11 minute read5 Common IT Contract, Maintenance and Renewal Mistakes & How to Prevent Them
Put processes in place to head off problems in advance, before they manifest. We can help.
When you think about IT contracts, maintenance agreements and support renewals what comes to mind? Happiness? Bliss? Order?
Most procurement professionals cite that they don’t know when their maintenance agreements are up for renewal.
In short, we have a visibility problem.
And if you are a procurement manager, you know that if you don’t have a process to see when these agreements are up for renewal, there is no way you can control the risk and cost associated with these contacts. It’s almost impossible to do your job.
~ “You can’t manage, what you can’t measure” Peter Drucker
But how can it affect the rest of your team?
The last thing we want to do is lose credibility with our IT team. If IT is stuck in reactionary mode, scrambling to get last minute support for servers, storage and network gear and software, this can leave them extremely vulnerable and stressed.
According to Harvard, the long term effects of chronic stress are damaging to health, happiness and decision making, which impacts employee satisfaction, culture and ultimately business results.
This is further compounded by the fact that if we don’t know what is up for renewal we are bound to have issues related to the budget.
Without a proper process to track renewals, maintenance agreements and IT contracts, procurement can’t create a process, finance can’t trust the budget, IT can’t sleep at night and the C-suite has an overworked, stressed out team, with budget, vendor and potential security risk.
In this article, we’ll talk about 5 common mistakes related to renewals and how to fix them.
Mistake #1: Lack of a Procurement Process, (that incorporates renewals)
The number one reason most companies fail to manage their contracts at renewal is because of their process, or lack of it.
But what is a procurement process?
- Identify Needs and Requirements
- Create a Budget
- Find a Supplier
- Negotiate Support
- Performance Management
And there are lots of procurement tools for buying things from ball bearings, trains, paper and chairs, such as Coupa.
But if you are in IT, you have to track the agreements such as Cisco SmartNet, when the agreements renew and what the associated assets are.
The solution: Create a clear cut procurement process that includes renewals, maintenance management for your team.
Mistake #2: Lack of Centralized System For Tracking Renewals
If you are responsible for renewing IT infrastructure, such as data center assets, it’s not easy to keep track of all of the hardware and associate agreements.
Yes you can use a spreadsheet, and if you are just getting started – that’s a great place to start, but a spreadsheet has limitations:
You can’t. It’s all manual.
The solution: Get software to do this work for you. There are a lot of contract management, IT Asset Management and Software Asset Management tools out there. Getting started will require you to get demos.
Owlytica is available for a 30 day free trial if you’d like to give it a try. Here is just one screenshot of how you can turn on notifications for assets and contracts that are EOL, EOSL or ending support within the next 180 to 90 days
Organization is key when managing contracts, and a centralized point of access puts all of the information in one spot where it’s easier to manage and access by your entire team.
Mistake #3: Lack of Association between IT Assets and Contracts.
Many organizations have a contract management software application. That’s great. The problem is that these contract management systems can be for Non Disclosure Agreements, Sales Contracts, Marketing Contracts, Contracts with Suppliers that have nothing to do with IT.
That’s a problem.
IT is unique, and without IT assets linked to the contract, IT procurement is stuck without the proper context to make a wise decision.
Because if you have a Cisco Smartnet Agreement that is $900,000 to renew, you need to evaluate all the assets associated with the agreement.
IT and IT procurement have to work together to assess these contracts AND their assets far in advance to properly negotiate the contract renewal.
And without a system, you are stuck sending spreadsheets back and forth with annotations for weeks, giving your vendors ample time to plan their pricing strategy and retain a competitive advantage in the negotiation.
The Solution: Make sure your contract management system and contracts are linked to the assets on the contract.
Mistake #4: Lack of EOL, EOSL and Support End Dates for Planning
If you are not using EOL and EOSL dates in your planning process you are missing out.
You might not want to renew those assets. But without the data you are flying blind.
When you know when your hardware or software reaches its EOL or EOSL date you can plan +ahead and start looking for coverage.
Tracking EOL and EOSL end dates for all of your assets is a tedious task but it is a simple way to improve your contract management.
The Solution: Track your EOL and EOSL and Support Dates
Here are steps:
- Gather EOL and EOSL dates from your vendors
- Set up a Google News Feed for all of your vendors and the keywords EOL, EOSL
- Subscribe to a knowledge base with this information
- In Owlytica we have begun to build an EOL and EOSL database for data center related assets, such as servers, storage and network devices.
You can see here that when you import an asset, that it is linked to a contract, the associated EOL or EOSL date will pull through in this list view
You will also show it pulls through in this asset lifecycle view
You will also see that you can run custom reports on when things will go EOL, or EOSL
All of this information helps you make a better decision on what to renew or replace, and with data in hand you can ask your team to create planning events and set aside budget for those requests
Mistake #5: Too many IT contracts, renewals and maintenance agreements to deal with
A procurement team can literally process 1000s to hundreds of 1000s of Purchase Orders per year. The sheer volume of purchasing is often overwhelming.
What we have seen mature IT procurement organizations do is separate contracts into tiers:
- A Contracts: Strategic and Large
- B Contracts: Medium Size
- C Contracts: Small Size
With tiers set in place, you can manage each group individually and independently, if the proper governance and oversight is in place.
The Solution: Outsource a portion of the procurement or analysis to an outside vendor.
Let’s pick data center assets as a particular tier.
This is just for servers, storage and network hardware, and with 1000s of assets in a mid to large size data center – the task is overwhelming.
You can hire a team like Reliant to discover, audit, import, organize and optimize your data center assets, and create a proactive methodical plan that coincides with your Cloud, Data Center Consolidation or Merger and Acquisition strategy.
Here is what that data could look like in the platform
With so many projects on your plate already, data center and IT infrastructure contracts can be overwhelming. Fortunately, there are ways to offload some of your contract management responsibilities.
How Can You Get Started Solving the Problem?
Contracts, maintenance agreement and renewals management is hard. It’s not easy to fix. It will take time.
Reliant is not an expert at software asset management (at the time of this article 2021), but we are experts at data center maintenance contracts, maintenance and third-party maintenance.
If you are ready to discuss getting a component of hardware renewals management off of your plate, you have a few places to start.
A No-Cost Maintenance Review
This is a 30 minute discussion with a Reliant services consultant to discuss your data center assets, maintenance strategy, organizational methods and current challenges to see if our methodology, approach and tools may be of service. Think of it like a doctor’s visit, where you tell us what hurts and we inform you of options.
Schedule a consultation today
We can provide you with advice, options and support on all your data center needs.