Many of you will be in the midst of a contract negotiation or maintenance renewal with BMC and/or CA at the moment, because both software vendors do a large proportion of their license deals in the January to March quarter as it’s their financial year ends on March 31. It’s a sourcing cliché that software companies give their best discounts at their financial year end, but just because you are making a purchase in month 12 doesn’t mean that you are getting a good deal. Through client interactions, I see a lot of software deals and I am often surprised by the gulf between the latest deal on the table and what I would consider to be a market best deal – one that sets the relationship up for mutual success, balancing price, flexibility and risk.
Buying software from powerful providers such as BMC and CA is very different from buying hardware, services and non-IT categories. Unfortunately, many sourcing professionals seem to think that they’ll look weak if they engage external expert help to coach them during a negotiation, but it isn’t a question of just buying additional haggling advice (although that can sometimes help), it’s really a question of buying deep, current market knowledge. Unless you have that, you risk:
Emerson Network Power today announced that it is entering into a significant partnership with IBM to both integrate Emerson’s new Trellis DCIM suite into IBM’s ITSM products as well as to jointly sell Trellis to IBM customers. This partnership has the potential to reshape the DCIM market segment for several reasons:
Connection to enterprise IT — Emerson has sold a lot of chillers, UPS and PDU equipment and has tremendous cachet with facilities types, but they don’t have a lot of people who know how to talk IT. IBM has these people in spades.
IBM can use a DCIM offering — IBM, despite being a huge player in the IT infrastructure and data center space, does not have a DCIM product. Its Maximo product seems to be more of a dressed up asset management product, and this partnership is an acknowledgement of the fact that to build a full-fledged DCIM product would have been both expensive and time-consuming.
IBM adds sales bandwidth — My belief is that the development of the DCIM market has been delivery bandwidth constrained. Market leaders Nlyte, Emerson and Schneider do not have enough people to address the emerging total demand, and the host of smaller players are even further behind. IBM has the potential to massively multiply Emerson’s ability to deliver to the market.
I’ve been with Forrester for just over a month now. It’s great to be involved with our clients and communities and to be helping businesses across the world evaluate the quality of software suppliers' proposals from a commercial perspective (e.g., is this a great deal or can the supplier do better?). One of the best parts of being at Forrester now is seeing the continuation of the work I did prior to joining Forrester — advising businesses on software contract and pricing negotiations. One thing I noticed then, and continue to hear about now, is the reluctance of software suppliers like IBM, BMC, CA, and Compuware to publish meaningful list prices or to explain how their price book worked or how discounts had been determined. Time and again I had to ask suppliers to un-bundle prices and confirm the basis for the net prices they were proposing. Does anyone else agree with me that pricing should be clear and transparent and not a black art?
Here’s an example of an “art” that should be science: list pricing. While it’s logical to think list pricing is the same foundation upon which all bids are built, that’s actually not the case. Often, I found that my clients were being quoted “list pricing” that was different. Isn’t list pricing supposed to be the same by definition? Which is why you may with good reason doubt the validity of a list price or the competitiveness of a discount that you’re being offered by a software supplier. It’s why I love my work, and why you should make sure you get third-party validation of your deals.
How you do validate your software vendors’ list pricing and proposed discounts?
On November 16, Accenture and BMC announced the expansion of their already existing relationships with joint development and delivery agreements plus additional technology services for the ongoing BSM journey. Beyond gaining additional delivery consultants to BMC’s Professional Service organization, this will also allow both companies to focus on developing solutions which allow IT organizations to optimize and streamline their operation while taking advantage of technologies such as virtualization and cloud computing.