Tuesday’s Tips: Five Simple Steps To Reduce Your Software Maintenance Costs

By R "Ray" Wang

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 strong dollar for US based vendors. Not surprisingly, vendors are hard at work vigorously protecting their 70 to 80% margin in maintenance revenues just as clients and readers of this blog now zero in on this line item as the major concession target during contract negotiations.  Here are five steps (i.e. A,B,C's to software maintenance) you need to do now*:

1. Assemble all the relevant contract information. Aggregate all your contract information and vendor interaction history so that its centrally accessible.  Determine the value of your maintenance agreement. Examine how often you call for support, apply patches, conduct upgrades, and require technical assistance.  Then calculate the total support and maintenance spend.  Most customers will find that for $1M a year, 5 support calls can be pretty pricey at $200k a pop, especially when upgrades aren't in the picture for the next 24 months.   The vendor better show up the next day with white gloves and be there in person.
2. Breakdown the total cost of shelfware. Simply put, shelfware is the software licenses purchased, not deployed that is incurring support and maintenance fees.  That great deal 3 years ago you got on 1000 user licenses, when you only ended up using 800, now comes to bite you in the butt.  Calculate the maintenance fee you have for 200 user licenses at $1000/user which is $200,000 X 20% annual support and maintenance X 3 years.  At $120,000, you had better make up the "big" discount you got for buying 1000 user licenses by at least 12% this year and 15% the next year.
3. Craft your overall software adoption strategy. Consider the business drivers that impact software adoption.  Assemble the domain experts, vendor management and sourcing professionals, legal experts, business owners, and IT team.   Apply a long term apps/ recession proof apps strategy and determine when and how licenses will be used in the software ownership lifecycle.  What processes will be supported? What roles will use the software?  When will you upgrade?  Can you consider an alternative?
4. Determine all the alternatives. Depending on your adoption strategy, multiple paths exist.  If there are no intentions to upgrade or enhance the software, self support and third party maintenance (3PM) options from vendors such as Rimini Street and Spinnaker should be considered.  In some cases, an upgrade should be completed before switching over to 3PM or self support.  If the system can be replaced, begin vendor selection efforts so that you will have leverage during the negotiation.  If the system cannot be replaced, consider swapping out unused licenses for credit towards newer or more desirable modules.  Reduce your CPI for new maintenance.  Focus on reducing new license costs.
5. Engage account representative at least one quarter before the contract expires. Put preparation on your side and begin to let your sales rep know three to six months in advance that you are unhappy with the current agreement.  Based on steps one to rou, you now have the ammunition you need to negotiate from a position of strength.

The bottom line — align your contract negotiations strategy with your product adoption strategy.

Successful negotiations will require these five steps. However, more importantly, organizations should keep a current apps strategy and product adoption strategy. Without these two key documents, lack of visibility into the business case will lead to shortsighted negotiations that fail to meet the true requirements of the business. Sourcing, procurement, and vendor management professionals should partner with domain experts who can provide third party, independent and objective advice that will complement contract negotiations strategy. Click here for more contract negotiation strategy tips.

Got more enterprise software contract negotiations questions? Set up a call with the inquiry team and ask for R "Ray" Wang.

Your Turn

What's your best practice in reducing maintenance costs? Post your comments here or send me a private email to rwang@forrester.com

Contribute to the 2009 Enterprise Software Licensee's Bill of Rights

Take the new poll on what rights should be included in the 2009 Enterprise Software Licensee Bill of Rights. Posts are preferred! For every good idea or comment, whether or not we use your idea, we'll send you a copy of the final report. Let's put the collective wisdom of the Web to work and help our end user clients create a fair win-win playing field with the vendors. We'll be publishing the official update in Q2 2009. Thanks and look forward to your input!

*Caveats are as follows: 1) This does not constitute legal advice. Please consult your legal counsel for an official opinion and wording. 2) This does not consider any procurement or vendor management rules that must be applied to your enterprise. Please work with your vendor management teams for compliance. 3) Contract negotiation support provides insight into overall trends and price points. Benchmarks are not provided as each user scenario is unique.

Copyright © 2009 R Wang. All rights reserved.

Reposted from http://blog.softwareinsider.org

After So Many Years Of Ballyhoo, Semantic Web Still Searching For Killer App

By James Kobielus

Cynics might call Semantic Web a technology looking for a solution. And they might have a point.

Semantic Web refers to a long-running World Wide Web Consortium (W3C) initiative that is working toward an ambitious — some might say hopelessly utopian — goal. At heart, it is a vision for how the World Wide Web should evolve to realize its full interoperability potential.

People vary widely in how they interpret the scope of the Semantic Web initiative. The tech industries are swarming with a wide range of projects, products, and tools that implement different variants of this vision. What vision is that? In the broadest sense, Semantic Web refers to an all-encompassing metadata, description, and policy layer that can, potentially, support universal, automatic, comprehensive, end-to-end interoperability across every macro or micro entity — including data, components, services, applications, and services — on every conceivable level.

Whew! If that’s not the working definition of “pie in the sky” or “boil the ocean” (pick your metaphor), I don’t know what is. In fact, I’m hard-pressed to refer to Semantic Web as a definable market or solution segment. However, it’s not entirely vacuous.

For starters, organizations can implement W3C-developed semantic description standards — such as Resource Description Framework (RDF) and Web Ontology Language (OWL) — to make the meaning of content unambiguously comprehensible to services, applications, bots, and other automated components. Second, there is a reasonably robust market for “ontology” tools to support RDF/OWL-based modeling of application semantics. Finally, there is some incremental adoption of these tools and concepts in established IT segments, such as:

• Enterprise content management (ECM): Semantic approaches can support more powerful discovery, indexing, search, classification, commentary, and navigation across heterogeneous stores of unstructured and semi-structured content. Semantic search — driven by concepts, not mere text strings — is regarded by some as a primary Semantic Web application. Indeed, many Semantic Web vendors are primarily implementing the technology in search engines that leverage ontology-based concepts to improve search accuracy and reduce spurious hits.
• Enterprise information integration (EII): Semantic approaches enable consolidated viewing, query, and update of structured data that has been retrieved from diverse sources. Indeed, most commercial EII environments present an abstract semantic layer that mediates access to heterogeneous data, such as enterprise resource planning and customer relationship management applications, converging to a common presentation-side schema. A handful of those EII vendors have begun to support Semantic Web standards, primarily through third-party software plug-ins.
• Enterprise service bus (ESB): Semantic approaches can facilitate multilayered application, process, and service interoperability across disparate environments. To date, there has been little production implementation of Semantic Web standards in the ESB arena, though some vendors have adopted semantics, ontologies, and RDF to describe the conceptual models implemented by application endpoints, agents, and intermediary nodes within ESB-like middleware approaches such as event stream processing.

But Semantic Web approaches are still on the periphery of these markets. 10+ years into its inception, Semantic Web still has no clear killer app. It’s not clear if or when that app will emerge.

Lean Information Management Strategies For Lean Times

By James Kobielus

When the going gets tough, the tough get lean, focused, and flexible. To help organizations survive the bad times and thrive in all climates, their information management initiatives must remain agile and adaptable.

If you feel your information management strategy is anything but lean, you’re not alone. Many organizations struggle to gain control over information infrastructures that have become too bloated, rigid, and slow to realign with new business drivers.

Lean information management practices are essential for corporate survival. They are far more than belt-tightening exercises. They also help you build analytic muscle for excelling in any business environment. Here are some basic pointers for keeping your information management strategy lean:

• Trim your information infrastructure of excess cost. Lean means you should cut excessive, budget-busting overhead from your information management environment. Careful cuts are best, because they optimize your existing operations without gutting the core information, analytics, and applications that underpin your core competencies. Silo, server, database, and application consolidation should be your principal approaches. Also, you should re-evaluate vendor-sourcing strategies and renegotiate licenses at more favorable terms. And you should investigate lower-cost alternatives, such as software-as-a-service, to address business intelligence, business performance solutions, enterprise data warehousing, master data management, enterprise content management, and other information management requirements.
• Fit information initiatives to key business imperatives. Lean also means you fit, focus, and fully align your information management initiatives to mission-critical business imperatives. Strategic alignment ensures that you leverage information assets across diverse application domains and business processes, rather than allow that intelligence to languish underutilized in silos. To sustain this approach, you should establish an information management framework, such as a Business Intelligence Solution Center, that enables ongoing collaboration between business and IT stakeholders. You should engage all key business and technical groups in information management planning discussions.
• Flex information architectures to changing circumstances. Finally, lean means maintaining an approach that is flexible and adaptable, able to shift course as your needs and environment change. In yoga terms, lean is all about building, toning, and stretching analytical muscle to keep it from tearing when you need to transition rapidly from one strategic alignment to the next. You need the flexibility to swing between centralized information management infrastructures and decentralized or federated environments. For end-to-end data management environments, Forrester has developed an architecture decision support tool that helps information managers to determine which of several topologies is best suited to their needs: centralized enterprise data warehouse, hub-and-spoke, independent data marts, data federation, and information-as-a-service.

Considered as a comprehensive strategy, these lean practices are true bloat-busters and recession-beaters. They allow organizations to deliver practical insights that address all pain points, even — especially!!! — within strict budgets.

Are There BI Implications In The Rumored IBM/Sun Merger? You Betcha!

By Boris Evelson

I always predicted that Open Source BI has to reach critical mass before it becomes a viable alternative for a large enterprise BI platform. All the individual components (a mixture of Open Source BI projects and commercial vendor wrappers around them) are slowly but surely catching up to their bigger, closed source BI brothers. Talend and Kettle (a Pentaho led project) offer data integration components like ETL, Mondrian and Palo (SourceForge projects) have OLAP servers, BIRT (an Eclipse project), Actuate, Jaspersoft and Pentaho have impressive reporting components, Infobright innovates with columnar dbms well suited for BI, and productized offerings from consulting companies like European based Engineering Ingegneria Informatica – SpagoBI – offer some Open Source BI component integration.

However, even large closed source BI vendors that acquired multiple BI components over the years still struggle with full, seamless component integration. So what chance do Open Source BI projects and vendors with independent leadership structures and often varying priorities have for integrating highly critical BI components such as metadata, data access layers, GUI, common prompting/sorting/ranking/filtering approaches, drill-throughs from one product to another, etc? Today, close to none. However, a potential consolidation of such products and technologies under one roof can indeed create a highly needed critical mass and give these individual components a chance to grow into large enterprise-quality BI solutions.

Who are the potential consolidators? Red Hat, with its JBoss and Metamatrix – critical BI integration components – would make sense. And/or Sun with its GlassFish app server, NetBeans integration components, and MySQL, a small, but growing option for DW platform, would probably make an even better acquirer. Now, the recent rumor that IBM may be in M&A talks with Sun is throwing a wrench into my well oiled engine of prediction logic. This would be an interesting twist with lots of implications for IBM, such as reconciling its WebSphere line of products with Sun’s GlassFish and NetBeans, and reconciling its InfoSphere line of products with Sun’s MySQL

If, and only if, IBM decides that such two pronged product strategy – open and closed source – makes sense for them, then I can theoretically see IBM becoming the consolidator for Open Source BI products. It can then potentially leverage its resources and subject matter expertise from Cognos to build up and position both open source and closed source BI offerings targeted at specific client bases. But the challenges of developing, marketing, positioning, and selling two families of highly overlapping and competing BI products will be huge!

If such a future is not in IBM plans, then my hopes for the bright Open Source BI future and bets are on Red Hat.

Yawn! Business Process Visions Consistent Over The Years

By James Kobielus

I pride myself on my tidy notes (I hear you laughing, all you people who’ve seen my chicken-scratch briefing scribbling) and my long detailed memory (yes, everybody, I know I’m a fountain of trivia and should go on Jeopardy some day — thanks for a lifetime full of comments to that effect).

But my memory has limits. So I build and hold extensible conceptual models in my mind, often in the form of the nuanced phraseology you may hear exuding from fingertips now and again. These mental models help me resurface a lot of buried info when I need quick access.

Business process management (BPM) is an area where I have so many overlapping models that it’s hard sometimes to keep them all straight. Sometimes, models decay through the passage of time (I didn’t say I’m photographic, Mr. Trebek). Sometimes, I simply dispose of the shallowest or more clichéd of the lot.

A couple of nights ago, I found my handwritten notes from 1997, summarizing a literature search I was doing at that time while authoring my first book, the IDG Books title “Workflow Strategies.” Reading the prettier handwriting of a 12-years-younger Jim Kobielus, I was struck by how little has changed since then.

What I mean is, how little the business vision — transformation, optimization, and agility — behind BPM’s value proposition has changed. My notes say this: “common theme [something something] most modern management books [something something] hierarchical workflows [something something] traditional corporate command, reporting, and review chain [something something] lack speed flexibility necessary for business success [something something] nouveau mgmt thinkers call for streamlined, nonbureaucratic, decentralized, parallel, team-oriented, customer-driven workflows.”

Also on the sheet was a quick/dirty tabular presentation of various business process reengineering visions (BPR — remember when that was the rage?). Various management gurus (for some reason, I don’t see their names on this sheet) used different buzzwords to describe more or less the same vision of the flexible, reconfigurable, distributed, knowledge-worker-driven enterprise. Here’s a quick reconstruct of those ink scrawls:

• Business reengineering: Post-industrial corporations built around the idea of reunifying production tasks into coherent business processes.
• Cluster organization: Multidisciplinary project teams working together on a semi-permanent basis.
• Dancing elephants: Large companies that are massive but agile, surviving in the competitive arena by learning how to behave like small companies, establishing flexible project-oriented management structures, moving quickly to take advantage of opportunities, and cultivating close, responsive customer relationships.
• Extended enterprise: Enterprise that uses information technology to implement high-performance team structures, function as integrated businesses despite considerable business-unit autonomy, and reach out and develop new relationships with external organizations.
• Human networking: Dynamic coalescence of people with diverse skills into transient project teams.
• Necessary disorganization: Dynamic construction of networks of small, self-contained elements, units, and businesses.
• Networked organization: Highly decentralized enterprise that relies on contractors, suppliers, and consultants to perform many or most functions.
• Perpetual organization: Organization that can take the form of any structure, based upon market demands at the moment.
• Relational organization: Organization defined not by fixed structures but by ease of relationships.
• Value chain: Organization modeled as interrelated series of activities that each adds value, directly or indirectly, to finished goods and services.
• Virtual corporation: Amorphous organization with permeable and continuously changing interfaces between internal functions, as well as between the company proper and external suppliers, distributors, and customers.

A Google or two would probably establish which management guru promulgated which vision.  A deep dive into my moldering pile of 12-year-old paper might do the same. So, OK, I’m not as tidy as I claim, either on the notetaking or notekeeping side. And I’m no memory artist either (as my wife likes to remind me).

Regardless of who coined these particular phrases, they all feel beholden to Peter Drucker, plus a smidgen of Alvin Toffler and a dab of Tom Peters. I wouldn’t be surprised to see some ancient economist’s fingerprints all over them too.

Anyway, it all feels a bit like clever people dreaming up new ways to dish out the same old stuff. It feels like a case of everybody jostling for recognition in the crowded marketplace of ideas. Everybody's working far too hard to add a dash of “this is now” to their pet coinage.

Do I sound jaded? Can anybody point me to any substantially new BPR (or what have you) thinking since then?

It's Time To Update The Enterprise Software Licensee Bill of Rights!

By R "Ray" Wang

Now's The Time To Assert Your Rights

With the market now in favor of the enterprise software licensee, its now time to update the Enterprise Software Licensee's Bill of Rights to include newer topics such as virtualization, SaaS and subscription pricing, newer usage based pricing models, open source, and vendor lock-in avoidance.  As mentioned in a call to action in a December 2008 Monday's Musings, this groundbreaking report, originally published in December 2006, will be updated to reflect current market conditions.  The goal - improve this reusable contract negotiation model that cuts across the 5 key phases of the software ownership life cycle:

1. Selection
2. Implementation
3. Utilization
4. Maintenance
5. Retirement

An Enterprise Software Licensee's Bill Of Rights Gives Users A Platform to Build a Win-Win Client Vendor Relationship

Your POV So based on some key market changes, here's my challenge to you.

1. What rights should be added?
2. What rights should be updated?
3. What rights should be retired?

Take the new poll on what rights should be included in the 2009 Enterprise Software Licensee Bill of Rights or send me a private email to rwang at forrester dot com.  Posts are preferred!  For every good idea or comment, whether or not we use your idea, we'll send you a copy of the final report.  Let's put the collective wisdom of the web to work and help our end user clients create a fair win-win playing field with the vendors.  We'll be publishing the official update in Q2 2009.  Thanks and look forward to your input!

Copyright © 2009 R Wang. All rights reserved.
Reposted from http://blog.softwareinsider.org

Quantifying Employee Performance Management — It’s Tougher Than You Think

By Zach Thomas

As you may, or may not, know Forrester has one of the most rigorous Total Economic Impact (TEI) – or ROI methodologies out there. "The ROI Of Packaged Apps Instance Consolidation" and "The ROI Of Interactive Chat" are a couple of completed TEI reports (you need client access to view these reports) and below is a graphical representation from the second report, to give you a flavor.

So, I decided to create a TEI model for employee performance management. I thought it would be pretty straightforward and valuable to clients who are looking to better manage performance, identify top and bottom performers, implement pay-for-performance, etc. — especially in this economy.

Over the last couple of months we have been speaking with numerous software vendors, consultancies, and organizations about this very issue. Sure, it was easy to quantify efficiency-based cost savings like easier reporting, time savings for managers and employees, etc. But how about these? (And remember, you have to show verifiable, measurable dollar savings directly linked to employee performance management):

• Increased retention
• Increased employee engagement
• Increased productivity due to competency alignment with job requirements
• Reduced time to productivity in new roles/projects
• Visibility into your bench strengths
• Visibility into goal attainment
• Competencies aligned with job requirements

These are just a few examples of the benefits that neither vendors, clients, nor consultancies could quantify to my satisfaction. Anyone have suggestions on how to quantify these?