Posts Tagged ‘Software Maintenance Fees’

Software Asset Management – Hard Alone But Afraid To Go Outside

Wednesday, June 17th, 2009

crewWHERE ARE YOU ON THE SOFTWARE ASSET MANAGEMENT CONTINUUM?

Empty or Full – When it comes to Software Asset Management (SAM), organizations find themselves somewhere between two extremes: doing next to nothing to manage their software license and maintenance expense, and aggressively managing the expense. During the current recession, many organizations have gotten serious about SAM because it can produce some immediate and substantial cost savings. Those who have done nothing historically are making their first foray into SAM, and those who have done some SAM historically are looking at doing more.

Options – Organizations have two basic options for SAM. They can either run a SAM program solely with internal resources, or they can hire a third-party SAM provider. Running a SAM program solely with internal resources is a challenge for most organizations, but hiring a SAM provider is not always the welcome alternative. CXOs fear that the SAM provider they hire will uncover substantial savings (the very goal of the engagement), which may lead some within the organization to believe, after the fact, that the CXO has been asleep at the wheel—that the CXO herself or himself should have produced the same savings, and long ago (an unintended consequence of the engagement). But this fear is largely unfounded.

WHY IS SAM DIFFICULT TO PULL OFF WITH IN-HOUSE RESOURCES ALONE?

Essence of SAM – The most effective SAM programs involve a multi- and inter-disciplinary approach requiring IT management, administrative, business lead, business process, accounting (including tax), and licensing (intellectual property) elements of expertise. For an optimal SAM program, an organization cannot bring to bear just one, presumed-dominant element of expertise or an incomplete set of elements.

Silos – Within most organizations, these requisite elements of SAM expertise are housed within separate silos. Sometimes a required element is missing entirely (e.g., the licensing expertise). Further, in most organizations folks tend to operate mainly within their respective silos, with little cross-disciplinary interaction. In fact, even when preferred or necessary, it is usually very difficult to get one silo to work effectively with another. Ninety percent of the time this is okay, but SAM is one example of the 10% of the time when it is not okay (not optimal).

Dynamic Process – An effective SAM process cannot be accomplished incrementally or in counterpart (e.g., Silo A does its piece and hands off to Silo B, and so on). The process is very much dynamic and interdependent, requiring interaction among otherwise disparate sources of organizational knowledge and expertise.

WHY ARE CXOs FEARFUL OF SAM PROVIDERS?

Misplaced Sense of Blame – Given the (accepted) status quo across corporate America—silos operating independently with little cross-talk—it would be a mistake to characterize a SAM exercise as “fixing a problem.” “Problem” suggests that fault or blame can be ascribed to someone, and this is what gives CXOs anxiety in the SAM context. It doesn’t matter whether a SAM provider is talking to a CFO or a CIO. Either might feel responsible for not finding the savings that the SAM provider found, and neither would want their CEO to form the impression after the fact that they have been asleep at the wheel. So, either might be reluctant to hire the SAM provider. Because of ostensible blame, any CXO might be reluctant to hire the SAM provider. The blame does not fall squarely on the CXO’s shoulders, but neither would the CXO be conclusively exonerated. In this netherworld of blame, the CXO’s default position is possible blame, and so the SAM provider does not get hired.

Fear Is Unfounded – Here is the critical distinction that CXOs should bear in mind when they are thinking about hiring a SAM provider. Because SAM is not the responsibility of any one silo (and should not be because no one silo could accomplish SAM by itself), the head of any one silo should not be put under an umbrella of suspicion after a SAM exercise is completed. SAM requires a multi-silo effort that is difficult to pull off in any organization, and it requires elements of expertise that might not exist within any silo. If anyone is “to blame” after an effective SAM exercise, it would be the heads of ALL silos for not working together in the past on SAM. But again, silos not working together is the accepted norm, so even blaming all silo heads is not very useful (beyond the slight emotional benefit it may give a CEO).

I realize that “should not” be put under an umbrella of suspicion is not the same as “will not” be put under an umbrella of suspicion. But bear with me here.

Test – To test my “blameless” hypothesis, think about this situation. If you were a large, software-intensive organization, and you wanted to hire a full-time SAM expert (assuming you could find a single individual with the requisite skills), where would you place that person within your organization? To whom would this person report? Accounting? IT? Purchasing? Administration? The head of the main revenue-generating business unit? The CEO? Settling upon the ultimate reporting structure would be difficult, and most organizations would probably opt for multiple reporting paths leading ultimately up to the CEO.

I think this example illustrates the multi- and inter-disciplinary nature of SAM, and by extension, the blamelessness of any single silo head for the historical lack of a meaningful SAM “facility” within an organization.

Test 2 – CapCo wanted to replace its 20 year-old, home-cooked HRIS. It needed only 6 PeopleSoft modules to replicate existing functionality, but it bought 6 extra modules at a steep discount (the decision of the VP of HR). Five years later, the extra six modules still have not been deployed, but CapCo has been paying maintenance and support for those licensed modules. Who’s to blame for this unnecessary spending? IT? VP of HR? Accounting? Purchasing?

I would say it’s hard to fairly blame anyone. The VP of HR may have made a good decision at the time. IT was too busy to get the other modules up and running, and HR never expressed a need. Purchasing kept paying the maintenance fees on the extra modules because the licensures were in effect (probably having no idea the modules were not being used).

GETTING PAST THE FEAR FACTOR

Your goal is to take advantage of a rare opportunity (you pay your SAM provider nothing unless it produces savings for you) and cover your butt at the same time (not getting blamed for not producing the same savings yourself).

Here’s how you achieve your goal. By the way, your SAM provider will be happy to work with you on these items.

  1. Emphasize to your boss and constituents early and often that your provider offers a multi- and inter-disciplinary approach to SAM. Within any organization, Accounting couldn’t pull off an effective SAM exercise alone any more than IT could pull it off alone.
  2. Assure your boss and constituents that, because it requires a multi- and inter-disciplinary effort, most organizations do not have an effective SAM program (silos, little cross-talk, missing expertise, etc.). “We’re not alone,” and without saying it directly, you imply that “You’re not to blame.” “We’re the norm and not the exception, and there are some valid reasons why the norm exists.”
  3. Explain to your boss and constituents that your SAM provider will bring specialized expertise to the table (filling any gaps in the organization’s expertise), and it will serve as a cohesive force, bringing the organization’s disparate sources of knowledge and expertise together to get the job done. It will provide the (heretofore missing) catalyst that will join the Red Silo and the Green Silo at the hip, at least temporarily.
  4. Emphasize to your boss and constituents that, at the end of the process, your SAM provider will recognize the contributions of your various silos. Without the silo dwellers, your SAM provider would not have been able to get the job done. And without your SAM provider, the silo dwellers would not have been able to get the job done. Everyone is a winner, and no one is to blame for not having achieved this success with internal resources alone.

Item 4 is a way to convert “should not be under an umbrella of suspicion” to “will not be under an umbrella of suspicion.” The chain reaction could not have occurred without the catalyst (your SAM provider). In other words, you want to give your boss and constituents the assurance at the outset that the process itself (in sort of a self-revealing way)—as well as the final report or executive summary—will make it abundantly clear to onlookers that the process simply would never have occurred within your organization in the normal course (at least not with the same level of success) because it is so far removed from the status quo. And no one is to blame for that.

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Posted in Software Buyer Habits, Software Licensing, Software Negotiations, Technology Procurement | 2 Comments »

Reducing Software Maintenance Expense – Plant a Seed Approach

Sunday, June 7th, 2009

plant-a-seedSERIES: Software Mainenance Costs – Pop The Bubble – Part 3

View Part 1 or Part 2.

PLANT A SEED APPROACH

Like the Quick and Dirty Approach, the Plant a Seed Approach is for those with minimal time and resources available to orchestrate a full-blown software maintenance re-negotiation process, but it can also be useful for those who will undertake a more comprehensive approach down the road. This approach by itself is usually not optimal for the average software portfolio owner, but it’s better than doing nothing. It’s not as good as the Quick and Dirty approach in that it does not produce immediate (within days) cost savings, but it’s better than the Quick and Dirty approach because it leaves more doors open.

The Basic Premise – The basic premise of the Plant a Seed Approach is to create the impression in the minds of your software vendors that you are looking to adjust your software license structures, reduce fees (both license and maintenance), and in the broadest terms, extract more value from your software portfolio.

How to Pull It Off – Contact the sales rep’ for each of your deployed software vendors. You can make contact by phone, e-mail, or both. Explain to each rep’ that you have been tasked with the stuff in the basic premise above (adjust software license structures, etc.). Then you invite each sale rep’ to join in your effort by providing some necessary information and offering up any creative solutions that come to mind. Indicate that you don’t need an immediate response because you want your rep’s to think about your request carefully. Ask for a response over the next two weeks, and set up a reminder to contact each rep’ after two weeks’ time if they haven’t yet responded.

Questions to Ask – Ask each rep’ to respond to the following questions:

    Will you be releasing any major updates or upgrades in the next three months?

    Do you have any license structures currently available, or soon to be available, that might be more appropriate for my company’s needs?

    Have you taken other customers through a similar exercise, and if so, what were the outcomes?

You may want to add some additional questions, but remember to keep them “open-ended” (not amenable to “yes” or “no” answers). Your goal is to create dialogue, not cut it short.

Why to Use This Approach – Although this may seem like the ultimate Lazy-Bones-Jones approach to reducing your maintenance expense (because it is), there are bits of genius to the approach that might not be obvious at first blush.

  • Fresh Approach – Your rep’s may be captivated by the novelty of your approach. They receive lots of calls from customers who use more aggressive spend-management tactics, and often those encounters are very confrontational. You have the same endgame in mind as these other customers, but your rep’s will likely appreciate your decidedly different approach.
  • Partnering – In their heart of hearts, most people like to help others. They really do. You are asking your sales rep’s to help you help your company, and most of them will rise to the occasion. Do you remember positive and negative motivational drive states from Psych 101? Well, here you are working to create a positive drive state.
  • Expanding Your Options – Instead of following some dogmatic approach that you’ll apply across all of your deployed software vendors (e.g., “must reduce maintenance expense by 40%”), you are asking your vendors for options. They may present options that you never would have imagined, and one or more of them may produce a better result than your dogmatic approach. Don’t forget that you can always apply your dogmatic approach later, if necessary.
  • Not Limiting Your Options – Even though it takes very little time or effort, this approach can produce some good results. Basically, you have everything to gain and nothing to lose. Some folks use a version of this approach as a prelude to a more comprehensive approach to be undertaken at a later date, using the information gathered to advantage down the road. Perhaps most important, this approach does not limit your options. You are free to accept or reject any bones thrown out by your vendors during the process. If you gather enough decent bones during the process, you may not need to proceed further with another approach.

What to Expect – After two weeks have passed, a given vendor will respond somewhere between these two extremes:

  • “I took a close look at your account, and I had a long discussion with my boss. Right now there is not a whole lot we can do to help with your effort. However, we’re always open to discussion, and if you have some specific ideas in mind, I’d be happy to work with you.”
  • “I took a close look at your account, including your update history and support use numbers. I would propose that we make the following changes to your account: switch from the Platinum level of support to the Tin level, exchange your non-tiered seat licenses to our new Flexi-Seat license program, [and so on].”

For each vendor response, you will have to decide whether the initial proposal is enough for you, or whether you want to go for more. It’s all up to you. If you want to go for more, you can do it now or wait until some later date (e.g., as part of some fuller re-negotiation exercise).

So, plant a seed and see what grows!

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Reducing Software Maintenance Expense – Quick and Dirty Approach

Sunday, June 7th, 2009

phoneSERIES: Software Mainenance Costs – Pop The Bubble – Part 2

View Part 1. View Part 3.

QUICK AND DIRTY APPROACH

This is not an optimal approach, nor a recommended approach, but it’s definitely better than sitting on your hands and doing nothing. If you haven’t the time or resources available to take a more comprehensive approach, and you don’t want to hire a third party for assistance, this is probably your default option. Remember, each day that passes without your re-negotiating your maintenance expense obligations means wasted dollars. Doing something, even a crude something, is usually better than doing nothing.

STEP ONE – Open up your dusty folder containing your license agreements.

STEP TWO – Skim through invoices for each license agreement and order the licenses based on maintenance cost outlay, most expensive to least expensive.

STEP THREE – Find your sales rep’s contact information for the first license and contact the sales rep’ by phone.

STEP FOUR – While on the phone with your sales rep’, explain your boss’ recent directive to you. You must cut all software maintenance expenses to the bone. Keep it short and simple.

STEP FIVE – Remain silent and let your sales rep’ make the next move.

STEP SIX – Repeat Steps Three through Five for each of your other licenses.

Vendor Come-Backs – In the typical scenario, this will be your first contact with your sales rep’ in several months or even years. Your call will almost certainly catch the rep’ by surprise, and your very direct statement of your purpose for calling will probably put the rep’ on the defensive. Typical come-backs from a rep’ in this context include:

    Buying More Time (To Think)
    “Well, I’ll have to access your account information and see what I can do. Can I call you back later today?”

    “I’d be happy to talk to you about that, but I have a staff meeting in 10 minutes. Can I call you back?”

    Appeal To Higher Authority
    “I don’t have the authority to change your fee structure. I will have to talk to my boss and get back to you.”

    “We’re just a reseller, and we don’t have the authority to change your license terms.”

    “I’ll have to talk to the business lead and get back to you.”

    Fishing
    “What sort of reduction are you looking for?”

    “Are you not happy with our maintenance or support?”

What To Do Next – What you do next depends on your stomach for negotiations and your negotiations skills. If negotiations make you squeamish, or you’re just not a good negotiator, you may want to let your rep’ take the lead. Answer the “fishing” questions politely, and move your rep’ toward action. Avoid disclosing the actual percentage reduction you are seeking by saying that you need to “cut expenses to the bone,” or “we need a substantial reduction.” For dead-end (“shut-out”) responses like “have no authority to . . .”, ask for the contact information for the person who has such authority, contact that person, and start a new Step Four. However you do it, get your rep’ or your new contact person to make the next move; that is, offer up some reduction in your maintenance expense. You’ll then have your starting point for additional downward movement. A first offer is rarely a final offer.

If you are generally comfortable with negotiations and at least somewhat skilled, you may want to drive things a bit further on your own. Express your urgent need to get something done (blame your boss), cite to your company’s limited use of support services and the fact that you haven’t installed an update in over three years (if both are true), mention the fee reductions your other software vendors are providing (if you’ve already made some headway with your other vendors), and so on. In short, state your position for lower fees and negotiate.

Outcomes – As crude as this approach is, chances are good that it will produce at least some expense reduction with most of your vendors. Again, it’s not an optimal approach, but it’s usally better than doing nothing.

Cautions – Remember, when it comes to re-negotiating software maintenance fees, you don’t get an unlimited number of kicks at the cat. In fact, all other things being equal, you should count on getting only one kick at the cat during any annual period (perhaps even longer). What this means for you:

    Don’t Use This Quick and Dirty Approach If . . . – Don’t use this less-than-optimal approach to re-negotiation if you plan to exectute a more considered approach in the future. Focus instead on developing and executing your other approach now. Stop talking about it and get it done.

    Any Approach – Regardless of what approach you use to re-negotiate maintenance fees, be fair. Don’t lie, don’t be a bully, and maintain respect. In most cases, you’ll need to maintain a working relationship with your software vendors and their sales rep’s, and over-the-top negotiation tactics will usually damage your credibility and sabotage your short- and long-term and objectives.

    Don’t Go to the Well Too Often – After you’ve hammered a few times on your deployed software vendors for reduced maintenance fees, you will have reached a saddle point at which your fees are probably commensurate with your use of support, updates, etc. In other words, you’re paying fair value for what you are receiving. Stop bugging your vendors at this point. Unless your circumstances have changed, don’t go to the well again. Usually, at this stage of the game, your next option is to drop maintenance altogether.

Take me to Part Three: Reducing Maintenance Costs – Plant a Seed Approach

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