Don’t be an innocent lamb – prepare to renegotiate your software contracts on your terms…
Your software vendors have an agenda for the renewal of your licencing contracts – and this will be your de facto agenda if you fail to plan well in advance.
The salespeople from the big guys (Oracle, Microsoft, IBM, SAP, Vmware, Adobe et al) want specific outcomes including:
- Convert your payments from perpetual licences with maintenance to subscriptions in the cloud (and charge you more)
- Shunt you into their strategic product set (they love to report cloud revenue)
- Sell you the biggest possible bundles (and lock out competitors)
- Lock you in with a predictable (and growing) revenue base
This almost certainly will not align with what you need – such as:
- Control and reduce costs
- Get a Return On Investment (ROI)
- Eliminate shelf-ware and wasted spend and only pay for what you use
- Remain compliant and audit ready
- Avoid lock in – and allow flexibility to move to alternative vendors
The following list outlines the steps you need to take to gain control of your own destiny.
First things first, create a negotiation schedule
Effective negotiation of any major contract requires a bare minimum of three months – but be nice to yourself and allow a minimum of six months.
Pareto the overall software spend (by cost and risk) and map out the renegotiation schedule for the next two plus years – ensure:
- You have sufficient governance in place – you do have the support of senior stakeholders, don’t you?
- Alignment to your strategic planning schedule
- Alignment to your budgeting and demand forecast
- Alignment to your project pipeline
- You have allocated sufficient resources to undertake the planning tasks – this is important so treat it like a project and book in the help you need in advance
Now, for each prioritised software vendor, prepare yourself with the following eight steps…
Understand what you are paying for
Have you got copies of all the past and current agreements, master agreements and supporting documentation such as price lists, product use rights, true ups, disputes, invoices and credit notes?
Have you got a clear list of current entitlements including?
- Perpetual licences with current maintenance
- Perpetual licences without current maintenance
- Are the entitlements clear – Unit of Measure, restrictions by geography or business unit, etc.?
Assess the current level of value realisation
Establish an assay of the ROI for the current investment:
- Have you got a clear view of deployed inventory?
- Are the entitlements fully deployed?
- Are deployed instances in use?
- If deployed instances are in use, is it benefiting your organisation?
- What is the total cost of ownership (service desk, hardware, hosting, operations, etc.)
- Are the software products causing disruption – high incident rate and lots of open problems?
Is your deployment and usage of the software products compliant?
- Have you got a positive Effective Licence Position (ELP)?
- Is usage within the Product Use Rights?
- Are the common compliance traps for the software products under control (think old favourites like virtualisation, cloud usage rights and indirect access)?
- Prioritise any compliance risks by financial impact and likelihood of discovery and establish a remediation plan. Compliance is not an option – going into contract negotiations while blind on compliance will render you culpable.
Establish your requirements
Even at the highest level, this helps put you in control.
- Talk with your customers – what are their priorities?
- What is your demand forecast?
- Can you reduce the volumes under contract?
- Are any systems due for retirement and could go to a lower level of maintenance – or third-party maintenance?
- Align to organisational and IT strategy
Understand what your vendor wants
Research your vendor – find out well in advance what they will be trying to achieve
- Talk with account representatives – just ask what incentivises them
- Talk to resellers
- Google the vendor and establish market intelligence
While the big players (Oracle, Microsoft, IBM, SAP, Vmware, Adobe et al) have much in common such as driving the customers to long term cloud lock-ins, bundling products to lock out competitors, etc, their sales staff have unique drivers:
- Microsoft – Microsoft 365, Azure, Dynamics
- SAP – all things HANA, SuccessFactors, Concur, Ariba
- Oracle – need to make significant ground in Infrastructure as a Service (IaaS)
- IBM – Watson, BI, Bluemix
Understand the competition
Establish the key competitors and high-level feasibility/cost to transition to alternatives
- Can they meet your requirements?
- How disruptive and costly would a transition be?
- Can they pose a serious threat to the incumbent?
Define and short-list your options and work towards a decision
Start with all ideas on the table and work towards a short-list
- Narrow down on viable options
- Prioritise selection criteria
- Socialise and communicate recommendations
- Engage the vendor and give them an opportunity to respond and to provide counter proposals inside a defined engagement structure and timeframe
Transition the changes to your organisation
Effectively communicate things changed by the new contract
- Is there any impact on end users?
- What does your service desk need to know?
- What do the IT operations people need to know?
- What do your architects and planners need to know?
- Do you need to establish new controls and risk mitigations?
And just to reiterate, never forget your customers in all the excitement – ensure you fully engage them at three critical steps:
- Establish your requirements – what do they want?
- Define and short-list your options – how can we get them what they want?
- Transition the changes – ensure you transition what the customer wants as smoothly as possible
ELS lives and breathes this stuff – contact us today for a no obligations initial discussion.
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