A Software Insider's Point of View

High Cost Of Ownership And Changing Requirements Drive SAP Users To Seek Optimization Solutions

As users await SAP to regain its mojo (see Dennis Howlett’s post) and implement it’s “Voice of the Customer” strategy in 2010, users must continue to reduce their cost of ownership and complexity. In addition, rapidly changing business requirements require some users to seek SaaS alternatives, additional point solutions, and extensions.
Consequently, vendors providing SAP optimization and extension solutions represent one of the fastest growing parts of the $78.7B (2009 Altimeter Group estimate), 850,000 SAP service partner and developer ecosystem. SAP users already embrace many of the solutions from vendors on this inaugural SAP Optimization List as part of their business value oriented apps strategy. The living list covers seven areas including:

1. application extension and usability;
2. application life cycle management;
3. archiving, storage, and test data management;
4. license management and optimization;
5. Microsoft Office integration;
6. third party maintenance; and
7. virtualization

Keep In Mind Basic Rules Still Apply Regardless Of Deployment Option

The proliferation of SaaS solutions provides organizations with a myriad of sorely needed point and disruptive solutions.  Good news - business users can rapidly procure and deploy, while innovating with minimal budget and IT team constraints.  Bad news - users must depend more on their [...]

Free Software Gimmicks From Some On-Premise Vendors Only Address The License Cost Issue

Recently, readers and clients have been approached by on-premise vendors offering free software modules to incentivize new license purchases.  However, free should not be confused with the Open Source (i.e. Freeware) movement, where source code is provided with minimal copyright restrictions.  Free should [...]

Vendor Sales Reps Keep Using An Age Old Excuse Out Of Habit
Many organizations start their Q4 software maintenance renewals process in September.  This has led to a flurry of emails and phone calls about revenue recognition (a.k.a. “rev-rec”) rules for software maintenance contracts.   Apparently, both customers and vendor sales reps suffer from mass confusion [...]

Organization’s face significant prioritization challenges as they plan their 2010 apps strategies.  Faced with shrinking budgets, competing priorities, increased management scrutiny, outdated legacy apps, and uncertain economic conditions, organizations must answer key questions such as:

How do I determine which business requirements carry more weight?
Where do regulatory requirements fit when compared to other priorities?
What’s a good [...]

Labor Day (US Holiday) traditionally marks the end of summer BBQ’s, the beginning of the fall conference season, and yes, the time to begin a review of your software maintenance contacts that expire end of year.   As clients prepare for this seasonal ritual, a few trends in 2009 should set the stage for negotiations:

Continued [...]

In the first step of the original seven simple steps to successfully negotiate software contracts, the key is to have the right team in place.  To refresh everyone’s memory from the March 8th, 2004 post the details for Step 1 are:
Step 1: Ensure that the right team is in place

Inputs:  Organizational chart and agreement on [...]

Declining demand and diminishing output increase the pressure for enterprises to reduce their software license maintenance costs.  As part of a larger enterprise apps strategy, shelfware reduction provides an area for significant cost savings.   However, shelfware reduction is often hard to achieve because many vendors impose:

Enterprise wide agreements. These “all you can eat” agreements incentivize [...]

In the past 2 weeks, emails from 31 software insider readers highlight a growing and concerning trend with support and maintenance contracts.  Vendors concerns about support and maintenance contract retentions has led to new initiatives to consolidate contracts.  At first glance, this may appear to be proactive and beneficial to customers.  In fact, common rationale [...]

Enterprises continue to transform themselves from the functional fiefdoms of the past and move towards a business process orientation.  As organizations begin that process of documenting business processes, they must differentiate among the 3 major types of business processes.  In key flows such as order to cash, hire to retire, incident to resolution, procure to [...]

Collective support and maintenance, constant innovation, best practices, and improved ROI represent the key arguments that led enterprises to packaged applications such as ERP. Today, this promise appears to be broken as enterprises question the value received for their support and maintenance monies.   In addition, on-premise upgrades require painful testing and down time [...]

With 2009 rapidly becoming the “Year of SaaS” and the tipping point for Cloud Computing, it’s hard not to notice the growing number of SaaS start ups (along with the legacy application vendors rushing to provide an “On-Demand”, but not really multi-tenant deployment option).  My snarky SaaS bigotry aside, we can expect hybrid deployment options [...]

Maintenance costs represent a major part of the software budget and the largest growing source of revenue for software vendors.   In fact, an aggregation of the past four quarters of software vendor financial results definitively demonstrates double digit declines in new license revenue, even more exacerbated by the evils of currency flux from the [...]

A common question asked by readers of this blog is when should vendor contract negotiations be led by a domain expert and when should this be led by a procurement professional?  As the complexity of the technology topology increases, expect a multitude of domain experts in roles such as application specialists, business process experts, enterprise [...]

In several contract negotiation support calls this month, clients have discovered interesting language in their contracts designed to prevent them from choosing a third party maintenance option.  The language is often buried deep into the legalese and many unsuspecting clients may sign without understanding the future implications in the software ownership life cycle and the [...]

Vendors Find New Ways To Limit Access to Third Party Advisers

Conversations over the past 3 months with clients about their software contracts highlight some egregious licenses practices by software vendors.  Here are some examples of gag rules that some vendors have recently attempted and successfully put into contracts:

Limits on third party negotiation support.  Licensees limited [...]

Blogging Platforms Provide A Good Showcase For The Power And Benefits Of Open Source
Over the past 3 years, I’ve had the pleasure and privilege of experimenting with a variety of blogging platforms.  For my day job, I use TypePad and at night I build this blog with WordPress.  (Prior to that, I used Blogger.)  Without [...]

Consumer Price Index clauses represent additional costs of ownership that should be avoided.  Maintenance typically represents 2 times the cost of the original license fees after 10 years of ownership.  Many customers have these CPI clauses in their contracts.  In the worst cases, customers may have signed CPI + X%.  CPI adjustments provide very [...]

As competition intensifies for new license deals and users are under pressure to be cautious with new spending, all parties should expect increasing pressure for quality customer references.  Customers seeking references should focus on the following areas of relevance:

Industry - expect to get down to the micro vertical level
Market size - focus on [...]

Continued interest in software as a service (SaaS) stems from the pay as you go pricing, constant stream of innovation, rapid deployment options, and the ability to do an end run around IT.  As the number of options proliferate, enterprises will increasingly lean on SaaS as the mission critical system.  Thus, end users need an [...]

“Begin with the end in mind is based on the principle that all things are created twice. There’s a mental or first creation, and a physical or second creation to all things.
~ The Seven Habits of Highly Effective People by Stephen R. Covey”

This Coveyism rings quite true especially with MDM deployments.  Those seeking to innovate [...]

In both the enterprise and SMB space, recent market conditions point to a lack of available financing for enterprise software purchases.  This trend will continue as the credit markets tighten.  The result - vendors will be more inclined to discount.  Enterprises engaged in contact negotiation with software vendors should take this opportunity to seek [...]

The tightening credit crisis continues to impact IT budgets and 2009 planning assumptions.  Ongoing conversations with clients confirm that most enterprises anticipate some retrenchment of budgets.  As business and IT teams seek to reduce the cost of existing systems, several key enterprise packaged app strategies rise in importance:

Software contract reviews - leading clients invest [...]

First of all, some of you may be wondering what shelf-ware is so a quick definition.  It’s software you buy and don’t use.  So if you bought 1000 licenses of Vendor X’s latest ERP software and use 905 licenses, you now have 95 licenses not being utilized.  That’s 95 licenses of shelfware you pay [...]