How to Get Tough with Your Tech Vendors

Planning a purchase from a major IT vendor? In this still-tough economy, negotiating pros recommend being aggressive and creative, as well as analyzing your requirements first so that you don't buy more than you need and know where you can compromise.

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Which agreement is real? "Some companies are real slimy about putting terms and conditions in the purchase order" that may override the master services agreement you negotiated, says Tony Greenberg, CEO of RampRate, a sourcing advisory firm. Not all vendors regularly steer users to the corporate agreement that contains the conditions most favorable to the customer, notes Miro Consulting's Colon.

How does virtualization affect licensing? Virtualization helps companies save money and boost agility by letting them move virtual machines within pools of hardware. But if a vendor requires a separate license for every server, processor, or even processor core, licensing costs can skyrocket.

Colon says that for two years customers have tried and failed to push Oracle away from per-core licensing. By contrast, Ullman says Microsoft has "a very good set of licensing rules for virtualization for Windows, and is slowly but surely adding licensing options for additional products," such as its management software and SQL Server database.

When dealing with IBM, the quality of your relationship with the sales rep determines the amount and quality of information you get about its virtualization licensing, says McLachan.

The situation is murkier at other vendors, including EMC and SAP, as the companies work out their virtualization licensing models, the companies admit. So you may find clarity in some products but not in others. For example, "at EMC, we have specific versions of our non-array-based software" designed and priced" for virtual environments," says a spokesman; "we are working to assign licensing metrics that reflect the value that EMC software delivers to customers."

Are you locked in to a cloud? Blake says pricing models for cloud services and SaaS (software as a service) are becoming more complex and sometimes violate the cloud's "pay as you go" promise by requiring a multiyear commitment to get lower prices. (InfoWorld executive editor Galen Gruman reports he's increasingly hearing complaints from CIOs that Salesforce.com's pricing is designed to discourage pay-as-you-go, flexible use in favor of multiyear contracts, for example, that end up making Salesforce.com's value no different that traditional enterprise software vendors.) Some cloud and SaaS vendors also don't reduce the customer's costs if their usage drops below an agreed-upon level, Blake says.

Are vendor audits just fishing for revenue? Software audits can be a legitimate attempt by the vendor to protect their interests -- or to extract more money during tough times. Compliance teams often "overzealously pursue their own revenue targets outside of the main account team's control," even if it harms the vendor's long-term relationship with the customer, wrote Forrester's Jones in a January 2009 report.

According to an informal survey of 60 customers conducted in August by Martin Thompson, editor of the IT Asset Management Review, 78 percent of respondents had experienced an audit in the last year, with Adobe Systems, IBM, Microsoft, Oracle, and SAP most active.

If a vendor's sales team launches an informal audit, says Colon, ask why it is looking for the information. If it turns out it suspects you are underlicensed, use that information to bargain for a better price on the additional licenses, rather than turning over all your usage information so that the rep can look for possible violations, he says. If you must undergo the time and trouble of supplying information, make sure you get a clean bill of health at the end.

The best protection against audits, consultants agree, is a strong asset management program that ensures compliance or at least gives you evidence to defend yourself. (Microsoft, says Thompson, has done more than other vendors to promote software asset management to help customers stay in compliance.)

Is vendor financing just a trick to increase your costs? Vendor financing, with the backloading of some payments until a later time, may be attractive but watch out that the vendor doesn't calculate your maintenance fee as a portion of the larger, back-end payment rather than as your lower, regular payment, warns Snyder. That type of calculation can raise your costs unexpectedly.

The bottom line: Negotiate Despite the shaky economic recovery, consultants say it's still mostly a buyer's market, with vendors competing for your IT dollar. Use the uncertain economy -- and the knowledge that vendors need your dollars -- to drive smart deals based on a clear-eyed knowledge of your real needs.

This article, "How to get tough with your tech vendors," originally appeared at InfoWorld.com. Keep up with the latest developments tech industry news at InfoWorld.com.

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This story, "How to Get Tough with Your Tech Vendors" was originally published by InfoWorld.

Copyright © 2010 IDG Communications, Inc.

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