Reduce Manufacturing IT Costs and Regain Control of Your Roadmap
August 2, 2024
3 min read
August 2, 2024
3 min read
There’s no doubt technology plays a crucial role in supporting manufacturing. IT leaders have already invested a considerable amount of financial and technical resources in modernizing their software estates. But these days, they are being asked to do more with the same, if not less, and are looking for ways to reduce manufacturing IT costs in any way possible.
Faced with a barrage of challenges, including global supply chain issues, continuing economic uncertainty, and the ongoing shortage of skilled labor, the industry is adding another seemingly impossible feat to its docket as it continues to move into Industry 4.0 — how do you optimize your software budget?
In general, the amount a company spends each year on software is second only to its personnel costs. You would think with the size of that investment, organizations would be easily set up for rapid digital transformation, but actually the opposite is true.
In most companies, 90% of their overall IT budget is spent just keeping their existing software operational, leaving only 10% for the digital transformation initiatives CIOs are counting on IT leaders to implement.
For the manufacturing industry, that percentage is even lower — only 8% of the overall IT budget is used for innovation — well below the 10% average, according to Gartner.
While software from OEMs like IBM, HCL, and VMware power manufacturing around the globe, there are some well-documented issues with various megavendor business practices, particularly when it comes to negotiating software and support renewals.
To keep manufacturers locked in, enterprise software vendors offer bundled deals that include lower support costs, but only if customers make new software purchases at the same time. These bundled services and products often come with three-year enterprise license agreements.
If the manufacturer chooses to keep the solutions it currently has, stand-alone support renewal costs often come with hefty price tags. This allows mega-vendors to continue increasing revenue even if their customers don’t want to expand the relationship.
IT leaders in the manufacturing industry understand the importance of maintaining their IT estates. Unfortunately, navigating the ever-changing landscape of software maintenance and support can be overwhelming, even for the most seasoned professionals.
A thorough examination of your maintenance agreements can hold the key to decreasing your software spend and freeing up extra budget dollars that can be reallocated to strategic initiatives.
Take a look at your current OEM S&S or SnS contract and ask yourself:
An alternative to software OEM support, independent software maintenance can save up to 50% on your current support and maintenance fees, which then can be reinvested to fund future IT projects.
In its Market Guide for Independent Third-Party Software Support for Megavendors, Gartner says independent software support “can help keep budgets flat by eliminating the ongoing year-over-year vendor maintenance and support increases when organizations are challenged to meet cost-saving goals and initiatives.”
Gartner also found that the independent market offered substantial operational savings and value-added services, including:
Manufacturing IT leaders who explore alternatives to OEM maintenance and support can turn the tide on years of overspending, reduce overall manufacturing IT costs, and reallocate those funds toward strategic initiatives. These companies are able to maintain all versions of their software solutions and support their paths toward digital transformation.
Most IT leaders — 79% according to Forrester — are already using some form of independent software maintenance to combat increasing megavendor support costs. While often supplying better service at a more affordable cost, independent providers also offer improved agility, increased cybersecurity, and a strategic partnership that can help optimize your IT estate to usher your organization into the next phase of growth.
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