Outsourcing Cost Reduction
Increasing numbers of companies are using outsourcing of their mainframe services as a way to achieve cost reductions and to help address the issue around maintaining mainframe skills in their organization.
A very significant part of any mainframe outsourcing deal will be related to software license costs, usually in excess of 50%, and Watson & Walker has extensive experience in mainframe software pricing and reduction strategies. Applying this experience when a company is negotiating or renewing a mainframe outsourcing deal can result in considerable cost reductions.
In addition to software pricing, agreeing on the appropriate charging metrics for a mainframe service is absolutely key in being able to achieve cost reductions and efficiencies during the life of the agreement. A bad choice of charging metrics can tie a company’s hands when it comes to future exploitation of new technologies that drive cost reductions.
For companies in existing mainframe outsourcing agreements where all asset ownership (software license and hardware assets) have been transferred to the outsourcer, there is often considerable scope to achieve cost reductions by exploiting mainframe technologies that can reduce or flatten MSU growth. In many cases the outsourcer has no incentive to drive adoption of these technologies as they will result in revenue reduction.
Watson & Walker has consultants with extensive and recent experience in mainframe outsourcing pricing and delivery and mainframe cost reduction in an outsourced environment.
Our mainframe outsourcing cost reduction reviews are tailored to each customer’s circumstances but typically address:
- How to structure mainframe outsourcing contracts and charging metrics so as to allow you exploit the many cost reduction strategies (software licensing and technical tuning) available in a mainframe environment.
- How to analyze existing mainframe outsourcing agreements and work out cost reduction strategies within the limits allowed for by your existing contracts and charging metrics. Our experience is that many strategic outsourcing vendors lack these high end skills given the relentless pressure on cost reductions in the industry.