Key Areas To Consider In SaaS Contract Negotiation

With the Sourcing and Vendor Management Forums coming up next week in Miami and at the end of the month in London, our team is busy finalizing content and rehearsing sessions. Personally the hottest question I have continued to get since the keynote I did last year on SaaS sourcing is the question of SaaS pricing and contract negotiation. So, what can you expect in the track session “Negotiating Cloud Pricing and Contracts” for those of you who can join us?

New data from the Q3 2011 services survey showing:

  1. SaaS is disrupting spend on traditional services. Nearly half of the firms we surveyed say that “as-a-service” spending has reduced spending on traditional on-premises IT spend. And, these firms also say that it will have a noticeable disruptive impact. Out of the firms who say “as-a-service” spending will reduce spending on traditional spend, 30% say this disruption will be 6% or more.   
  2. SaaS adoption has expanded into IT applications and industry-specific applications. Firms are now using SaaS for an increasingly wide range of solutions: horizontal applications like CRM and HR and collaboration applications like email still dominate the trend but now 13% of firms use SaaS for IT software such as asset management and 10% of firms use SaaS for industry-specific solutions such as insurance claims management.
  3. Firms are centralizing their approach to SaaS sourcing and vendor management. The recently gathered data shows a strong trend towards centralized SaaS strategy and formal multi-year plans around SaaS. Not surprisingly, this data also shows that firms expect to see a decrease in unsanctioned, business-led buying.  
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Sourcing & Vendor Management: A Key Driver In The Customer Experience Ecosystem

This is a guest post from Kerry Bodine, a Forrester vice president and principal analyst serving Customer Experience Professionals. Kerry will deliver a keynote on the critical role Sourcing & Vendor Management Professionals play in customer experience at Forrester's Sourcing & Vendor Management Forum on Nov. 7-8 in Miami and Nov. 30-Dec. 1 in London.

Many customer experience initiatives don't meet their full potential — or worse, fail completely — because companies don’t have a complete picture of the dynamics that go into creating it. In order to break from their tunnel vision, companies need to understand their customer experience ecosystem: the complex set of relationships among a company’s employees, partners, and customers that determines the quality of all customer interactions.

In their quest to seek out the root causes of customer experience issues, companies often overlook the impact of sourcing and vendor management (SVM) professionals — often referred to as “procurement” by the rest of the organization. That’s too bad, because these decision-makers influence the customer experience in two key ways.

They influence which technologies and tools will be purchased. Some of these technologies are used internally. One example is: customer relationship management software, which enables employees across the organization to better understand customers and their ongoing relationships with the company. Other tools — like content management systems — directly affect the information that customers can access through digital touchpoints like the Web and mobile devices.

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Supplier Risk And Performance Management Takes Center Stage At Emptoris’s Customer Event

Having attended Oracle’s customer event a couple of weeks ago, I wasn’t sure I’d be able to make it to Emptoris’s Empower event this year, but I'm glad I was able to attend. The quality of the external speakers, the access to Emptoris execs, the content mix (high-level procurement trends and implementation best practices), the plentiful opportunities to chat with customers, partners, and employees — all these made it an extremely valuable couple of days.

A key event theme was the urgent need for procurement leaders to improve their risk monitoring and mitigation processes. For instance, according to Deloitte Consulting’s 2011 CPO survey, nearly 60% of respondents believe their risk exposure is higher than a year ago. Emptoris’s President & CEO Patrick Quirk explained his company’s response, with an ambitious roadmap to convert the acquired Xcitec product (now called Emptoris Supplier Lifecycle Management)  into a comprehensive supplier risk and performance management suite (SRPM), in line with our description of this category: FAQs About Supplier Risk And Performance Management Software.

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Mobility Is The Tail That Will Wag The UC Dog

How much of your IT operating and capital budget will go to UC related investments? I predict that spending by large distributed enterprises (defined as firms with 1,000 or more employees) on communications infrastructure and services will grow between 7% and 10% per year during the next three years. Moreover, there will be a gradual shift away from hardware to software, and wireless connectivity will account for MOST of the growth in communications services spending.

Momentum is building for broader UC adoption, and our Q1 2011 survey of 601 firms that have implemented or are piloting a UC solution showed that 55% of the respondents consider UC a top priority this year.

There are two BIG drivers of widespread UC adoption in large distributed organizations: Mobility and new business models (how UC technology and services are delivered). Mobility will become the “tail that wags the UC dog.” Why? Consider the management and usage cost efficiencies offered by fixed mobile convergence (FMC)  technology — least-cost routing savings including reduced international calling and roaming charges,  to name one.

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What Do You Mean When You Call A Supplier A “Strategic Partner”?

I handle many inquiry calls from clients asking for help negotiating with large suppliers, and often they claim the supplier is a strategic partner. I’ve noticed that many clients use that term, but when I ask them what it actually means in practice, I get varying responses. So Forrester recently surveyed over 150 sourcing and vendor management (SVM) professionals to ask them what they expect to get from strategic partners, and what they offer in return. I was bit disappointed with the results. For instance, while 68% said they would always expect partners to give them the best possible discount, only 6% said they would always make the partner their sole source for specific technology categories.

What’s wrong with this picture? Well, to quote Godfather 2, when explaining Hyman Roth’s longevity, Johnnie Ola says, “He always made money for his partners.” That concept doesn’t seem to apply in the technology world. On the one hand, buyers complain about vendors’ unfair policies (see my recent report Buyers Should Reject Unfair Licensing Rules) and transactional sales approach. Yet OTOH they want to squeeze their partners’ margins while still expecting them to sell their wares site-by-site and product-by-product around their enterprise. As one senior software executive told me the other day, “Sure, I’ll waive my usual policies for partners, but only if they let me off the huge cost of supporting individual, small product buying decisions.”

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On The Road To Diverse Parts Of The World - AKA Alternative Offshore Locations

I completed my Global Entry application earlier this week (www.globalentry.gov). They appeal to international travelers by promising the ability "to get on their way quickly and easily by using automated kiosks." The idea of an expedited process is very appealing. I've found that it's very hard for those customs officials to believe that you've been in a country or set of countries for 5 days and you didn't buy anything. Obviously they don't know the life of an analyst. I barely had time to eat and sleep; when would I have gone shopping?!? I get tired of having to explain that to these guys.

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Vendor Management And Procurement - A Marriage Made In Heaven Or Somewhere Further Down South?

I'm a Forrester analyst, but lately I've been feeling more like a marriage counselor.  Not that I mind that role; you get to hear all sorts of juicy gossip and sordid tales of woe. But I didn't anticipate it in my job at Forrester. I've spent many 30-minute counseling sessions (inquiries) listening to Vendor Management dudes (professionals) complaining about their Procurement spouses (colleagues) and vice versa. It appears that both parties are approaching married life (work) from two different sides of the bed. It feels like this arranged marriage is doomed to fail. But enough with the marriage analogy; this is a serious issue that seems to be pretty prevalent in the corporate world today. 

So what are the major areas of disconnect? 

  1. Procurement is goaled to save the company money and mitigate contractual risk. They can best do that by dissecting contracts that are coming up for renewal. They look for opportunities to reduce billable and fixed rates, maintenance costs, and license fees. They also review potential new vendor relationships and ensure that the lowest-cost provider is strongly considered. They act as the fiduciary agents of the company to ensure that the best price is negotiated for services or products the company wants to purchase. In partnership with general council, they also ensure that the T&Cs (terms and conditions) in the contract are appropriate and protect the interests of the company.
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Will Oracle Listen To The External Keynoters At Oracle Openworld And Help Customers Cut Their Maintenance Costs?

I’ve just returned home from San Francisco where I was attending the Oracle Openworld 2011 (#OOW11) event. Overall it's a good event, although, as usual, a bit frustrating. Instead of examples of how customers are using its products to transform their businesses, the Oracle keynotes always descend into technical detail, with too little vision and too many unimpressive product demonstrations and ‘paid programming’ infomercials (if I had wanted to listen to Cisco, Dell, and EMC plugging their products, I’d have gone to their events).

When, a month ago, I accepted Oracle’s invitation to attend #OOW11, I thought I’d be able to escape the oncoming British autumn for some California sunshine and watch some Redsox playoffs games on TV. Well not only did the Sox’s form plummet in September like a stock market index, but Northern California turned out to be 20° colder than London. But despite that, and the all-day Sunday trip to get to the event, one can’t help being impressed by the attendee buzz and by the logistical achievement, with over 45,000 attendees accommodated around the Bay Area and bussed in and out every day to the conference location. Luckily, Oracle looks after its analyst guests very well, so we were within walking distance at the excellent Intercontinental Hotel.

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Cisco and Citrix: Enhancing the Value of Desktop Virtualization

Cisco announced today a five-year strategic alliance with Citrix in the desktop virtualization space.  As a first outcome of their new alliance, Cisco WAAS will be optimized for Citrix XenDesktop.  It’s designed to improve the end-user experience such that it has “LAN-like” performance.  This translates into the capability of a more rich Unified Communication experience—HD quality video, faster print jobs, and improved app performance.  Rather than buying several products to get this done, this is nicely packaged as one solution for virtual and physical desktops.

What does this mean for Sourcing and Vendor Management (SVM) professionals and what can you do? 

1.       If your organization isn’t looking at this, it will be forced to within your next refresh cycle.  While Desktop Virtualization has been around for years, it’s more recently been attracting enterprise customers at a very robust growth rate.  Most resellers I’ve spoken to enjoy double digit semi-annual growth rates as high as 40% in inquiries and many of them include desktop virtualization on tablets.  At this stage, most companies are still in education mode, but adoption appears to be steadily increasing.  If you’re not working on it right now, spend the time to get educated on the various flavors and the elements of the project that lead to savings for your organization.  ROI will vary from company to company due to the varying desktop environments.

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Will The Bring-Your-Own-Device Phenomenon Help Propel Desktop Virtualization?

I recently appeared on CIO Talk Radio to discuss the growing challenge brought by increased diversity of computing devices in the workplace and the bring-your-own-device (BYOD) trend. There is no question that customers are increasingly embracing their own technology in the workplace, and in many cases believe the technology they themselves own is superior to that provided by their employers. The tablet computer is certainly one big part of this, and the ultimate impact may be as disruptive as that brought by the original PC.

IT executives like Steve Phillips, Senior Vice President and Chief Information Office of Avnet, my co-panelist on the CIO Radio broadcast, are beginning to see that desktop virtualization provides a potentially useful means to separate the realm of the corporate environment from the private world of the device user in this increasingly diverse environment. Outsourcing suppliers are definitely seeing this trend. They are gearing up for the potentially significant opportunity by running pilots and helping customers implement desktop scenarios, although with some differences from the past: For one thing, a focus on a more selective tiered approach to desktop virtualization as opposed to a one-size-fits-all. That tendency, along with the accompanying high cost for bandwidth, were a stumbling point in the past, as well as several other factors described by my colleague Steven Johnson.

But what do you think? And if considering desktop virtualization, do you envision a role for service partners or will you go it alone?