Posts Tagged ‘IT cost reduction’

8 More Tips For Getting A Good Deal In Software Negotiations

December 16th, 2010

#1. Don’t spill the beans. Often, vendors talk to people at buying companies before the negotiations start, then gear the negotiation to the budget. The business ends up thinking they got a good deal, when they may have got another 20% off.

#2. Use your leverage. Let the vendor know it has a credible competitor, but not who it is. It’s also crucial that the negotiator understand the marketplace climate and the relative importance of the deal. Buying a large package from a vendor that’s coming off a poor financial quarter can work to your advantage. A vendor trying to break into your vertical industry may be willing to discount a product to get a foothold in a new area.

#3. Form the negotiating team early. Nothing kills more deals than bringing in the team at the last minute, but that’s what happens about 80% of the time. Too many companies think of contract negotiations in terms of price, when that’s a small component of the deal. Today, people are focused on price, but the risk and investment are a lot higher on the implementation agreement.

#4. Future-proof the deal. What happens if the vendor goes bankrupt, gets acquired, or doesn’t live up to the contract’s terms? Future-proofing a contract gives your business rights. First, escrow the software’s source code. Most times, when a business licenses software, they only get the object code, not the core source code. An escrow clause in the contract lets businesses obtain the core source code should the vendor go bankrupt or sell its assets.

#5. Take advantage of the here and now. Use current negotiations to get better prices on future software purchases. You may be able to get a deal for additional products purchased within the next few years at a pre-specified discount.

#6. Beware of hidden fees. Does your business have the right to relocate the software without penalty? If you need a copy of the software to test a disaster-recovery plan, are you required to pay full price for another license? Such hidden costs can add up to significant extra unbudgeted spend.

#7. Customisation can bite you in the end. Be as specific as possible about what’s being customised and how it should function. If you’re not very clear, the vendor won’t build it right. Vendors often will include a provision that says if a company doesn’t accept or reject the customization within 45 days, the customization is automatically accepted. That shouldn’t be the way it works. A company should have the right to refuse a customization whenever it doesn’t function properly.

#8. Know your definitions. How are you defining a user, a partner, or a customer?

The cost of IT

April 6th, 2010

The recession has forced many businesses and public sector organisations to put expenditure of all kinds under close scrutiny, and it was no surprise to see that ‘Reducing IT Costs’ was quickly elevated to the top of many IT department’s strategic priortities. But while IT assets are an easy target fo cost reduction exercises, it’s what those assets do for the business that can have a far greater value than their removal rewards. Information flow is the lifeblood of businesses and cutting back on IT assets can quickly strangle that flow. Keeping the assets requires money but that justification can  be made easier by demonstrating: 1/ the value of the assets, 2/that the assets are being acquired and maintained at rock bottom prices through good negotiation, and 3/ that the assets are being fully sweated prior to retirement or replacement. IT management is no longer simply about running a good IT department, it now includes keeping a canny eye on cost management, ROI and contract negotiation skills. Some of these skills you may already have in-house and the rest you can buy in from such cost management advisors like Silver Bullet Associates.  Instead of stripping assets you should first squeeze your IT suppliers.

IT Cost Reduction; lessons from 2009

January 27th, 2010

According to various sources, the most effective strategies applied by businesses last year to help reduce their IT costs were 1/ encourage remote and mobile working, 2/ deploy more cost effective technology, 3/ negotiate lower IT costs with their incumbent IT suppliers, 4/ deploy open source applications, and 5/ standardise on one application platform. Many businesses were loathe to lose staff or to outsource as a quick fix. Silver Bullet Asociates helped many businesses negotiate cost savings and cost reductions with their IT suppliers last year and we are looking forward to doing the same this year. In fact, we’ve already made a fast start and have saved money for a handful of clients whose IT negotiations had drifted over from December.

When is an IT cost reduction not an IT cost reduction?

March 23rd, 2009

I had to laugh the other day. IT cost reduction comes in many forms; one of which popped up when we were questioning a well known software supplier about a proposal they had produced for a client of mine. To the comment ‘your proposal doesn’t explain whether these are list or discounted prices’, the supplier replied by saying ‘they’re neither list nor discounted prices’. Once we had stopped laughing the supplier clarified by saying that the proposal included ‘special prices that bear no relation to their own price book or to their current list prices’. They had simply bundled the software licence costs with the implementation services and the on-going maintenance costs, and had then taken off an arbitrary discount off the whole lot. We then insisted that they break down the bundled costs and show itemised list prices, discounts and net prices for every product and service. Unsurprisingly, this revealed that they had varied discounting with some items discounted aggressively and some items remaining at or near list price (the latter of which no doubt gave more commission to the salesperson at that particular moment in time). Suffice to say, itemising allows everyone to see how a deal has been shaped and enables good negotiatiors to attack both the detail as well as the total cost number.