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Posted by Boris Evelson on May 20, 2010
By Boris Evelson
I get this request almost on a weekly basis: "Boris, my BI vendor is offering me the following discount, is it a good deal or not?" The first question is what are you comparing it to? It reminds me of an old joke: Q. How much is 5 times 5. A. Depends on whether you're buying or selling. Many of the vendors do not publish or reveal list prices, or even if they do, they are revealed only under NDA to each client, so good luck comparing what the vendor told you and what they told another client. So what ARE you comparing it to?
Another problem, IMHO, is that many of the vendors muddy the waters with CPU based prices, clock speed based prices, etc. Yes, CPU, server, core based prices make sense if you are growing and want to lock in a good deal now, before you grow and expand. But in the end, you, the buyer, still need to figure out how much the software costs you per seat, per user. So with both of these challenges in mind I looked through my 20+ years of notes on BI contracts and per seat license costs and came up with the following. Notice, an interesting X-factor (obviously, I fixed the numbers a bit to have it look nicely like that):
Then, what I usually tell my buy-side clients is that in large deals a BI vendor would typically offer a 20%-30% discount right off the bat. Don't fall for that. My recommendation: ask for a 70% discount and do not negotiate to below 50%. I plan to publish a research doc on this subject with more specific vendor details and BI pricing/contracts best practices in Q4.
I know BI vendors will hate me for this, so I am putting on my motorcycle helmet and am ready to take the shots.
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