Economy Gives IT a Sword for Slashing Software Costs

But cutting maintenance could prove costly if you're dealing with vendors that take a hard line in such situations, according to Eliot Colon, president of Miro Consulting, a firm that helps Oracle and Microsoft users negotiate and analyze software contracts.

Colon recounts the case of a semiconductor maker that dropped support for its Oracle apps two years ago but then found itself needing access to a mission-critical software patch. Despite offering Oracle a "six-figure flat fee" for the patch, the company was rebuffed, he said.

He added that after three months of negotiations, the chip maker agreed to pay Oracle several million dollars -- the same amount it would have spent if it had left the maintenance contract in place.

3. Bring hard business data to the negotiating table

Sharing financial info and other internal data may seem like a surefire way to lose the upper hand in vendor negotiations. But some analysts suggested that when done in good faith, it is often more effective than simply claiming corporate poverty or making empty threats to migrate to rival products. Vendors that are good business partners will respond to calls for pricing that is more in line with the economic value users get from software, the analysts said.

Colon cited the experience of a large client in the retail industry. "They told Oracle they were in financial disarray and had a bleak outlook for the next year or two," he said. "Oracle didn't budge at all." But when the retailer went back to Oracle with data showing how low its usage of the vendor's software was outside of the 10-week holiday shopping season, Oracle responded by drawing up a less expensive custom contract, Colon said.

4. Look for concessions other than discounts

Microsoft last month announced a zero-percent financing promotion for new buyers of its Dynamics ERP and CRM applications. But for the most part, such deals have either "dried up, or the terms aren't going to be all that attractive," said IDC's Fauscette.

That's partly because of the tightening of credit markets. "Vendors used to be able to get you approved for several million dollars [of financing] if they just knew your name," Colon said. "Now banks are asking for audited financials and [checking business] references."

So, what are some realistic concessions? One is asking vendors to provide free installation and training -- something that Oracle, for one, has been agreeing to do, according to Colon.

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