Project Management

There's Gold in Those Contracts

• By Russell Diaz
• 01/01/09

Wondering where to find the dollars to upgrade the eroding systems you've just inherited? Mine your service contracts! Here's a commonsense approach from a comrade in the small-college trenches.

IN 2006, IN 2006, I JOINED THE STAFF at Dominican College (NY), and like many of my tech peers in similar situations, I discovered that the network, computers, and IT contracts were in sorry shape. In the three years since I've been here, I've met other IT directors from across the country and have indeed found this to be a common condition in small colleges. Still, no one sets out to take his eye off those balls, and I'm the last person to claim such circumstances are the result of shoddy work by IT management and staff.

No, such a state of affairs is usually brought about by the unrelenting demands placed on small IT staffs. The truth is, IT staffers at small schools pretty much spend their days running around just trying to keep up with the day-to-day work. That overwhelming volume of work-- teamed with an ongoing lack of funds-- frequently leads to neglected systems and contracts. Yet it's ironic that focused attention on one neglected area, service contracts, can lead to great improvement not just in service and maintenance, but in an IT director's ability to find the dollars to fund those efforts.

So, it was my goal to stabilize the network and greatly improve the services to students and faculty-- which of course would require major investments. Yet, I could not simply request more money. (I knew what the response to that would be.) My solution: If we could reduce the operating expenses, we could use those savings to pay for the system upgrades. In the end, we greatly improved our services, to the benefit of students, faculty, and administrative and IT staff. Some of our improved projects have ROIs of two years. Our network is now stable and we are doing much less firefighting as a result. Yes, my contract-mining process entailed a lot of work, and we took some risks bringing certain services in-house, but it's worked out well for everyone.

Here's how I approached the task, and how you can, too:

Audit Those IT Service Contracts

I started by getting copies of every contract that generated an IT-related invoice to the college. Unfortunately, because there was no drawer anywhere that contained current copies of all the contracts, it took me many weeks of work and untold calls to vendors, requesting copies of the contracts. In the end, I got them all and read each one very carefully.

Prepare for Battle

Preparing for battle means: preparing to battle with vendors for better pricing. Before I could do that, however, I had to be completely sure of my facts as they pertained to the number of items I needed, and the details of the current contracts. In addition, I had to ensure that I had internal support in place before I moved forward. So, before meeting with the vendors, I met with my finance and purchasing people and got their approval and support so that I could close any deals I needed to, without having to go back to them and put a vendor's representative on hold. That way, when I got the individual on the verge of agreeing to a deal, I could say, "Listen, I can close this deal right now if you give me the price I need." It was at that juncture that I waved the approved purchase order under his nose. And it was at that juncture that the vendors invariably made their phone calls to get their approvals to close the deals-- and my prices were met.

Attack Those Contracts

OK, you've got those original contracts in hand; now, how do you find ways to save money? Following are the five tactics I used, to go after the vendors' contracts.

1. Find a new provider. Changing vendors often can uncover some great deals, and provide better services at the same time. I even discovered that some vendors offer competitive buyouts of competing vendors' contracts.
2. Combine disparate purchases through a single vendor. Simply put: Volume is power. By purchasing multiple products through one vendor you become a larger customer. Larger customers are more valuable and get bigger discounts, so go ahead: Negotiate better terms for the larger packages.
3. Throw the outsourcer out. I looked for ways to end or reduce expensive outsourcing of services that could be handled in-house, and found them. Working smarter gave us time to learn to deal with the new tasks.
4. Haggle. That's right: I used all the plain, old-fashioned negotiating skills I could muster, to help me get vendors to give us better pricing. This worked especially well when I was a) setting up contracts for services where switching vendors was difficult, or where b) there were no other options. But never let the vendor know either of those things!
5. Think: group. In other words, take advantage of state contracts and purchasing consortiums. Your own college or university purchasing department should be able to locate these state contracts, if they are available in your state.

Proof of the Pudding

By carefully doing our homework and applying the proper tactics, my team and I succeeded in reducing our costs to the point where we were able to pay for all of the IT projects that were needed! In the end, which contracts were we able to negotiate at better terms? Here is the list of the contracts we were able to close via the tactics indicated.

• Tactic: Change vendors. We moved to a new antivirus system from Sophos, which not only provided a much better solution for us, but also cut our expenses by a meaningful amount.
• Tactic: Combine purchases. We moved our purchases for the Microsoft Campus Agreement into our company account at Dell. This resulted in savings of thousands of dollars each year.
• Tactic: Combine purchases. We had five copy machine vendors on campus. By selecting a single vendor (local company Digital Products), we were able to get a better deal and better service.
• Tactic: End expensive outsourcing. Previously, e-mail had been outsourced. We purchased a Microsoft Exchange Server, dropped the outsourced e-mail system, and hired a consultant (filling an existing job opening) to provide training and make sure every aspect of the e-mail system was con- figured properly.
• Tactic: End expensive outsourcing. The hosting of our Blackboard Learning System was outsourced. We were able to bring this in-house and eliminate the outsourcing bill.
• Tactic: Reduce expensive outsourcing of services. We checked our usage of our internet connection, to make sure we weren't buying more than we needed. A bandwidth report from our internet provider revealed our actual usage, and we discovered that we were using only about 30 percent of the bandwidth that we were paying for. We dropped the bandwidth by 50 percent-- and our bill dropped by 50 percent.
• Tactic: Reduce expensive outsourcing of services. We examined our fiber backbone leasing arrangement. Due to the physical location of our buildings, we have had to connect four separate sections of the campus with a fiber backbone over a public road. Our provider had connected every building in each section to their fiber, but we changed that to just one connection at each section. Then we connected all the buildings in each section with our own fiber or a wireless backhaul connection. The number of pricey leased connections dropped from 11 to four, resulting in an invoice reduction of 60 percent. The ROI for all the new equipment: 18 months.
• Tactic: Plain old-fashioned negotiation. When we built a new dorm on campus, it created the ideal opportunity to renegotiate the cable TV service for all three dorm buildings. At first, the vendor presented the same terms we had in place for the first two dorms. When we were done negotiating, however, the monthly cost per connection was reduced by $12 for each of the 620 connections.
• Tactic: Join state contracts and purchasing consortiums. Three separate phone systems were restructured so that we now have one college phone system and one phone account. All the phone numbers are now on one combined state contract with all the proper discounts applied.
• Tactic: Join state contracts and purchasing consortiums. Verizon Wireless was added to the New York state contract. Switching our cell phone service to this vendor got us a better deal: We saved 50 percent over our old contract.

An Important Caveat

By going after these contracts, we were able to cut our IT costs enough to fund major upgrades in many areas. One note of caution, though: If you are going to bring a task in-house, you must make sure that your staff is able to handle that task. At Dominican College, we rearranged some IT responsibilities and created specific jobs to handle the tasks we were going to bring in-house. And don't forget that you can invest some of your savings in training the IT staff to make sure they can handle the work being moved in-house. But whatever you do, do not overcommit the IT staff, no matter what the savings are, or you'll be right back where you started.