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Manage your IT service contracts to save money

IT contracts amount to paperwork, which IT staff members tend to hate. But it's critical to manage service contracts to prevent runaway bills -- and unused features carrying a price tag.

As IT tools move to contract service setups, IT staff members get flooded with paperwork. This overflow of sign here and sign there legal paperwork is outside the comfort zone of the average IT manager, which can hurt the team's budget.

Renewable service contracts are ideal for IT vendors because the ongoing spending model provides them continual revenue. The IT operations teams must be diligent to ensure the contract includes what's best for their company.

It doesn't matter if the contract is monthly or annual; you must be vigilant and go through the steps and check at least once a year. To start managing your service contracts, evaluate your services, develop a checklist and compare competitors' prices and services. 

1. Evaluate services

First, determine if you still need the service and the payment method used. If the business has shadow IT services running or a distributed IT model, it can be a nightmare to find out where the bills go. Establish a comprehensive checklist of IT services to walk through and address each contract.

How in-depth this checklist gets depends on how much money you want to save. It is less about stepping on other groups' toes. Plan for core IT services, but also services on the fringe of IT, such as mobile devices and plans. I have seen people use mobile hotspots from companies they left years ago because the company is still paying the bill.

Fringe devices add up to thousands of dollars per year and get rolled into monthly contracts that no one looks at. Decide how wide you want the net, and even if it's bigger than expected, this endeavor can provide positive gains in the end.

Once you have a comprehensive list, use it as a guide to work with the contracts. For the most part, billing amounts don't go down -- they normally go up. If your needs haven't changed, and it's a case of growing or decreasing user numbers, then why does the base price increase? New features added to IT services, often without the IT team asking for them, increase the bill from a vendor.

Quickbooks, a popular online accounting vendor, increased their prices by a hefty margin in 2021, for example. They justified the increase by adding multiple new reports and features. This is a problem if you didn't ask for these additions or don't need them -- you can't opt out of a price increase for extra services if you don't know about them. Understand what the organization is doing with these services it pays for, because subscription providers have no issue rolling new services into a plan irrespective of expected use.

2. Check licenses

In addition to added base features, check your bill for once-free demos or tools that have become paid subscriptions.

Software package demos are notorious for adding costs to enterprise accounts. IT teams are paying for maintenance of software packages they didn't ask for, but received as temporarily free trials. There is a reason the detailed billing on a given IT service contract can be 20 pages long. Most IT people simply check the front and back pages, losing money because they aren't managing the line items in the middle.

3. Compare competitors

If you can avoid all those pitfalls, look at the base service costs and what the competitors are doing. While moving services can be a challenge, don't ignore this option when comparing costs and services.

People spend hours or even days comparing phone plans for home use before they renew a contract, but the internet pipeline at work might not get more than a glance. Switching internet providers isn't easy, but you could find a company that offers higher speeds, lower costs and more reliability just by looking.

You might not have to switch. Mentioning your contract review to your current provider can get talks moving toward a more beneficial setup. Most service providers don't want to lose your subscription dollars, as it's consistent revenue. They might work with an IT team's needs to retain business.

When it comes to IT service contracts, complacency is the real issue for both the customer and the vendor. The IT environment is always changing, so most IT ops groups do some due diligence when it comes to IT spending. However, service contract management is paperwork that IT people love to hate.

This must change, because IT tools and services vendors have no incentive to help you into a cheaper plan. In fact, they normally push you in the opposite direction. Investigate what is available and what you're using internally to find the best tools, licensing plans and add-on features for your company.

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