Never Too Late to Renegotiate IT Contracts

Michael Vizard

Even as the economy shows signs of recovering, IT budgets are still tight. That leaves many executives wondering whehter they got the best deal possible for their IT dollars. And if the financial results of many of the top IT companies are any guide, they probably didn't.


A look at the balance sheets of the leading IT companies shows how much profit they derive from software and services. More often than not, the driving factor behind those numbers is not some great business consulting service, but rather the maintenance and software licensing fees attached to hardware systems and applications. In fact, it's relatively easy these days to get a great price on any IT product, because the true costs of that product are wrapped up in multi-year maintenance and licensing fees.


But what if you could go back and renegotiate all those fees? That's the fundamental premise behind a service offered by Virtual Procurement Services. Run by CEO Scott Robins, the company essentially consists of a group of IT contract specialists that help IT organizations renegotiate IT contracts. Many of the people who work for VPS used to work for vendors or IT services companies, so they know the ins and outs of an IT contract.


Robins says VPS only gets paid if it saves a potential customer at least 10 percent on a IT contract, with VPS getting paid a percentage of those savings. Robins notes mid-size companies that don't have IT contract specialists usually are the ones that wind up paying the most for IT, so his company provides the same type of IT negotiating skills that many Fortune 100 companies have.


VPS has created a database that tracks the IT deals make by publicly traded companies, which it then uses to press IT vendors for better terms and conditions. Robins says that on average about 60 percent of the time, a customer got a good deal or some value-added service that makes the IT contract worth standing by. But about 40 percent of the time, VPS finds it can save customers a substantial amount of money.


What most customers need to realize, says Robins, is that IT companies are more than willing to renegotiate contracts if pressed. Customers just need somebody armed with all the right data to get the process started.



Add Comment      Leave a comment on this blog post
Feb 3, 2010 5:28 AM James Talbot James Talbot  says:

I have always felt that the "maintenance is non-negotiable" line was not real.  How long has this company been around? How many customers do they have?

I would love to know how much they save customers on avg?

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Feb 4, 2010 11:13 AM Rani Nathwani Rani Nathwani  says:

Emmm.... do you operate in South East Asia?  We find here that we are held at the mercy of the large multinationals, and have practically zero leverage in negotiations.

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Feb 5, 2010 12:39 PM Scott Robins Scott Robins  says: in response to James Talbot

James,

We have been working with customers for a little over a year, and we have been billing customers for a little over six months.  Today we are saving an average of about 26% -32% on hardware and approximately 1/2 of those percentages in software. 

Best Regards,

Scott

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Feb 5, 2010 12:44 PM Scott Robins Scott Robins  says: in response to Rani Nathwani

Ran,

Our systematic approach includes proprietary technology, people, and process'.  Unfortunately our unique systems apply only to US domestic operations.

Thank you for the question and if you would like to discuss further please email me at the address above.

Scott

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