Technology and West Monroe Partners go hand-in-hand. We pride ourselves in making sure our recommendations align properly with our clients’ core business needs. This theme comes around again and again with our clients and after having open conversations and demonstrating that sometimes the solution is more than the technology, there’s a wonderful “ah-ha” moment.
Take for instance a very large data center consolidation project we are currently working on in the life sciences space. During technically complex projects such as this one, it is easy to gravitate towards and begin “addressing” the technical challenges first, but this is often times not the best move. Instead of leading with how best to introduce this month’s latest technical trend, we have chosen to start by collaborating with our client to discover what will have the greatest business impact and identifying the business challenge we are attempting to solve with technology.
An example of this is to first find the costs for systems that are important to either the underlying infrastructure or the business applications that affect the business’ ability to serve their clients and subsequently generate revenue. We know that in complex environments, 2-3% savings can be realized by simply correcting accounting errors found in vendor contracts from data centers, circuit providers and other third party support contracts. Staying on the topic of contracts for a second, this has become a more serious blind-spot for companies with how complex they have become and all of the different types of services they offer. We also know that with the right partnerships with firms specializing in this space, there’s the potential of an additional 20-30% savings that could be realized through properly renegotiating and consolidating these contracts. There are commonly three contract issues that, from our experiences, regularly cause headaches for our clients:
- The first is signing long-term contracts for services that are not planned for implementation until a future date. There’s no price benefit to buying the service early, so if the plan is to implement a service next year, buy it next year and bank those costs.
- Unnecessarily running on-premises and hosted systems in parallel. I get that your first reaction to this is, “Ed, isn’t that the keystone to a hybrid cloud solution? This sounds logical to me.” Well, if a hybrid cloud deployment is what you are after, then you would be correct; however, if the plan is to migrate to a hosted email platform and you leave running your on-premises email platform (or only migrate a small portion of your user base to the hosted solution), that is a HUGE unneeded cost. You’re paying a premium to have a third party vendor manage the email servers and you haven’t reduced your on-premises management costs at all and worse, you have drastically increased your overall costs.
- Not paying very close attention to the service level agreements (SLA) that are signed for long-term contracts. It’s now pretty common to sign longer term contracts to optimize contract costs, but what is often not negotiated is the SLA for service outages (which is something we all need to come to terms with…sorry) and how that relates to the potential of lost business revenue. While the majority of hosting providers will not agree to compensation conditions that require full compensation for business revenue losses resulting from their systems being offline, you can often times negotiate a better SLA contract that what’s initially offered.
Once we have worked through the financial and contractual justifications for: 1) Consolidating to a particular data center provider; 2) Consolidating to a particular circuit provider(s) and/or 3) Migrating on-premises services to a hosting provider, we can then focus our efforts on modernizing the environment, perhaps leveraging newer Microsoft technologies, in a manner most effective for supporting the business. So be vigilant in how you manage your contracts, whether they are traditional vendor contracts or “new” cloud services contracts, because for all of the “good” that comes from modern technical solutions, there is an equal portion of “bad” introduced with contract complexities.