Last week, I wrote about the importance of financial competency for every leader. I covered the subject broadly and taught several principles that are applicable to everyone. If you missed that article, go back and read it, then continue on.

Today’s article is about financial efficiency. I like being efficient in everything I do. I work very hard to be efficient with my time. I’ve learned how to systematically create process efficiency through Lean. Finally, I naturally enjoy being efficient with money, both personally and at work. I like a good deal and am willing to work to get it.

In 2020, many technology leaders in a variety of industries are looking for ways to become more efficient. There isn’t a single formula to do this. In this article, I will share the methods that have worked best for me.

Create healthy competition

The most traditional way to get a good deal is to have your technology suppliers compete for your business. This ensures you are keeping your current suppliers engaged, ensuring your costs are in line with the market, and allows you to interact with different suppliers that might become new strategic partners. This is known as the Request for Proposal, or RFP. There are variations on this, such as the Request for Information, Request for Quote, and Request for Solution.

Based on the situation, you will need to use the best process to create the optimal outcome. RFPs are best suited for very well-defined and well-understood subjects. You may very well get exactly what you asked for, but that may be different from what you actually want and need. If you’d like to get a sense of the potential pitfalls of competitive bids, read this interesting editorial.

Legacy is expensive

Technology has a short shelf-life. Something you spent millions on 5 years ago is typically worthless today. The balance sheet probably reflects that accurately, but in our hearts and minds, we get dependent on old technology and it is very hard to remove from the production environment.

To make matters worse, it usually costs more to support and maintain old technology than new. Whether it’s skills or spare parts, if it is scarce, the price will go up. Disciplined technology refresh is efficiency’s best friend. If you feel like you could do better on this subject, you are in good company. This is very hard to do well. Every technology leader I know struggles here.

Right-size your products

When you initially make a purchase, you usually estimate quantities. Perhaps you bought 1000 licenses for Widget Software, but upon renewal, you only need 900. Additionally, perhaps you bought “Platinum Edition” but after a year, you are only using the “Gold Edition” features. Check-in with those that use the technology product to make sure it is generating the expected value.

Take the time to right-size every product on every cycle. Auto-renewing without checking is wasteful.

Eliminate shelfware

Shelfware is a personal pet peeve of mine. Sometimes we buy a piece of software, but for some reason, we never actually implement it. Shelfware is software that we own, but it sits on the proverbial shelf. Perhaps the project got delayed or canceled. Perhaps we weren’t sure if we needed it or not, but it got bundled into the deal anyway.

Regardless of why you have it, shelfware is the efficiency thief that keeps on stealing. The initial purchase was bad enough, but you’ll get stuck paying the maintenance and support, even if you never use it.

If you have shelfware, don’t beat yourself up. As we covered earlier, all technology needs to be decommissioned eventually and you just saved yourself the trouble of implementing it in the first place, thus making it a whole lot easier to remove.

Check the market price

Some of our technology products and services are subject to market forces that exert continuous downward pressure on price. If you struck a great deal two years ago, that very well may be a bad deal today. Even if your agreement isn’t due for renewal yet, you can re-examine pricing any time. If it’s worth your while, you can renew mid-term.

3^rd party

It’s very common to buy support and maintenance from the company that makes the technology. This is usually a good idea, especially if the technology is new or highly specialized. However, there is an entire industry built around 3^rd party support and maintenance. They are often cheaper than 1^st party support. Sometimes, their service and expertise even exceed what the 1^st party offers.

There are also downsides to consider. If you pull 1^st party support, you may lose entitlement to security and feature updates that you are counting on.

Negotiate

Many years ago, I was downright afraid to negotiate. I enjoyed being a technologist, but I fully relied on my boss to work the deals. I knew that I needed to conquer that fear, so I took a class on professional negotiation. Once I knew how, I was no longer afraid. It took practice and help, but I eventually became confident at the negotiating table.

We can often find a tremendous amount of efficiency for our company if we are just willing to negotiate. If this is a weakness for you, do something about it. Start by reading the article I wrote on negotiation.

Think long-term and build strong relationships

It’s worth noting that the technology vendors and their salespeople are not your enemy. They have interests just like you have interests. It may sound cliché but try not to look for a win-lose, but instead, work to find a win-win. It takes work to align interests, but it’s often possible. Usually, your search for efficiency doesn’t need to get ugly. You count on your vendors for a long-term relationship. Always keep that in mind.

Success depends on working with a like-minded and empowered person representing the vendor. If that’s not the case, escalate. If you escalate, and that’s still not the case, then perhaps you should re-consider the long-term relationship.

Partner

So far, I’ve given you several tips that you can follow to find efficiencies. Now, read this section very carefully. Don’t do it alone. This isn’t exclusively up to you. In fact, if you try to do this all by yourself, you may very well do more harm than good. Here are your lifelines:

1. Your boss. Your boss may have more experience doing this sort of thing that you do. This is your responsibility to take the initiative and do the work but lean on your boss for help and support. Ask questions and get advice at every turn.
2. Sourcing. Most large companies have a sourcing or procurement department. They are your friends. They don’t do the work for you, but if you engage early and often, they will be right by your side every step of the way, ensuring the best possible outcome.
3. Legal. Most technology leaders don’t enjoy reading the fine print on commercial agreements. However, for some unknown reason, attorneys absolutely love that stuff. Engage your legal team on every contract.

Thanks for reading my article on efficiencies. Please add some of your own tips in the comments below.

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