We have worked with public sector organisations where not one member of the team knew what a good price was for a particular software module. In another case, they were being charged on average 400% more than the average corporate rate for the same service,” Steyn says.
Dante Deo works with the business to understand what they have deployed, how they use it, on what and whether they are being fairly billed, and then ensure this is aligned to the licence renewal. The company’s software audit defence division also helps companies negotiate with vendors in the event they have made costly mistakes.
Legal knowledge
“The second thing we see a lot of is a lack of understanding of the contract terms – few people understand the legal side from a commercial perspective,” Steyn says.
He cites termination and partial termination as an example. “Many people don’t have a clear understanding of what the legal requirements are to effect a termination. This includes the notice period, what constitutes a formal notice, law provisions in terms of common law and the implications of early termination,” he says. “You can’t just send an e-mail to your account manager saying you want to terminate.”
Proper process
In addition to the risk of penalties or being locked into an agreement they don’t want, organisations that do not follow proper renewal processes also risk being locked out of their data and systems.
Steyn says: “The proper process needs to be followed. Many organisations struggle to pick up on the process embedded in the agreement, or fail to kick off the process allowing enough time for the discovery, assessment, negotiations and approvals that must take place before the renewal date.
“At Dante Deo, we ‘plan the work and work the plan’. When we come in with our IT Renewals management service, we start to plan and execute the process properly, so organisations don’t incur unnecessary risk and costs,” he says.
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