Get more for your enterprise software budget: Negotiating strategies

There are more choices to navigate these days, but some fundamentals still apply, too

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"You absolutely need to figure out your business software goals upfront," says Thomas Jefferson, former vice president of business technology at TMP Directional Marketing. While at TMP, he had monthly planning meetings with the CEO, the CEO's direct reports and several strategic business managers. "We would go over what we're doing, where we're going, and make sure this strategy is reflected in the overall IT road map."

TMP has been discussing the potential business benefits and cost trade-offs of implementing a document management system, Jefferson says (and a current IT executive confirms). This would save on document access time and improve customer responsiveness, but would also require expanding storage and SAN capacity and purchasing additional licenses for storage software, databases and client data access applications, he notes.

Once the group has assessed what resources the new system will require, they can go to vendors and say, "We're going to need approximately this number of licenses over the next three years. How can you guys help me do that while taking advantage of today's prices?" Jefferson says.

Know your assets

IT decision-makers also need to get a handle on their own software installations -- not just what's out there, but who uses it when, and how often. This is particularly critical if you're thinking about going with a pay-per-usage pricing model.

Over the past few years, industry bodies such as international standards organization ISO have collaborated on a set of software asset management (SAM) best practices for reducing software costs. Practices include eliminating or reallocating underused software licenses, eliminating overhead associated with management and support, and ensuring compliance during vendor license audits.

Practicing effective SAM involves systematically and regularly inventorying software assets, determining usage and comparing what's installed with what the license agreement entitles you to, says Gartner's Snyder. Companies that do this "are in a powerful position to drive down software costs," he adds.

Unfortunately, many IT staffs have trouble establishing entitlement information accurately because they do it manually and fail to keep documentation, according to Snyder. Software purchases are often made by individuals or business groups, with limited or no IT oversight. This severely limits IT's ability to negotiate volume discounts, and "vendors take full advantage," Snyder says.

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