Revisit Contracts Already in Place
Customers have more power than they might think in negotiating an existing contract. "A customer's leverage is not just to go to a competitor," explains Frank Scavo, president of Computer Economics, a 28-year-old IT research firm.
According to Scavo, customers can use "events" in the normal course of a relationship as opportunities to negotiate, such as buying more user licenses or modules, or upping the ante to a longer-term contract.
[ Time to pull out the checkbook? Prepare yourself with "Seven strategies for highly effective buyers" ]
"If you're planning to buy additional modules from an apps vendor, use that as an opportunity to negotiate better terms and conditions," Scavo advises, "perhaps to get a refund on other modules not implemented, or to lock in maintenance fees at some fixed rate. Or to get computer-based training thrown in for free. Roll that discussion in as part of the transaction. You may not get what you want, but there's no better time to ask than at the point where the vendor wants to make a new sale to you."
Also, Scavo suggests assessing what you have and what actually gets used -- for both support options and application modules -- since some customers inevitably wind up paying for more than they ultimately put into practice.
"With Oracle, the way the license is negotiated you get the kitchen sink. There are definitely features in there that we pay for but don't use just because the package is so big," says John Mayes, associate vice president and chief procurement officer of Yale University.
Scavo also recommends that IT look hard at how many user license seats you initially purchased and how many are currently being utilized because while the vendor will tell you if you've exceeded the original number, they're not as likely to let you know about the surplus you're still paying to use, support, and maintain.
[ If you skip the fine print, you may not get your money's worth. Read "Are you paying too much for software licenses?" ]
Yet another option for cutting costs is to consider a lower tier of support. "A lot of CIOs and CEOs are rethinking the level of support and what they're getting for it. People are cutting costs where they can," says Laura DiDio, a research fellow with Yankee Group. "But there's a sense among CEOs and CIOs of 'let's not be pennywise but pound foolish,' so they at least get phone support."
SAP, for instance, offers Enterprise Support at the high end. According to an April 2008 IDC report entitled "The Evolution of SAP Support Services," software upgrades, updates, and patches are the chief reasons customers purchase premium support. Older, more mature applications that run with relatively few problems could be ripe for a lower level of support, such as SAP Standard Support or even the project-level SAP Safeguarding.