During mergers and acquisitions, organizations are tasked with examining current vendor and software contracts and developing a strategy for the newly positioned entity.
Here are three strategies to help reduce software and vendor costs when undergoing M&A activity, presented by Deloitte.
1. Build a contracts team. Centralizing all contract-related resources into one team can help keep control over the transition project. Such a team — including executive, legal and project management oversight — can control any outward communication and reduce the need for external legal involvement. A contracts team can govern, gather data, review contracts and develop strategies before entering talks with software vendors. "This establishes the team as the central, authoritative entity on licensing matters and ensures control of the messaging," said Thomas Jackson, a principal with Deloitte Consulting, in the report. Additionally, a centralized team approach can help organize and streamline the process for reviewing vendor requests an organization receives during an M&A event, Mr. Jackson said in the report.
2. Steer all vendor communication to the contracts team. Software vendors will often call a number of individuals throughout an organization to offer licenses and contracts upon learning of an M&A event. However, CIOs should inform stakeholders and members of the organization of the contracts team and its responsibilities. "One of the biggest challenges CIOs will face is communicating throughout the organization that there is a contracts office handling all contract matters," Mr. Jackson said in the report, adding executive support for the contracts team's processes becomes important in ensuring all purchases and discussions regarding transactions are overseen by the contracts team.
3. Work with vendors to renegotiate agreements. Vendors may demonstrate some resistance to a client proposing new terms, especially as M&As generally present opportunities to upsell, according to the report. However, a contracts team can demonstrate how renegotiating contracts can benefit the vendor, particularly in terms of loyalty and continued demand for support. "Supporting a client with flexible solutions during a time of transition allows a vendor to continue an established maintenance relationship," said Joni Young, a director with Deloitte Consulting, in the report. "It also pleases the vendor’s customers, which may help ensure a place for that vendor in the post-deal IT portfolios of both the parent company and divested entity."
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