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.”
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.
As soon as you think you understand software companies’ policies on virtualization, a new problem appears that makes you tear your hair out and scratch your now-bald head. This month’s conundrum is whether or not VMware’s ThinApp product breaches your Microsoft Windows license agreement:
However, Microsoft, via its knowledge base, claims that “Running multiple versions of Windows Internet Explorer, or portions of Windows Internet Explorer, on a single instance of Windows is an unlicensed and unsupported solution.” http://support.microsoft.com/kb/2020599/en-us#top
VMware doesn’t warn customers that ThinApp could cause them Microsoft licensing problems, but neither does it claim that it is legal. It merely advises customers to check with Microsoft.
Yesterday, SAP announced its intention to acquire business-to-business (B2B) integration provider Crossgate http://www.sap.com/index.epx#/news-reader/?articleID=17515. This was no great surprise, as SAP was already a part-owner and worked closely with the company in product development and marketing and sales activities. SAP will be able to offer a much better ePurchasing solution to customers when it has integrated Crossgate into its business, because supplier connectivity is currently a significant weakness. As I’ve written before (So Where Were The Best Run Businesses Then?), many SRM implementations rely on suppliers manually downloading PO from supplier portals or manually extracting them from emails and rekeying the data into their own systems. Not only does this cost the suppliers lots of money, it creates delays and errors that discourage users from adopting SRM.
SAP doesn’t intend to use Crossgate only for transactional processes; it also wants to develop support for wider collaboration between its customers and their supply chain partners, both upstream and downstream. That’s a sound objective, although not an easy one for SAP to achieve, because its core competence is in rigidly structured internal processes and it hasn’t done a good job to date with unstructured processes, nor with ones that go outside the enterprise’s four walls. Buyers who think they can force suppliers to comply with their edicts, just like employees do, soon end up wondering why no-one is using their ePurchasing solution.
What does the acquisition mean for sourcing professionals who are wondering where Crossgate or its competitors fit into their application strategy? My take:
I’m in Las Vegas attending Infosys’s Connect 2011 client event, and one of the recurring themes in sessions and side conversations has been the nature of Strategic Partnership. The phrase risks becoming a meaningless cliché, so I was interested to research what it actually means to Infosys execs and clients. I got some interesting, varied perspectives.
A large CPG company’s central IT group described its interpretation in a couple of sessions. It demands, among other things, a strong cultural fit, a commitment to win:win solutions to problems, and regular meetings with partners’ CEOs. This group has 12 “strategic partners” who get a lead role in a specific area, but may not even be considered in other areas, even though they have good solutions in their portfolio. I might argue the semantic point about whether this means they are merely ‘important, at the moment’ rather than ‘strategic’. However, the key point is that the two parties’ commitment to making the partnership work creates a better, stronger commercial framework than any legal agreement could deliver.
Raj Joshi, MD of Infosys Consulting, described his group’s Value Realization Method (VRM) that formally tracks each project’s expected business benefits from the initial project business case through design and implementation and onto ongoing value delivery. Joshi stressed the importance of shared incentives, such as risk/ reward sharing commercial models, in ensuring projects’ success.
I’ve just had a negotiation lesson from Number-one-Daughter, who has been studying in China for a year. I’ve just returned from beautiful, vibrant Beijing (北京) where my wife and I met her, to see the city and to help her get her luggage home (which explains the 6 pairs of ladies’ shoes in my suitcase and makeup in my carry-on — at least, that’s my story and I’m sticking to it).
A couple of months ago I was blogging from sunny Barcelona with the Red Sox 0-6. Now I'm in Barcelona again for our IT Forum, but this month its raining heavily here, while back in UK we officially have a drought. But the good news is that Boston is 6-0, at least in Yankee Stadium. A lot can change in two months.
The same is true in IT. Just now, Microsoft faces threats to its strong market position from many directions, and Steve Ballmer is under pressure, but strong results for its June fourth quarter could deflect the flak. That's one reason why sales teams will have greater incentives than ever to close Enterprise Agreement deals in the next couple of weeks. Hopefully if you're negotiating an EA right now, whether a new deal or a renewal, you've read my report Consider These Five Criteria When Choosing A Microsoft Volume Licensing Program and maybe even had an inquiry call with my colleage Christopher Voce or me. One common question we get is whether the stated deadline to accept an offer is real, or will the same deals be available in the last days of the quarter or even in the subsequent months? The short answers are Yes, it is, and no, they won't." Microsoft has its own deal approval processes that take time to complete, and though it won't want to reject Purchase Orders, it may have problems processing them if they arrive too late. And the deals available almost certainly wont be as good next quarter because sales teams will still have 9 months remaining in which to recoup any shortfall.
My tireless research of sourcing and vendor management technologies has brought me to Barcelona, for Emptoris’ EMEA customer conference. I’d like to assure my colleagues in Boston, still cold and still "0 and . . .", that I’m not writing this while sitting in the sunshine at an open air café, sipping a cold cervesa and watching the lightly clad señoritas walk by. I’d like to assure them that, but I can’t, because this is exactly what I am doing. Hopefully you’ll also be able to experience Barcelona if you attend our IT Forum here in June: http://www.forrester.com/events/eventdetail/0,9179,2510,00.html
I saw some very good presentations by customers about their implementations of Emptoris’ sourcing site. As a fearless analyst, I asked the question about the elephant that, while not actually in the room here in Barcelona, is certainly present in the customers' IT environment, namely SAP. All the speakers were procurement professionals in supposedly SAP-shops, so why had they chosen Emptoris over SAP’s sourcing and CLM products?
As promised in a previous blog post: Which Software Licensing Policy Is The Unfairest Of Them All? , we've launched a survey to find out what sourcing and vendor management professionals think about some common software licensing policies. This isn't about bashing powerful software companies, but about building a consensus behind a campaign to bring software licensing rules up to date - i.e. protection of innocent buyers, rather than regime change. I've narrowed an initial list of 30 questionable policies down to this Foul Fifteen of candidates for the (un)coveted "Unfairest" award:
1. Double charging for external users
2. Prohibiting or overcharging for anonymous users
3. Maintenance on shelfware
4. Counting cores instead of processors
5. Counting all processors in a server, even if partitioned
6. Upfront license purchase only, not phased in line with project milestones
7. Maintenance repricing
8. Insisting on purchase of all licenses before implementation starts
9. Product enhancements packaged as new SKU’s
10. Licensing by deployment, even if unused
11. Charging for use of modules that customers cannot control or track
12. Retaining right to change licensing policies at any time
13. Multiplexing – definition is unclear or too wide
It’s a beautiful sunny day here in England, the first snowdrops have appeared in my garden and at least one of my pet hens has restarted laying – yes, Spring is on the way. Meanwhile, in the US the main harbinger of the changing season is the migration of baseball teams to Florida and Arizona for their annual pre-season ritual known as ‘Spring Training’. In the software sourcing world, the rites of Spring often include major negotiations with Oracle and Microsoft ahead of their fiscal year ends of May and June respectively. That’s why this is a perfect time of year to get some spring training of your own, at one of our ever-popular Microsoft Negotiation workshops.1 Anyone considering a major purchase or renewal with the Redmond Sluggers between now and the World Series should come along to Amsterdam on February 16 or Dallas on March 2 to hear why they may have extra leverage this year, and how to use it to get the best possible deal.
Microsoft had very high sales revenue for its December quarter, particularly the business division, but that didn’t come from the multi-year Enterprise Agreement (EA) and Software Assurance (SA) deals that the direct sales teams need. Microsoft’s revenue boost came from one-off purchases of its just-released Office 2010 product through its retail and small business programs. EA/ SA deals would initially appear in the accounts as unearned revenue in the balance sheet, and that was at the same level as two years earlier.2 So these results are consistent with our research that predicts that Microsoft’s direct sales teams will struggle to meet their tough EA bookings targets this year, and that will strengthen prospective buyers’ negotiating position.
We can’t promise warm weather or adoring fans, but our spring training session will help you with: