Negotiation with software vendors – rely on alternative solutions

Partager sur Facebook
Partager sur Scoopit!

Competition is everywhere. Sometimes experienced negatively, it is nevertheless virtuous, pushing those who are confronted with it to develop, change or completely reappraise themselves.

One of the favourite drivers for lowering costs is the call for tenders. As all managers or buyers will say, it is surprising to see the extent to which suppliers are ready to do whatever it takes to win a call for tenders and retain their market share or enlarge their scope: reappraisal of their model, innovation, price drops, investments,… Without exception, competition benefits everyone, not only the client and the winning supplier, but also the loser, who will learn in order to come back stronger next year.

And while all this is going on, 90% of software budgets are never subject to open competition and market share is not moving. And yet…

Oracle is ready to offer discounts close to 100% when it is in competition or near to closing a sale; Microsoft slashes the prices of its email systems to win business from IBM and convert an installed base from Lotus to Exchange; CA Technologies can completely disrupt its model to replace Compuware; Orchestra, a French vendor of Master Data Management solutions has been able to divide, by 2 or 3, the range of products hitherto monopolised by Infosphere or SAP…

And the list is long. But not long enough. Few companies yet dare to reappraise their historical software vendors concerning mature technologies, even though it is a key driver for reducing costs and stopping the continuous inflation of software costs.

Changing technologies is not simple. The arguments for doing nothing are relevant (proficiency in the technology in place, trained teams, risks related to change,…) but they are not sufficient. It can be tried and in any case it should be studied unless you want to see the software vendors of the 1980s act like tax collectors who unilaterally decide to increase rates every year, change tax brackets and rules, reduce benefits,…

To save money, it is not (always) necessary to launch RFPs indiscriminately. Business cases discussed internally in advance, chosen carefully and managed in relative privacy, with skilfully distilled leaks, are enough to have the choice of an alternative and influence the negotiations.

Here are some actions that are useful for breaking down the comfortable commercial arrangements of the historical software vendors and preparing for the renegotiation of your long-term contracts, which are so expensive in IT budgets:

  • Analyse what exists, make sure that there are no compliance problems and look at the software components that cost, and will cost, the most – work using trends: over the last 5 years, today and 5 years into the future
  • Select 4 or 5 products to be dealt with during the year, for example: all or part of the DBMS, application servers, email, one or more office software components and a business-oriented application
  • Bring together Procurement, Software Asset Management and IT to identify credible alternatives in the market – open up and go and see what happens in similar companies, in France and abroad
  • Get the challenging software vendors to do some work, discreetly, under NDA. If the exercise is performed on several software programs, the same supplier may sometimes be the challenger and the historical supplier. So much the better

 Finally, use these alternatives to lower costs,

  • Either by deciding to switch, in which case it will be necessary to include the costs of investment and change in the business case, and the double run. The challengers may bear part of the cost of change and cover any side-effects with the historical player (price increases, risk of audits and threats of any kind)
  • Or by using this alternative, which will have reached the ears of the historical supplier as a threat, to demand substantial trade-offs and commercial concessions

Bringing historical software suppliers into competition and having alternatives is essential

It is a fundamental project which must be prepared and will last over time. It must not be a threat that is made likely, but rather built on an organised approach around a hard core going from the IT department to the procurement manager and the SAM team. For the approach to be credible, there must be concrete achievements and “counter-fires” and a well-oiled internal and external communication strategy, without which the market will not feel under pressure and the historical players will be free to continue to grow peacefully within the organisation, without competition…

Partager sur Facebook
Partager sur Scoopit!