Insight

Microsoft Insight: Is your incumbent vendor always the best commercial option?

Insight

ITAA helped Virtuoso to understand the complex contractual options, successfully negotiate with a shortlist of vendors and achieve a €1m cost saving

*Protecting our clients’ confidence is of utmost importance at ITAA. While our case studies are based on true projects, we have used fictitious names and removed or changed other identifiable details.

Background

Virtuoso is a company responsible for collecting province taxes in the east of the Netherlands, including 95% of all outstanding tax bills. They have around 3,000 employees.
They had set a target to reduce their total IT costs by 30% within two years. They also wanted to replace their legacy systems with a lift and shift migration to the cloud.
With this in mind, Virtuoso needed to update its IT infrastructure to ensure it was reliable, stable, scalable and, crucially, cost efficient. They expressed a wish to migrate to Microsoft Azure, but didn’t have a thorough understanding of the contractual options and possibilities. They approached ITAA to help.

Our approach

Step 1: Re-assessing the consumption plan

We first checked the consumption plan Microsoft had prepared in collaboration with Virtuoso. It transpired that Microsoft was strongly recommending that everything be moved to the cloud – but this did not match Virtuoso’s goals or timeframe. The lift and shift migration timeframe was too ambitious.
Microsoft started a rightsizing of the environment, but they were using higher-priced VMs, without distinguishing between the test and development VMs.
The consumption plan for Virtuoso was estimated at €3.6m over 36 months. Microsoft didn’t mention any discount options or benefits that would make the transition more cost efficient.
ITAA helped Virtuoso to adjust the consumption plan, taking a more realistic, market-standard approach. The new term of the plan was 36-60 months, with a conservative grow curve in cloud consumption. This resulted in a €2.9m– €4m consumption over 36-60 months.
To help keep consumption under control over this period, we also helped Virtuoso to create a governance structure.

Step 2: Identifying commercial options

It was important to help Virtuoso understand that Microsoft’s Azure is not the only way to migrate to the Cloud. We worked with their IT architects and Procurement team to explain that, in our experience, a multi cloud strategy can be more flexible and also lower cost.
We carried out an assessment to compare the list pricing between Azure, Amazon Webservices (AWS), Google Cloud and the Ali Baba Cloud. We educated Virtuoso on the different sales models, benchmarked the pricing against the market standard and explained the commercial offerings. It turned out that, based on the list price, Microsoft was not the most cost-efficient option for Virtuoso.

Step 3: Selecting a cloud vendor

When we started working with Virtuoso, they were unclear about the different vendor options. As a Microsoft customer, they automatically gravitated towards their offering, not knowing that other vendors sometimes offer a better service.
It is always worth being mindful of the ease with which you connect with your vendor, because you might miss out on important cost savings opportunities. When you conduct your due diligence, you will find many providers – particularly in the cloud – can offer similar or better services and conditions. This does not only hold true for back-end service providers, such as Azure or AWS, but for all fronts.

Step 4: Evaluating the options

Virtuoso decided to select a single cloud vendor for their journey. Together we made a shortlist, which resulted in a deep dive into AWS and Microsoft Azure. We assessed both providers on their implementation costs, running costs, flexibility and exit strategy in the future. Based upon the outcome, we helped Virtuoso to negotiate with both vendors to ensure the best final conditions.

Results

Originally, Virtuoso was anticipating a running cost of €3.6m over the coming years. With ITAA’s help, they reduced this by more than €1.1m. This led to a more favorable contract of €2.5m over a three-year term. We achieved this by:

  • Offsetting the different vendors against each other
  • Optimizing the consumption plans from the vendors
  • Leveraging benefits to their maximum – if you don’t know, always ask!

In addition, the selected vendor agreed to fund the initial lift and shift, and Virtuoso is currently migrating to the cloud as planned. They have been able to reduce cost of the contract and access a solution that is many times cheaper than hosting their own data center.
Can we help your company migrate to the cloud or explain your different options? Speak to our Microsoft expert, to find out.

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