Desperately needing a major software upgrade but unwilling to pay through the nose for a new enterprise software license on which his vendor insisted, Dave Waterman recently found himself between a rock and a hard place. After weeks of negotiations in which he attemptedâ€"unsuccessfullyâ€"to wring price concessions out of the vendor, CompuWare, Waterman, the principal information analyst at utility company National Grid USA, finally swallowed hard and did what he had to do: He walked away and found a new vendor.
For Waterman, the experience represents a change in his relationship with his enterprise software vendors, which historically had been willing to bend the rules and negotiate licensing terms.
"The rules have changed," said Waterman. "As licensing models have evolved, it's become increasingly difficult for us to get a break."
Waterman isn't the only IT manager searching in vain for a break on enterprise software licenses these days. As times have gotten tough, vendors have increasingly been playing hardball, negotiating more toughly and coming up with software pricing strategies intended to generate cash flow by, for example, stimulating upgrades and pressing customers to forgo perpetual licenses in favor of software rentals, enterprise customers and analysts say. While some of these vendor-introduced licensing schemes can save some customers moneyâ€"enter prises willing to upgrade frequently, for exampleâ€"for most, they have brought only uncertainty and new management headachesâ€"not to mention higher software bills.
As a result, savvy enterprises are adjusting their software buying strategies. Some are looking more favorably on open-source software, which can often be licensed for far less than traditional commercial software. Others are arming themselves with the most current and complete information about pricing strategies they can find and demanding further discounts or added services and support. They are also resorting to tried-and-true negotiating tactics, asking software companies to match competitors' prices and even switching vendors when demands are unmet. Lastly, experts say, IT managers can combat software vendor hardball tactics by being willing to delay purchases to get the most cost savings out of a deployment.
"Just because the vendor licensing strategies have changed doesn't mean IT managers shouldn't continue to use traditional tactics such as lengthening the contract term, asking for software bundles or opening the bidding to competing software suppliers," said Chad Robinson, an analyst at Robert Frances Group. "Software vendors are under extreme pressure to improve their financials, and IT managers who don't use that to their advantage will find it difficult to keep acquisition and management costs from rising."
Contents
 Digging into the details | |
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Handy hints: The art of the deal | |
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One law? Sure, but this one isn't it | |
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Open source = no problems