Here's an Almost Guaranteed Way to Generate Cost Savings from Software Licenses

For the past few weeks, we've been talking about how a good contract management process can help generate cost savings from technology agreements. When you have better visibility into your technology agreements, you're less likely to fail an audit or get hit with a software compliance penalty. And when renewal time comes around, you'll be able to negotiate with suppliers from a position of strength.

All of this results in cost savings.

But there's one specific area that can generate almost guaranteed and immediate cost savings — mainframe software licenses.

Technology vendors who supply mainframes like to scare clients into believing they're the only ones smart enough to manage the software licenses.

Not in my experience. We once helped a client save $1 million annually in management fees they were paying a mainframe data centre supplier.

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Video Transcript

We’ve talked about how good contract management can help us avoid compliance payments and overspending on renewals. But it can also help us in a few other areas.

If an organization has an accurate, holistic view of their contracts they can consolidate suppliers and leverage economies of scale. They can manage suppliers against negotiated terms and deal from a position of strength when re-negotiating with incumbent suppliers

All of these things equate to cost reduction, but the one area that’s almost a guaranteed cost savings opportunity is mainframe software.

Any mid-sized or large corporation that processes a large amount of data probably owns or leases mainframe capacity.

But because they're dealing with mainframes - as opposed to servers or desktops - the IT suppliers that manage these machines scare their customers into thinking that they (the suppliers) are the only ones smart enough to be able to manage the software licenses on these machines.

I had a sales rep once tell me that MIPS-based licensing was too complicated for him to explain to me, but when I asked him what MIPS stood for, he couldn’t tell me it meant Million of Instructions per Second.

The reality is, licensing a machine by MIPS is no different than licensing by core, CPU, server or named user, so there’s no reason for you to pay a supplier exorbitant administrative fees to do it for you.

We once helped a client save over $1,000,000 annually in management fees they were paying their mainframe data center supplier.

The supplier, who I won’t mention by name(but has a lot of blue in their logo) is one of the top tier mainframe suppliers in the world. But their mainframes don’t just run their software. For this client, there were 25 additional Independent Software Vendors (ISV’s) running software on the mainframe.

The mainframe supplier had graciously offered to manage these ISV suppliers on behalf of the client for a management fee that would be incorporated into their annual license fees.

All the supplier was really doing was renewing maintenance on the ISV software every year. But for each invoice they paid on behalf of the client, they added an admin fee, sometimes as much as 50% of the maintenance cost. So much for a cap on annual increases.

So much for a cap on annual increases.

We showed the client how they could manage those renewals themselves, using alerts and contract summaries and we were able to squeeze a cool million out of Big Blue. That was very satisfying.

So don’t think that just because you have license agreements in place with your software suppliers, there’s no more opportunity for cost savings.

Remember, software companies are constantly searching for ways to change their licensing models and their pricing to increase revenue, so customers should always be looking fir ways to reduce costs.

One more to go. Next up we’ll look at how good contract management can increase the efficiency of your procurement department.

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Also, if you’d like a free contract management process review, where we’ll show you how you can save the time you spend on contract management by up to 75%, just head over to and claim your free session.

Thanks for watching.