Stopping the Leaky Faucets of Cloud Subscription Costs
Cost management of IT subscription services is much like a leaky faucet. It does not seem very significant until you put a bucket under it, and you quickly have a bucketful of water. So, let's discuss how to turn that bucket of water into gold -- by managing your cloud subscriptions.
Let's start with duplication of services within the unified communications (UC) and collaboration spaces. I recently talked with an enterprise client that was trying to figure out why its costs for subscription conferencing and collaboration services were so high and growing. In looking further, we discovered the company had conferencing services with four separate service providers... in addition to its UC endpoint licenses. After looking a little further, the company realized many of its users had multiple subscriptions to services such as Webex, Zoom, and GoToMeeting -- and that was in addition to the company's standard UC license for each user as well as Slack Channels. For this business, the problem was three-fold:
- No centralized management visibility of user licenses across the enterprise, or even business unit
- Staff often purchased the subscriptions using credit cards, with automatic renewals
- Poor user adoption of the IT organization's preferred and least expensive solution, due to lack of training
This environment is similar to what we saw in the mobile industry as smartphones became a critical IT asset for individual workers. In the good old days, individuals and business units typically purchased mobile phones with individual voice and data plans. Eventually those plans were consolidated into corporate plans, leveraging management sharing data plans and reducing overall cost for the enterprise. As it turned out, in the case of the client I mentioned above, the business found that 30% of its staff were subscribing to at least one unnecessary collaboration tool subscription. After disconnecting the unnecessary cloud licenses, the business realized about $70,000 in savings.
There's Gold in the Cloud
A second bucket of gold can be found by evaluating cloud license levels for each user. As organizations move to the cloud, they make purchasing decisions based on what they think their users will adopt -- an approach that is frequently overly optimistic. While UC cloud providers are moving to offering fewer license levels, over-subscription by users can still be a significant problem, and subscriptions should be re-evaluated on an annual basis.
To put this in perspective, if an enterprise has 10,000 users with higher-end licenses, the cost savings could be as much as $8 per user, per month. It may not seem worthwhile to focus on costs that small, however, on an annual basis, that's just under $1 million in savings.
The problem we have in the industry is that the service provider has no incentive to report out who is using a given feature, which would allow an organization to make appropriate adjustments to its cloud agreements. Fortunately, there are tools to monitor and measure the types of services that are used. For example, video calls are tagged on the network, so we know the amount of network utilization for video calls, but not who specifically is making use of video features. So it's difficult to associate it back to individual licenses.
The last bucket in which you could find gold is to simply focus on the quantity of licenses you are renewing -- especially in the first year after converting to the cloud. As I said above, I find clients tend to overestimate, not underestimate, users, which frequently happens when multiple phone numbers are associated with an endpoint.
I recommend that you first look for your buckets of gold, and then divert any savings you gain to other needs within your organization. But more importantly, you need to figure out how to stop the leaky faucet. A few points to consider in your cloud contract negotiations:
- Build in flexible terms so that you can add, remove, or inactivate a license throughout the year
- Require the service provider to provide usage reports related to features associated with their various license levels
- Require the service provider to provide a cost-per-license increase as well as the annual cost increase in the contract terms
Keep Your Eye on the Details
The relatively small monthly cost for any particular user's licenses can be deceptive. However, when grouped together with all your other users, and multiplied on a monthly basis, the costs are actually quite significant. By taking an inventory of which subscription-based services your users actually use, and dropping the rest, you can gain, if not buckets of gold, at least significant cost savings.
"SCTC Perspectives" is written by members of the Society of Communications Technology Consultants, an international organization of independent information and communications technology professionals serving clients in all business sectors and government worldwide.