Shared Savings – The Single Best Way to Acquire Mainframe Software
Today’s digital economy and turbulent climate of change is creating more challenges than we’ve ever seen. The perfect storm of rising customer demand for access to your applications is colliding head-on with tighter resource constraints and rising costs. How can mainframe IT shops become more efficient and increase productivity without new tools for which they have very little budget?
Does your team ask this question often? “How can we help with the budget if we cannot afford to buy software that lowers our costs and improves our productivity?” Indeed—it is a catch-22 in the quest for business agility.
Furthermore, particular industry organizations feel this more than others. Financial services, banking, insurance, and public sector are just a few examples. The fact is that forin some, there is a management perception that the mainframe is outdated or costs too much already.
But at BMC, we know that customers who invest a little time and focus on how to solve this dilemma see big payoffs. And with new pricing models being developed for purchasing mainframe software, the pain is receding.
Enter the Shared Savings model.
How does it work? Companies can model their savings prior to any investment of project time or cash. For example, we see instances of savings estimated in the $10 million range. With this new framework, customers don’t pay until they experience the actual savings on their monthly software bills. And they only pay a portion of those savings at that time. Very low risk.
When your team currently invests in large software purchases, do you know what your ROI and timeline will be for those returns? Most of the time the answer is, “not really.”
For software that helps you to be more productive, more agile, and more cost-efficient, the best way to invest is to work with the vendor up front to determine an approximate timeline of savings. Vendors should be able to present a business case with a very detailed implementation proposal and expected results based on your own mainframe data.
Now, given this plan, you can now implement the software and “share the savings.” As an example, assume you want to invest in BMC’s R4-MLC Cost Management solutions to increase your advanced automation and productivity while reducing MLC costs. The business case might estimate savings of $850,000 in the first year from lowered MLC, and additional savings of, say, $150,000 in lower overage fees or elimination of a licensed product that is no longer used. We now have a $1 million potential savings in the first year, yielding you some big savings.
Let’s say you do indeed save the $1 million in the first year. You’ll share a portion of those savings with the vendor, and everything is a known quantity up front – your cost, your savings, your timeline, and your renewal costs. Given this model, you have much more visibility and confidence in your investment.
Don’t Pay Until You Save. Let me know what you think. I’d be interested to know whether you’ve had experience with this type of purchasing model in the past.