The first European HFTP Hangout in June was a masterclass on hospitality business software-as-a-service (SaaS) costs and cloud services optimization. It was presented by Carson Booth, CHTP, HFTP Global director and former CEO of SnapShot GmbH.
Cloud services optimization really refers to trading services and costs. While you have the time, it is worth reviewing all your hotel and business cloud services contracts — from SaaS to service-level agreements (SLAs) — and even for any potential new services or applications you may be considering. This is an important first step.
When looking at SaaS providers, there is not a lot of room for providers to flex costs for customers. While some expenses such as product development and cloud storage have some flexibility/scalability, most expenses — think staffing product support, customer service and administration to technology networks — are fixed. When you ask them to flex on costs, they have to dig into their own pockets pretty quickly.
Where you can get more optimal use of your service is by following these four steps:
- Know your cloud usage
- Customer-driven spend optimization
- Right-sizing the technology
- Building long-term partnership value
Know Your Cloud Usage
It is very important to understand your cloud usage when you begin your evaluation. Start by aggregating and inventorying your SaaS contracts. Where are the original contracts? Do you have clearly defined service levels? Who is using the apps? Does the business understand the value? Define and prioritize services based on business criticality.
At a minimum, you should aggregate contract start and end dates, renewal dates, automatic renewal terms, required non-renewal notification lengths, cancellation policies, required notification methods and reminders.
The key takeaway from this process involves your business’ central repository and management process for all SaaS contracts. Is there a clear ownership and review process?
Customer-driven Spend Optimization
Once you have a clear understanding of the current app management and business use, optimize the licenses. Remove departed and non-essential named users to reduce active seats, and consequent costs, and consider concurrent user licensing.
Be sure to keep an eye on your security, privacy and GDPR requirements for all access points to personal data and information.
Review your API access: Have you optimized your data pulls? Is there a need to pull data as frequently, and can the amount of data being pulled be reduced?
Look for terms or re-negotiation opportunities to allow flex based on business levels — perhaps based on occupancy, revenue share or a usage level. Unforeseen business “black swan” events like the Covid-19 pandemic are perfect opportunities to review or re-evaluate the negotiating language in your contract to allow temporary relief in these instances. This might include a reduction in SaaS fees temporarily in exchange for an immediate extension or longer renewal. Providers have considered these alternatives with success.
Ensure scheduled releases, outages and maintenance windows coincide with the lowest business impact. Consider a reduction in release cycles, a direct opportunity for the provider to take support staff out of the equation or otherwise reduce costs on their side.
Look at what is in storage. Do you really need seven years of history? Review the long-term storage requirements, the type of data you are storing and whether it is necessary.
Finally, review and optimize your scaling, deployment and support resource requirements. If you need to pause services or scale back resources, have a candid conversation with the solution supplier and take advantage of any potential cost savings. This also provides a level of predictability, transparency and trust with the supplier.
Next, perform a technology review. Review networking, processing and storage for over- and under-capacity. You might be spinning disks and processors that are not necessary and can be taken offline.
Also, review your dedicated processing versus on-demand processing. There has been a major shift to on-demand, and while it may be more expensive from a compute-per-minute perspective, you also do not spin on idle. So, be sure to consider the pros and cons with your solution provider to determine what data can be taken off on-demand processing.
API performance is another interesting element: are there bottlenecks in data processing that can be optimized? This is another opportunity to save money on storage if data is unnecessarily stored in multiple places. You can also offload data to cold storage and review restore SLAs and possibly reduce costs in this area.
It is important for both the business and the supplier to have candid conversations regarding service levels. Conduct performance reviews and evaluate support response times and resources, after hours and weekend support, and processing and storage capacity.
In the end, it also begs the age-old question of “buy versus build”: are these services better suited to self-manage? This is a serious question to consider, but not an easy one to answer.
Building Partnership Value
It is critical to ensure trust and build a solid relationship with suppliers. You have to seek win-win opportunities. When it comes to negotiations, large suppliers are very tough, while smaller suppliers are more open and flexible. Always keep in mind that taking money out of their pockets now could cause bigger issues for them later down the road. Every supplier has fixed costs and may end up negotiating against themselves.
Be careful with high-risk/business critical systems; it is often best to start with these last. You do not want to run a service level to the bare minimum and put your business at risk by doing so.
Focus on the future contracts, opportunities and relationship. Leverage future requests for proposals (RFPs) and services as a negotiating point. This may include renewing and extending contracts earlier for discounts, added licenses or subscriptions. While larger suppliers tend to be less flexible, they are more open to future opportunities, and to leverage these opportunities into a deal for the day.
Nobody wants to give away free money, but future value can be very interesting to suppliers. Note: Be careful when pre-paying for services. Not only can this cause cash flow problems to your business, you tend to lock yourself in, which invites risk. And, if the business does not survive, this money has been effectively wasted.
Remember the competitive landscape. Start thinking about what alternative services and solutions you can move to. Make sure you are ready for that change before issuing the threat. Also, remember: you have nothing to lose by asking.
- Review and be informed of your contracts — where they are, what they consist of and how they are being managed.
- Look to optimize with your business partners. This cannot be done in isolation. All stakeholders need to be at the table.
- Your existing suppliers are absolutely interested in building a stronger partnership with your business and seeking win-win opportunities.
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