Why the public sector needs to optimise its software costs now more than ever

The coronavirus pandemic has deeply impacted industries across the globe and the UK’s public sector has been no exception, with increased pressure felt beyond central government, impacting all public institutions. All eyes are on the public sector’s handling of the current situation, and on government spending in particular as they are forced to tighten the purse strings.

Leveraging the potential of digital transformation has also been a challenge in the past for the public sector, something which has only been complicated further by the effects of Covid-19. Digital transformation remains a priority in order to support future service development, but as government spending faces increased public scrutiny, it’s never been more important for the public sector to deliver value for taxpayers’ money through initiatives like software and cloud cost optimisation.

Below are just some ways in which public sector organisations can look to optimise their software costs at a crucial moment in time.

Plan ahead

Ensuring taxpayer value for money is a key focus of software cost optimisation and as local councils, as well as national governments, see huge demand for their digital services, getting it right has never been more important. Indeed, organisations risk wasting valuable resources, as well as loosing public favour, if they mishandle the current situation. If navigated correctly, they can come out on top.

An integral part of software and cloud cost optimisation is getting the negotiation process with software vendors right. To do this – and to get an optimised software contract – you must start planning well in advance of your current contract’s end or before you sign a contract for any new product.

For impending renewals, we suggest starting this process at least 12 months ahead, focusing on the historic and future value to be derived from each component of the investment as well as the overall vendor contract. Once this information has been collected, it’s then much easier to see what is and isn’t necessary in a future contract and how you need it to commercially work for you, benchmarking against other successes in your part of the public sector and beyond.

As part of this process, it is also important to engage with all relevant stakeholders in the organisation to find out their software needs and requirements. Also put together a strategy to manage messaging and communications out to the vendors who will be doing their utmost to get some early insight to the renewal and control their commercial outcome from the process.

Once these stages have been planned and put into action, public sector organisations can then approach vendor negotiations with a stronger, evidence-based investment case and start to understand the commercial leverage necessary for getting the best deal.

Know your vendor and the market

It’s also important to consider a software deal from a vendor’s point of view. Look at the sales representative and look at their negotiation strategy. What is their current sales focus and how are they incentivised and renumerated? For example, are they always looking to sell you a new SaaS product even through it doesn’t feature in your near-term plans or technology roadmap? Are they looking to upsell other products or services into new areas of the organisation to maintain the revenue cost of the renewal?

Understand the impact of OPEX costs

Similarly, look at the software market in general for current public sector trends, such as the uptake in premium cloud spend. Covid-19 has enabled Microsoft, for example, to quickly upsell Teams. It is now a core communication and collaboration technology for many education entities, allowing lectures, lessons and tutoring to be conducted online during lockdown, with usage continuing after pupils and students have returned. The cost profile of what was needed at the time and what the future needs may not be aligned, although it is fair to say that in light of Covid-19 there is no conclusive view of what may happen in the future and what the demand for the technology will be in the longer term.

Services and products that were once elective are now, for a while at least, a core requirement. This rapid change to a portfolio needs careful management, as it is the conditions that often create the largest cost increases and can become the hardest to optimise if value is not understood and benchmarked effectively.

As we move away from capital expenditure (CAPEX) and into a more operational expenditure (OPEX) subscription-driven world, cost management becomes harder as the smallest of decisions can have an ongoing cost implication. Decisions today have a much longer cost impact to budgets month-on-month and year-on-year. This changes how renewal cost optimisation needs to be approached.

Proactively managing the portfolio to optimise renewals is now a must. The capabilities need to be there to continually assess consumption, future needs and investment value. Having the right optics on cloud services and subscription spend is imperative to achieving on-going cost optimisation outcomes and driving better overall value.

Get expert advice

It is more important than ever before for public sector organisations to optimise their technology related costs. Software and cloud services that keep the country running and supports the public are no exception. At Livingstone, we understand that this can seem like a daunting task. We have extensive experience managing scale, enabling simpler integration of digital services, and helping to optimise costs. For public sector organisations, this means smoother digital transformations and limiting the financial impacts of Covid-19 so that public service can continue.

If you’d like to know more, you can view our webinarA Blueprint for Public Sector Software Cost Optimisationon-demand.

Alternatively, contact one of our experts



Author: Chris Gough, Chief Strategy Officer, Livingstone Group

Chris has worked in the IT Industry for over 20 years, starting as a consultant he then took on more senior practice management roles, focusing on networking, security, data centre and unified communications and in recent years specialising in data centre optimisation and particularly in software licensing. Having worked with large enterprise organisations, Chris understands the challenges faced in data centre licensing and the lack of expertise in the marketplace.

Having founded the Derive Logic business until its acquisition by the Carlyle Group in April 2019, Chris is now on the senior executive board for the world’s largest independent IT Transformation Assurance and Software/Cloud Risk Management business, Livingstone Group.