Spring Training For Microsoft Negotiators

Duncan Jones

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:

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New Insights On Sourcing And Managing SAP Service Providers

Liz Herbert

Thinking about setting up a relationship or renegotiating a contract with an SAP implementation services provider? We have some exciting new insights on these third-party firms pulled straight from their customers' mouths.  We collected some great data when we surveyed 186 SAP customers using 19 of the leading SI firms for their implementation projects and saw some interesting trends surface. 

The report, Insights Into Real-World SAP Projects, highlights key areas that sourcing professionals should focus on when selecting a provider: pricing model offerings, SI industry expertise, and ability to measure business benefits.

Pricing Model Choices Correlate With Project Cost

We will be presenting more of these findings in the Insights Into Real-World SAP Projects Teleconference we are holding on March 11 at 11:00 a.m. Eastern time.  You can use the data from these customer interviews and the accompanying  Forrester Wave™ report on SAP SIs, which is due out at the end of February, as leverage for your strategic negotiations with these providers in 2011. 

Click here to register for the teleconference now.

Which Software Licensing Policy Is The Unfairest Of Them All?

Duncan Jones

Early next year I'm going to ask Sourcing & Vendor Management professionals to vote on which software companies' licensing policies they most resent as Unfair.  Fairness is a subjective quality, but it seems to me that some policies penalize customers for circumstances beyond their control that are unrelated to the value they are getting from the software. Others have serious consequences that may not have been apparent to the buyer when he agreed to the contract. Fair software pricing charges some companies more than others, but in a logical, transparent way that is related to value. Jim Hagemann Snabe (SAP's co-CEO) explained software pricing best practice extremely well in this recent interview with Computerweekly.com's Warwick Ashford:
http://www.computerweekly.com/Articles/2010/11/29/244248/QampA-SAP-co-CEO-Jim-Hagemann-Snabe-on-SAP-strategy.htm

"Q: What is SAP doing to meet user demand for greater clarity on licensing and pricing?"

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What Does Oracle's Court Victory Mean For IT Sourcing Professionals? Not Much, Actually.

Duncan Jones

Yesterday, Oracle got a surprisingly high award from an Oakland jury in its case against SAP, in respect of its now defunct TomorrowNow subsidiary.

http://www.bloomberg.com/news/2010-11-23/sap-must-pay-oracle-1-3-billion-over-unit-s-downloads.html

Photo of Oakland Raiders Fans

The Oakland Jury, pictured after the verdict.

As my colleague Paul Hamerman blogs here (http://blogs.forrester.com/paul_hamerman/10-11-23-oracle_wins_13_billion_award_over_sap  ) SAP wasn't able to test the validity of the 3rd party support model, so this case has no bearing on the separate case between Oracle and Rimini Street.  I've stated previously that IT sourcing managers should not be put off by that dispute: Don't Let Oracle's Lawsuit Dissuade You From Considering 3SPs, But Recognize The Risks.

SAP customers shouldn't worry about the financial hit. SAP can pay the damages without having to rein back R&D. The pain may also stimulate it to greater competition with Oracle, both commercially and technologically, which will be beneficial for IT buyers. 

Was the award fair? Well, IANAL, so I can't answer that. But my question is, if the basis of the award was "if you take something from someone and you use it, you have to pay", as the juror said, does that mean SAP gets to keep the licenses for which the court is forcing it to pay?

Governing Large Implementation Projects: Execution Is Key -- Findings From Forrester's Recent Sourcing Forum

Liz Herbert

We met with 30 Sourcing & Vendor Management Professionals during an action session at Forrester’s Sourcing & Vendor Management Forum in Chicago to discuss how to improve governance for large implementation projects. Clients were looking for help across the sourcing life cycle – from determining who manages the RFP process, to determining scope with internal stakeholders, to driving governance after the contract is signed.

What tactics are Sourcing & Vendor Management Professionals using to tackle these challenges?

1. Renegotiate rates with current players. Forrester’s recent survey found that 68% of organizations are renegotiating with their existing suppliers. One attendee said, “This has always been a priority, now we are bringing more efficiency and innovation to the process.”

2. Drive innovation from vendors. Everyone wants innovation from their suppliers but few receive it.  Attendees shared tips for how they overcome major hurdles to achieving this in their supplier relationships:

a. Define what you mean by innovation. Many struggle to get innovation from their providers because they haven’t defined what that means — are you looking for idea-sharing or process improvements? Determine which type of innovation you need and communicate that to your vendor.

b. Identify metrics. “It’s not just how you measure innovation; it’s how you measure successful innovation.” Clients shared a variety of metrics such as:

i. Requiring the vendor to submit continuous improvement ideas they agree are impactful to your organization

ii. Number of ideas submitted for approval

iii. Number approved

iv.  ROI of implemented idea

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An Impressive Keynote From SAP’s Co-CEO Opens SAP’s UK And Ireland User Conference

Duncan Jones

I attend several software company customer events each year, and I always feel like the only atheist in a room full of religious zealots. However big or small the vendor, whether it consistently delivers competitive advantage or overcharges for mediocre software, the people who come to the events are usually fans — people whose careers depend on their employer continuing to invest in the product they know.

The SAP UK user conference today in Manchester was no different. So when Jim Hageman Snabe stood up to deliver his keynote, this wasn’t the toughest crowd he’s ever faced. Whatever their concerns about product strategies, support costs, court cases, etc., these people are desperate for him to do well, because otherwise they are out of a job.

Nonetheless, even heretics like me would have to admit that JHS delivered a great keynote. Even Ruby Wax, the Anglo-American comedienne compere was moved to say “you could sell anything.” Here are some of the things that particularly impressed me:

·         Likeability. From linking his speech to Ruby’s opening routine, to funny and pertinent family stories, JHS showed what sort of person he is. This is very different from his predecessors and competitors. When he says he wants SAP to be more customer-focused, it’s clear that he means it.

·         Clarity. JHS set out simply and effectively where he wants SAP to focus its development. He set out six themes: quality first, stabilize the core, reduce TCO, innovate without disruption, improve usability, give customers predictability. Then he explained succinctly how SAP is addressing each one, in parallel with its vision for in-memory computing, on demand availability, and mobile device usability. Even if you disagree with his vision, you’re in no doubt what it is.

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At Last, After A Long Courtship, They’re Engaged! (Ariba and Quadrem, That Is)

Duncan Jones

No, I’m not wasting Forrester’s blog space for yet more coverage of the royal engagement. I think Ariba’s proposed acquisition of Quadrem, that it announced today, is much more interesting. http://ht.ly/3bPei

Royal souvenir plate

Forrester has been predicting, and advocating, consolidation in the procure-to-pay market for a while:

“Once consolidation starts, the natural imperative of scale in the technology business will transform the market into one in which a few large, successful, interoperating networks enable buyers to reach all their suppliers, however small or physically remote.” Enterprises Should Push Supplier Networks To Deliver Interoperability, July 2009.

While I’m unqualified to comment on whose investors do better from the $150m purchase price for a company with about $50m revenue, I do believe the merger is good news for both sets of customers and suppliers. Firstly, Ariba reinforces its place as one of the four or five large supplier networks that will eventually dominate the market. Its customers now get access to a wider stable of suppliers. Quadrem originated as a marketplace for mining companies, so it is particularly strong in MRO categories and in natural-resource-rich regions such as Africa and Latin America where Ariba is under-represented.

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Sourcing Groups Prepare For 2011 -- Cloud Is Key Initiative

Liz Herbert

Sourcing executives are winding down 2010 and gearing up for 2011. Most of the sourcing executives we have spoken with recently are bullish about the year ahead, despite some looming uncertainty about the economy, particularly in Europe. Spend is opening up again, and buyers are investing in more strategic initiatives. But sourcing groups still struggle to balance low cost and high value.

Many of the sourcing groups currently working with Forrester are asking about cloud as a viable alternative to traditional deployment models. Cloud promises rapid deployment, potentially significant cost savings, and variable pricing in line with how buyers want to pay in the current economy. And cloud offerings continue to mature in areas where buyers previously had concerns (vendor viability, security, architecture, location of data). Cloud adoption is already over 25% in North America, and continues to grow in Europe (led by UK, but also growing in areas like Germany, France, the Nordics).

Most sourcing strategies around cloud consist of five key phases:

1.       Understanding the evolving supplier landscape and market maturity across cloud offerings.

2.       Educating business (and potentially IT) about the advantages and disadvantages of cloud.

3.       Building decision frameworks to support cloud purchases.

4.       Creating a contract negotiation and pricing strategy for cloud; building contract templates.

5.       Working with business, vendor management, and IT to routinely evaluate ROI and decide whether to renew relationships or find alternatives (potentially cloud, hosted, on-premise, or hybrid).

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Wanna See Something Really Scary? Five Ways To Scare Your CIO This Halloween

Christopher Andrews

With Halloween just around the corner, it’s time to get creative about how you can scare the pants off of the people in your IT organization. I’ve been attending a fair amount of CIO events recently, and in the spirit of Halloween I put together a few costumes that I can guarantee will keep your CIO up at night. 

  • A Storm Cloud. While “The Fog” might have scared your CIO in 1980, thirty years later it's the cloud that is scaring him. Despite all of the hype around "as-a-service technologies" over the past two years, Forrester has found 48% of IT decision makers still say they are “not interested” or “have no plans to adopt” software-as-a-service -- a number that rises for other cloud-based offerings. Why the lack of interest?  Security, integration, and lack of customization top the list of key SaaS concerns.  Yet, as the cost savings and purchasing flexibility benefits becomes increasingly obvious, IT professionals know they have to get comfortable with their fears to reap the  benefits that cloud-based offerings provide. 
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Fireman Sam Versus License Optimization, At Flexera's UK Workshop

Duncan Jones

©2008 Prism Art & Design Limited.[i]

Some of you may recognize the guy at the front as Fireman Sam, the eponymous "hero next door" of the BBC children’s program set in the fictional Welsh town of Pontypandy. What does he have to do with software licensing?

Yesterday I spoke about software licensing trends to a group of customers, prospects, and partners of licensing optimization vendor Flexera. One of my key messages was that software asset managers (SAMs) must move on from reactive firefighting via fire prevention (both of which I call "Fireman SAM") to a more proactive management of license needs (which I call "license optimization"). Fireman Sam uses traditional asset inventory and hard disk discovery tools to try to measure software usage, compare it with license entitlement, and rectify any shortfalls. Fireman Sam’s arch enemy is License Audit Bill.

In contrast, a more mature process adds analysis of what licenses you really need to the data on usage and ownership. This information enables software sourcing managers to cut expenditure on excess licenses and over-specified versions. For example, Flexera’s product for SAP enables customers to put users in the right categories, thereby minimizing the purchase of more expensive "full user" licenses.

Best Software License Management Considers Three Questions

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