New Strategies for Better Deals

IT managers are in a strong position to negotiate with software vendors and get more for their money.

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Asset management tools need to be backed up by organizational practices such as systematic enforcement of software retirements, says Snyder. Otherwise, data center administrators may keep an old system running while a new system is being tested and deployed but then forget to delete it, he adds. Be aware, too, that some software packages don't remove everything from the registry when you delete a program, or they may allow two versions of the same program to coexist.

Baker Hughes recently instituted a practice of assigning software to computers rather than to individuals, Crisp says. "When we decommission a computer, we harvest all software associated with it and reuse it more effectively," he notes. The payback: Microsoft enterprise license usage has stayed flat, even though the company has purchased additional machines and equipment, Crisp reports.

Centralizing software administration has enabled Crisp's group to accurately charge business units for software costs. Further, "it definitely helps us get volume discounts," he says.

However, asset management tools have yet to catch up with per-usage pricing models offered by SaaS and virtualization vendors, cautions IDC's Konary.

Time to Bargain

Providing usage statistics to a vendor can give you leverage at the negotiating table -- as long as you know how to bargain. For example, if your vendor insists on invoking a contract clause that penalizes you for giving back unused licenses, ask if you can reallocate the cost of those licenses to other products that you do need, Altimeter's Wang advises.

One way you can get your enterprise software vendor to listen is to mention that you're considering going with an alternative product, such as an open-source or SaaS offering.

Mosaic, an Omaha-based organization serving people with intellectual disabilities, wound up going with open source even though it hadn't originally planned to do so. As part of a desktop virtualization project, the nonprofit compared existing Microsoft products to Linux alternatives and found that the latter offered major savings in license fees, in-house IT infrastructure needs and staff costs, says Thomas Keown, data storage and security administrator at Mosaic.

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.

But IT decision-makers should thoroughly evaluate the cost-benefit trade-offs of an alternative type of software. While moving to open source 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.

Support can also be an issue, says Wang. If you're installing Linux software and you don't want to pay for outside help, he says, "you need a team that's trained in Linux software development." And make sure any open-source product you're considering has an active online support community. "Look at forums and bulletin boards and see how fast someone responds when you post an issue," he says.

SaaS, too, can provide significant cost savings over traditional software offerings, but it isn't a slam-dunk for all companies.

For small and midsize organizations, a hosted solution provides access to high-end systems and expertise they might not be able to afford otherwise, says Wang. For example, when 20/20's Warren evaluated tools for building a customized CRM system, he found that Force.com would cost about 75% less than a comparable packaged offering. Factors that drove up the cost of an on-premises product included licenses and the need for in-house IT infrastructure to support the software.

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