In 2022, we published a 4-part series on IT Services Contracts, which included:
- The Top 4 Reasons Why NOW is the Time to Review Your IT Services Needs
- The 8 Most Important Questions to Ask Yourself About Every IT Services Project
- The Top 10 India-Based IT Services Companies for 2022 (2023 Update Forthcoming)
- Our Top 25 Recommendations on How to Negotiate Best-in-Class IT Services Contracts
March is generally the time of year that many clients review, renew, reconsider, and/or renegotiate their IT Services Agreements and for the most part, all the content from our previous 5-part blog series remains true today (with some updates for 2023 on the way).
One of the reasons why we see an increase in IT Services Agreement activity in Q1 is due to the fact that many of the major IT Services Companies have their Fiscal Year-ends in March, so we understandably see a disproportionate number of renewals in the market at this time of the year.
Some of the major March FYE IT Services Suppliers Include:
- #LTI (Larsen & Toubro Infotech)
- #NTT Data
- #TCS (Tata Consultancy Services)
Notable exceptions include:
- #Cognizant (Dec)
- #HCL Technologies (Jun)
In 2023, we are calling on clients to re-imagine how and why they need IT services contracts, and to take full advantage of the best market opportunities we have seen since 2008 to Re-Do their IT Services Agreements to minimize cost and risk and maximize the realization of value and benefit.
Another reason why this is ‘the time of season’ for many clients is because it coincides with the fiscal year ends of many of the legacy Independent Software Vendors (ISVs) for the Mainframe, and it was common that suppliers such as #CA, #BMC, #Compuware, #ASG (Allen Systems Group) and others would process agreement renewals with Customers in Q1. – Many of these agreements may have just gone through a MIPS upgrade on their IBM Mainframe and would therefore see a sharp increase from their ISV who was eagerly waiting to calculate the increase in fees, and because of that, we see a lot of activity with #IBM.That activity now extends to #Kyndryl, and many of the large IT Outsourcing (ITO) Agreements we see primarily in the #banking, #government, #healthcare, #insurance, #retail, and #travel and #transportation industries.
In 2022, with the Z16 upgrades to the IBM Mainframe, we did see a big uptick in this type of business, and you likely remember our forecasting this in the preceding 2022 posts:
- Top 5 Reasons Why the IBM Empire Will Strike Back in 2022
- Top 20 Mainframe Independent Software Vendors (ISVs)
- Time to Defuse Your Kyndryl Deal BEFORE It Detonates
We also warned that smart clients should ‘future proof’ their IBM agreements to be sure not to box themselves out of savings opportunities with their ISVs, and those who worked with us did just that. If you weren’t one of them, now would be a good time to have us look at your third-party software agreements on the mainframe to assess your potential savings opportunities.
Harvesting Value from Your IT Services Contracts
It’s time to get aggressive with your IT Services investments. Since 2020, most clients have experienced rising input costs and softening business forecasts, and that led to conventional cost savings efforts including, but not limited to, cancelling projects, delaying spending decisions, and cutting discretionary spending. Some clients went through Reductions in Force (RIFs), and/or even closed facilities. In 2023, many clients are expecting continued cost-cutting efforts due to the expected macro-economic headwinds but are struggling to find the right places to focus because their conventional counter-measures are now somewhat exhausted. Some clients tried to cut costs with IT Services providers like the ones mentioned above but found these suppliers to not only be disruptive to any cost-cutting measures, but also aggressively pursuing their own agendas to force through cost *increases*.
The market opportunity in 2023 is the best it has been since 2008, and legacy business on the open market is selling significantly less today than it did just a few years ago. As a result, there is an immediate opportunity for market arbitrage on virtually any unit of work covered under a typical IT Services Contract. However, IT Services suppliers will be wildly disruptive to these efforts so it will require a professional and sustained effort to get the value you seek, and it may even require some disruption. You may remember another piece we did some time ago in response to client reactions to the pandemic called, “Terminating Your IT Services Contract.” In that article, we referenced an eBook we wrote called, “The Top 5 Ways to Break Your IT Services Contract.” To capture current market opportunities, clients will need to consider all options including evaluating market alternatives, and even terminating for chronic failures and other reasons if incumbent IT Services suppliers are not respectful of market realities.
Picking the right IT Service Partner is Critical.
#Garter has previously reported that 75% of #ERP projects fail and that the failure rate was nearly the same for #CRM. When considering all IT projects, Gartner said that 60% failed, but then later admitted that number was too conservative. Since then, studies have emerged that put that number between 66-68%. #McKinsey reports that only 30% of digital transformation projects result in improved corporate performance. Perhaps most alarming; #Forbes says that outright failure of an IT project is one thing, but that in an astounding 90% of cases, IT projects fail to deliver any measurable ROI. Ouch.
Significant savings opportunities exist but extracting value from Incumbent IT Services Providers will not be easy in 2023. To be successful in harvesting this value, clients will need to transform the way they manage supplier performance and measure value from their IT services providers. If you're ready to learn more and are dedicated to putting in the hard work with us, Contact Us today to learn more about how we can help you save on all your technology agreements or Sign up now for a Savings Cloud subscription, and we will get started right away.
Founded in 2002, NET(net) is the world’s leading IT Investment Optimization firm, helping clients find, get, and keep more economic and strategic value in their technology supply chains. Over the last 20 years, NET(net) has influenced trillions of investment, captured hundreds of billions of value, and has helped clients cost and value optimize all major areas of IT Spend, including XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, and Telecommunications, among others. NET(net) has the experience you want, demonstrates the expertise you need, and delivers the performance you demand and deserve. Contact us at email@example.com, visit us online at www.netnetweb.com, or call us at +1 (616) 546-3100 to see if we can help you capture more value in your IT investments, agreements, deployments, and relationships.
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