IT teams should rework supplier contracts to free up budgets

Many business users are unhappy with the level of support they get from their main software providers, according to research from Vanson Bourne for third-party software maintenance company Rimini Street.

In the survey of 500 IT executives and 500 financial executives, only 37% said the value of enhancement packs delivered by suppliers had increased in the past five years, and 56% said they felt pressurised to adopt their suppliers’ cloud strategy.

Commenting on the findings, Ilan Oshri, a professor at the University of Auckland Business School, said IT decision-makers and software providers need to move away from a transactional relationship to more of a partnership.

“There is some sort of tension relationship between the client and service provider,” he said, pointing out that the people who took part in the study said they felt they were locked in and were dissatisfied with suppliers. “If you are locked in, you can’t re-engineer your contract and the cost of switching is fairly high,” Oshri added.

The survey showed that 64% of respondents felt they were locked into a relationship with their current enterprise software supplier, reducing their ability to switch services and providers if they became dissatisfied with services. Also, 74% of the executives in the study said innovation in their organisations was hampered because they were spending too much on keeping the lights on.

When asked how they would reduce cost, 57% of respondents said they would look at extracting more value from existing IT and redirecting funds, while 43% said they would look at moving applications to the cloud to reduce the “lights on” spend.

Just over one-third (34%) said they would look at replacing legacy business applications (Oracle, SAP, Microsoft) with best-of-breed alternatives, and 31% said they would use more open source.

The survey reported that 81% of respondents acknowledged a link between spending on IT innovation and their firm’s competitive position, and 90% suggested that budget allocation for IT innovation must increase by 10% in the coming years to cope with the rapid introduction of competitive IT platforms. However, 70% indicated that their company struggled to find budget for IT.

In many cases, businesses are looking at budget to support innovation, according to the research. But Rimini Street said there is a gap between what needs to be invested and what is being invested.