By Amardeep Malik, Expert Specialist in Cloud Sourcing & Cost Optimisation
We all know that Public Cloud is the most popular route to minimising your organisations data centre footprint and having amazing compute flexibility at the click of a mouse as and when you need it, for as long (or as little) as you need it.
It can provide a company with a level of compute that may have been outside of their budgets previously and allows them to produce and refine products at a speed that was unheard of in the past.
Once a company has chosen its preferred public cloud provider, the next logical step is to enter into an Enterprise Agreement (EA). While they are the preferred method for organisations to secure preferred pricing and ensure that your legal and compliance departments are happy, here are 3 common mistakes companies can make when negotiating these agreements:
Overestimating their commitment level
EA’s require your company to agree to a certain amount of spend over a period of time, usually 3-5 years. One of the most common things that I have seen are organisations use the formula ‘current annual on-premise compute amount x commitment time in years = amount of public cloud commitment’ (I made this equation up for this article, so please don’t go looking for it).
There are many reasons for overinflating your spend commitment, but remember, once signed, you WILL have to live up to that spend regardless of your usage or not. Keep this number realistic and as low as you can.
Lack of buy-in from decentralised IT departments
This is very closely related to point 1.
A common exercise performed when working out your spend commitment is to ask the consumers of IT within your organisation the question ‘What can you move to the Cloud?’ You will almost always get one of two responses…Nothing or everything. Neither are helpful, both are expensive. More than likely, after some cajoling you will receive a list of moveable applications that you will use to form the bulk of your spend commitment.
The problem will occur after you have signed and the various IT departments start sending you excuses as to why those apps cannot be migrated. Remember, A list of migratable apps is not THE list of migratable apps. You can mitigate some of this risk by closely involving the IT heads from the start, making them accountable for their commitment and having the deep dive sessions BEFORE signing the EA.
The need for an Enterprise Agreement at all
As strange as it sounds, does your organisation really require a signed commitment?
Most public cloud providers do not even look at spend commitments less than $1m. If your commitment is less than $5m then you could save even more money by ensuring your cloud usage is properly cost optimised. Cost optimisation is THE best way of ensuring you are only paying as much as you have to when using public cloud. I’ll cover the basics of this in another article soon. The savings achieved will be far greater than a low commitment Enterprise Agreement, whilst giving you the flexibility of not being fixed to a single provider.
Amardeep Malik is a Procurement Specialist who works with multinationals to deliver unique strategic partnership agreements that reach far beyond traditional contracts. He believes in forging fluid, forward thinking agreements that allows corporations to grow and develop together.
He is currently the Global Cloud Services Procurement Category Manager for Swiss Re. Working for companies like TUI and Capita, he has many years of experience in all categories across IT Procurement with an unparalleled level of experience in Cloud sourcing.
Amardeep’s professional passion is to merge his love of new technology with his desire to create better outcomes through effective sourcing in order to place procurement at the heart of any organisation. Outside of work, Amardeep loves cycling, running, and helping his local community whenever possible.