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Arm Yourself with Information Understanding Your Entitlements for Effective Negotiations

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October 01, 2007
Property | Technology
Walker White

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© 2008 Hospitality Upgrade. No reproduction without written permission.

Negotiating with software vendors is a four-word phrase that sounds about as appealing to most IT professionals as going to the dentist. Every year brings new perils: The pricing structure might change, the vendor could audit you, and besides that, how do you know how many licenses to buy?

Most companies respond to this situation as if they were planning for a picnic: Buy more than you’ll ever need, and everyone goes home happy. Industry experts have estimated that companies buy up to 30 percent more software licenses than necessary.

And what’s more, adoption isn’t a straight line. In reality, the lifetime usage pattern of a software product is usually a bell curve, yet many companies buy more seats than they’ll ever need from day one, and sometimes keep paying for those seats through the end of life process.

Fundamentally, software license negotiation requires two critical inputs: first, what is your company entitled to use, and what is your company using?

Understanding your entitlements is a job for the procurement team, and understanding your installed base and usage is a job for the IT department.

Since most terms and conditions of software entitlement are captured in the pages of contracts, the first step must be to summarize these entitlements for the negotiation team. Often, the terms and conditions will vary across business units and divisions, with different organizations buying on different licensing models and cost structures.

Many organizations will ask the vendor to provide information on which divisions or business units have signed contracts with them. While this represents a potential starting point, the organization must realize that the vendor’s records may be even less reliable than your own. A software vendor, like any other organization, is constantly changing personnel, processes, systems and sales channels. As such, be sure to undertake your own investigation as well for comparison purposes.

Armed with at least a basic picture of entitlement, your attention can then turn to understanding what you have. While there are many tools that can potentially provide this information, most introduce either technical or organizational hurdles which can be hard to overcome.

Classic agent-based inventory solutions require software agents to be deployed and maintained across the entire organization. While this may be necessary for certain processes such as full lifecycle management, the cost and timeframe required for the implementation is too long to be of value for software license negotiation. Other inventory solutions require the use of privileged (administrative) accounts which creates organizational challenges. Security and operational teams will be resistant to deploying broad administrative accounts.

However, more advanced tools available today provide the ability to very rapidly gather the software inventory without intrusive software agents or privileged accounts. These tools enable organizations to capture their software inventory at lower cost and risk within the timeframes typically necessary to be effective for software license negotiations.

Using more advanced tools provides a clear picture of software installations for effective negotiation. With a reliable fact base, the customer, not the vendor, owns the leverage in the negotiation.

Organizations should remember that software vendors rarely have good information with which to negotiate effectively, but they will often prey on their customer’s inefficiencies. By creating internal processes around software usage and a fact base of entitlements and software installations, organizations can put themselves in a stronger financial position.

Walker White is vice president of technology for BDNA Corporation which enables enterprises worldwide to quickly catalog their IT assets including configuration, usage and other vital information.

What can you do to save your company money and get the most from your budget?

Here are a few simple tips:

1 Build a repeatable process for software acquisition. Software purchases can be very complex, but having a strong process for acquiring new software can simplify things. This includes procedures for everything from assessing how much people will actually use the software to documented installation processes. You’d be surprised how many large companies still reinvent the wheel every time they buy software.

2 Have a software code of ethics.
Make sure your co-workers know the dos and don’ts of enterprise software, including rules around copying software and what constitutes illegal use. Establish a code of ethics and educate your company’s employees – both inside and outside of IT.

3 Track illegal software on your network.
Ensure that you are able to quickly locate and eliminate unauthorized software from your network. iTunes can clog up your storage environment, and illicit versions of common products like Microsoft Visio and Adobe PageMaker can clog up a software audit.

4 Know everything that lives and breathes on your network. How many people have installed the latest copy of Microsoft Visio? Do we have rogue servers running Oracle? Too many organizations cannot answer simple questions about their IT environment which leads to reactive buying and loss of leverage in negotiations.

All of these things are easier said than done. Creating the organizational processes to capture the full lifecycle from software acquisition request to license disposal can be a daunting undertaking. Additionally, the velocity of the software (and hardware) environment does not lend itself to classic inventory management processes.

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