Managing IT Contracts: The Bane of IT
Business growth is almost always considered a good thing, but growth also brings challenges. As more employees and locations come on board, inevitably there are new demands for technology. With new technology comes new relationships with vendors and partners that provide those services. New products and services mean more IT contracts to manage.
An analysis by Okta Inc. discovered that the number of software applications deployed by large firms across all industries has increased by nearly 70% in just the past few years. The average number of apps stands at 129 per company.
Keeping track of every service and product you’re using and their invoices can be a monstrous task, often requiring full-time resources. It’s not as simple as evaluating and negotiating a contract and then signing on the bottom line. Every contract must be continually monitored to ensure the product or service was received as promised and is performing as expected before you pay your invoice. IACCM adds, “Through active monitoring of performance needs and outcomes, contract management informs commercial management with regard to actual and required commitment capabilities, together with their financial risk and impact.”
As your business grows, we’d like to help you avoid some of the most common pitfalls in managing IT contracts so you can reduce costs and risk while maximizing your return on your investments.
The 6 Challenges When Managing IT Contracts
There are numerous hurdles to overcome for each and every contract that comes across your desk. You’ve worked on building a business that runs smoothly, and you need technology that does the same. Managing IT contracts and invoices can be difficult, but determining a solid process is a huge step toward gaining control.
1. Ensuring You Stay in Budget
The budget is one of the hardest things to keep track of when running a business. Technology has come a long way, but some companies still rely on static spreadsheets or obsolete systems to manage an increasingly complex web of contracts and invoices. It’s easy to end up paying for unused seats and unnecessary features, as well as paying penalties and other charges for expired licenses and unmet terms. The time it takes to vet every technology invoice can lead to delays that trigger late fees and interest charges, let alone service disruptions.
Instead of consuming resource time manually managing IT contracts and processing invoices, integrate automated Technology Expense Optimization software into your accounting, vendor management, and ERP tools. With features like dynamic inventory management, service level invoice auditing, embedded exception resolution tools and automatic bill pay, you’ll have real-time visibility into every vendor, contract and invoice you receive, with a streamlined way to compare invoices to contracts and resolve issues in record time. You’ll also be able to see exactly what technology services are used enterprise-wide to make more informed decisions about future procurements.
2. Managing Subscriptions
As-a-service offerings are flooding the marketplace. Gartner forecasts the market size and growth of the cloud services industry will triple the growth of overall IT services. Cloud applications are more accessible than ever, driving up the number of apps per company and, therefore, the number of subscriptions that have to be managed.
Paying for a service on a subscription basis has its benefits, but it’s also easy to forget that you’re paying for it, when the automatic renewal kicks in, or how many licenses you’ve purchased. Forbes reported on a survey that found more than one-third of budget money is wasted on cloud services due to two reasons: duplicate subscriptions from a lack of cross-team transparency and paying for subscriptions that nobody is using.
Technology Optimization Management software helps companies overcome the subscription chaos by providing a dynamic inventory management database that is automatically updated with each invoice. You will be able to quickly identify duplicate subscriptions so they can be better managed. With embedded contracts management, your team will be alerted when contract milestones are approaching so subscriptions aren’t automatically renewed without you knowing about it.
3. Keeping Contracts Up-to-Date
As your business changes, so should your contracts. A contract that may have sufficed six months ago may no longer meet the needs of the business. Traditionally, managing IT contracts doesn’t always involve reassessing current contracts until they are coming due. But if they are not supporting the business as they should, you’re paying for service you may not be getting.
An automated Technology Expense Optimization solution will ensure your contracts are consistently meeting your needs and scaling with your company as it grows. You can see real-time usage reports to know if you’ve maxed out current contracts and need to adjust them or if subscriptions are being under-utilized. Either way, visibility into your contracts after the purchase makes it much easier to know if contracts are truly meeting business requirements.
4. Verifying Compliance Is Met
When you partner with a third-party cloud services company, you’re opening yourself up to significant risk. Depending on your industry, you may have regulatory requirements you have to comply with in addition to the security commitments you’ve made to your customers. To make things more challenging, each third-party may have their own ecosystem of vendors and partners. If any one of them fails to comply with regulations, your organization could suffer collateral damage.
Reduce your risk by working with partners that have high standards for not only helping you meet regulatory requirements but have the highest standards for themselves and those they choose to partner with. Take your communications and collaboration platform, for instance. A managed security services provider will be able to secure your network, proactively monitor cyber threats, and maintain PCI-DSS compliance.
Related: Case Study: BCM One helps financial services company bring voice communications to the cloud.
5. Having Efficient Workflow For Contract Approval and Review
As we’ve discussed, hiccups in the contract editing process can cost thousands of dollars. Establishing a workflow for different contract types is one of the largest money savers. A contract floating around the office waiting on the wrong desk will cost money, time, and sometimes the whole deal. Determining which people get which types of contracts for edits, review, and approval is the primary step toward victory.
Technology Expense Optimization takes your organization’s workflows into consideration so processed invoice data goes where it needs to go. Customized workflow integration helps in managing IT contracts by ensuring contract reviews and approvals are embedded into the process so nothing is missed, yet no additional steps are added. Everything flows seamlessly to ease adoption and reduce risk.
6. Evergreen Contracts
Evergreen contracts are contracts that automatically renew if a termination notice is not provided. This can cause issues if your business lets a contract roll over into the next billing period. Evergreen contracts are created for ease of use and to remove the hassle of IT businesses asking to renew every time a contract expires. It also creates a situation though where your business can be on the hook for another contract period if you forget to give notice of termination.
Managing IT contracts requires visibility into automatic renewals. Investing in a Technology Expense Optimization solution guarantees you and your team will receive an alert when a contract termination date is coming up so that you can decide if you want to keep the relationship or not, compare the vendor with a competitor, or modify your contract for a better fit.
Automation is Efficiency
The key to successfully managing IT contracts is to automate the process. Manual contract management is not only inefficient, it can lead to increased costs and risks. The influx of cloud services into today’s corporate infrastructure demands an automated management approach. Technology Expense Optimization and managed security services is your best opportunity to keep your contracts and invoices in check while improving your security and compliance stance.