Managing Your Maintenance Contracts and Costs in Six Steps - Part One
Every year, we see survey results like this one from the government sector, which reports that federal CIOs are spending roughly 76 percent of their annual IT budgets on operation and maintenance expenses. In our experience, these results are consistent across the board—most companies today are devoting the majority of their IT budgets to operations, maintenance, and support costs, leaving only a fraction for business-growing innovation and productivity efforts.
At the same time, some organizations fail to utilize options for simplifying the management of their support contracts. Usually the result of miscommunication between departments or missing documentation, these companies are wasting precious resources renewing high-level maintenance contracts they no longer need.
If you’d like to reclaim more of your IT budget for business and productivity growth, consider taking a more proactive approach to managing your support contracts. Here are six steps to help you get started:
1. Get an accurate inventory.
When it comes to managing support contracts, it’s critical that you have an accurate inventory. That’s why we recommend performing true-ups on a semi-annual basis. This process includes comparing which assets you’ve added or de-commissioned in your inventory against your maintenance renewals so you don’t end up with assets left behind or experience any denials of coverage.
2. Track the locations of your assets.
Don’t forget to track the locations of your assets—companies often move equipment between locations without realizing that vendors have stocked parts and personnel in key regions to meet the Service Level Agreements (SLAs) outlined in their support contracts. If you experience a problem and you haven’t notified the vendors of these changes, the vendors may delay or deny the necessary support altogether—leaving you to face the extra costs and hassle on your own.
3. Consider co-terms.
With an accurate inventory, you may also opt for co-terms. The usual asset acquisition and replacement process often produces maintenance contracts with expiration dates scattered throughout the year. By setting up co-terms, you can select a single strategic date for all your contracts to expire—like the end of a fiscal year, for example. Your IT department will be less likely to forget or miss any assets, and with only one date to remember, they can discuss whether to renew or not well before the contracts expire.
Be sure to return next week when I outline the last three steps. In the mean time, please share any comments or questions you have below.