The downturn has given organisations the opportunity to
revisit their software licences and maintenance contracts to make
cost savings.
Renegotiating contracts is a key strategy for reducing IT costs.
But before embarking on that road, experts advise organisations to
carry out a thorough software audit.
Robert Stanley, head of
Microsoft solutions at IT services firm Dimension Data said,
"We've found software audits to be highly effective in showing
exactly how many users, computers and systems are used per license
and identifying over- and under-use."
As well as a thorough audit, users should review all of their
contract models, rather than letting them roll over, said Richard
James, head of category for ICT at procurement specialist
buyingTeam.
Software maintenance and support is often seen as a fixed cost
but there are several ways in which these costs can be managed,
renegotiated or simply cut, he said.
"Headcount reductions can mean redundant licences. Terminate
support for them, or consider hibernation. Encourage use of
internal helpdesks as the first port of call. It's good for
suppliers, reducing their costs so they can pass on the
benefits.
"Also consider if legacy, stable platforms can be supported more
economically under time and materials arrangements," said
James.
Opening negotiations
When it comes to renegotiating licences and contracts, suppliers
may expect a quid pro quo, particularly if the aim is to reduce
service charges, said several legal experts.
"Unless the customer is fortunate, the chances are that the
supplier will want something in return for reducing the price. That
probably means a relaxation of service levels, a reduction in scope
and potentially a renegotiation of some of the other contractual
clauses such as liability provisions," said Duncan Pithouse,
partner with the IP and Technology group at law firm
DLA Piper. He added that
this could lead to short-term financial gain, but lack of key
services.
Another legal expert, Mark
Henley, partner at Wragge & Co, said that before opening a
renegotiation with a supplier, customers need to look carefully at
the terms of their existing contract and at the alternatives
available from the supplier's competitors.
"If moving away from the supplier will be prohibitively
expensive or not technically feasible, then there is every
possibility that they will stonewall any attempt to improve on the
original deal," he warned.
David Chan, City University London's director for the Centre for
Information Leadership, encouraged businesses to use their
commercial leverage to negotiate. "Perhaps you are intending to
extend a service contract in a year's time. By offering a longer
commitment the supplier may well drop the rates."
He also said that users should seek external advice from the
likes of Gartner, which helps
to renegotiate multi-million pound contracts, and at the smaller
end firms like
Silver Bullet
Associates.
Alternative licensing models
New models of software licensing can benefit users in these
tough economic times, and one of these is the pay-per-usage model,
also known as
Service Provider Licensing Agreements (SPLA), popularised by
the likes of Salesforce.com.
Woodson Martin, vice president EMEA marketing at
Salesforcesaid, "IT
directors everywhere are facing the nightmare of expensive fixed
contracts for software maintenance for licenses they have never
deployed. This broken model of shelfware is causing many to look
for alternatives like
cloud computing where they can start small and pay for what
they use."
One enterprise software provider that recently changed the way
it licences its software, is
Embarcadero. The supplier
offers users open access to every product, with customers paying
for what they use, including third-party applications integrated
into Embarcadero's platform.
"At Embarcadero, we've found it useful to demonstrate to some
third-party software providers the actual usage and distribution of
the product as a way to justify a lower per-user cost or fee," said
Jeff Anders,
All-Access
product marketing manager at Embarcadero.
One final way organisations can ensure they are not overpaying
on their software licences is to check the application is licensed
to the right processors, and not being linked wrongly to multiple
processors, said Gary Barnett, analyst at
The
Bathwick Group.
Suppliers such as HP help users to make sure they are using the
most cost-effective processing scenario for their enterprise
applications such as
Oracle. This might mean scaling up using an HP Integrity or
Himalaya server, or IBM
z series mainframe, rather than scaling out, which uses more
server boxes.
"When looking at your licensing you have to do the maths.
Different vendors treat multi-threaded processors in different
ways, and it might even pay to buy a single SMP machine,
particularly with the financing and discounts available," said
Barnett.
"At the end of the day, my experience is that a willingness to
play hardball and have very vigorous negotiations with your
software partner nearly always pays off," concluded Barnett.