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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In the case of Mosaic, which provides care for intellectually challenged individuals, the organization did wind up going with open source, even though it hadn't originally planned to. Shortly after a merger with another firm, Mosaic decided to centralize its client data and applications using NoMachine's virtualized desktop software.

"Our in-house Linux guru suggested migrating to open-source applications at the same time," says Thomas Keown, data storage and security administrator for the firm. A proof of concept for Windows and Ubuntu Linux found that the latter offered major savings, particularly in terms of license fees, in-house IT infrastructure and staff costs.

Software negotiations

Sticking with Microsoft products as the company virtualized would have meant paying separate per-user license fees for the Windows Terminal Server client, Keown says. In contrast, NoMachine's clients come free with the $800-per-server annual subscription fee.

Moreover, Mosaic was at the point of needing a second Microsoft Active Directory server, which would have required another half-time administrator. The freeware directory server OpenLDAP does a more-than-adequate job with just one server and one administrator, Keown reports.

Mosaic could also drop its Norton AntiVirus software, since Ubuntu Linux had built-in security, Keown says. "In four years, we haven't had any instances of viruses on Linux desktops or servers," he notes. Mosaic also replaced Microsoft Exchange with Google's Gmail, which it gets for free as an educator for handicapped individuals.

Factor in the real costs of switching

Keown conservatively estimates that moving to open-source software has saved Mosaic $465,000 annually, or about 19% of its IT budget. The organization has about 1,500 users nationwide.

IT decision-makers should thoroughly evaluate the cost-benefit trade-offs of an alternative type of software. While moving to freeware was the right choice for Mosaic, "every company has to do its own evaluation" of license, deployment, maintenance and support costs, Keown says. Particularly in larger companies, integrating open-source software with existing IT systems can be a problem.

Also, support can be a definite issue, says Altimeter's Wang. "You're putting applications in yourselves, so you need a team that's trained in Linux software development" if you don't want to pay for outside help. And make sure an open-source product has an active online support community, he adds. "Look at forums and bulletin boards and see how fast someone responds when you post an issue."

The hosted alternative

Like freeware, SaaS can provide significant cost savings over traditional software offerings, but this approach is not an ROI slam dunk for all companies.

For small to medium-size firms, a hosted solution provides access to high-end systems and expertise they otherwise couldn't afford, says Wang. For example, when 20/20's Warren evaluated tools for building a customized CRM system, he found that's would cost about 75% less than a comparable packaged offering. Major cost items for a comparable on-premises product included licenses and building and maintaining an in-house IT infrastructure to support the software, he notes.

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