The Next Three Weeks Are Very Important To Microsoft, And That Gives Buyers Leverage

Duncan Jones

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.

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ERP Versus Best-Of-Breed — Emptoris' SAP-Shop Customers Give Their View

Duncan Jones

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?

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Cloud Strategies On The Brain

Bill Martorelli

Recently, it seems that IT professionals cannot turn around without seeing another industry announcement involving the word "cloud."  I am guilty too -- in fact, the SVM team at Forrester has written extensively on the topic of what cloud strategies mean to sourcing and vendor management professionals.  Cloud impacts every technology, service category, industry vertical, geography, and company size differently. But despite impressive growth in software-as-a-service, infrastructure-as-a-service still takes a back seat to more conventional outsourcing “towers.”

My colleague, Wolfgang Benkel, and I recently published The Forrester Wave™: Global IT Infrastructure Outsourcing, but we realize there are unique regional considerations, which we covered in separate market overview reports for North America and Europe. In terms of what client references told us about what they are actually outsourcing from their IT infrastructure outsourcing providers, services like help desk, deskside, and storage management predominate, while old (which are on their way out, i.e., mainframe) and the new (which have tremendous growth potential, i.e., IaaS) technologies are among the least represented.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

We will present the findings from this Wave in a teleconference on May 12, 2011. Click here to register for the teleconference now.

KPMG-Equaterra highlights Outsourcing Advisor Consolidation

Bill Martorelli

KPMG’s recent acquisition of Equaterra signals some new dynamics in the market for outsourcing advisory services. The acquisition creates an intriguing combination of capabilities encompassing high-level consulting services for tax, supply chain management and IT strategy with Equaterra’s proven outsourcing transaction strengths. Moreover, it confirms a mini-wave of industry consolidation following TPI parent company’s Information Services Group (ISG) acquiring long-time benchmarking specialist Compass (more recently, ISG acquired public sector specialist STA Consulting).  

The mini-wave of consolidation may seem paradoxical given that growth has returned to the outsourcing marketplace. Forrester believes the overall market for such services will grow 7.1% to $254B this year. If the outsourcing market is again growing, why are the winds of industry consolidation blowing? Although the opportunity is broadening, large mega-deals that firms like TPI and Equaterra grew to prominence on are getting scarcer and scarcer. Moreover, clients are taking a more holistic view of outsourcing alongside evaluating shared services and other organizational dynamics, creating the need for a broader value proposition extending beyond transactional services. Although many outsourcing advisory firms have gone down this path with strategy and research services, the KPMG-Equaterra combination creates an unusually strong combination. KPMG, which heretofore had lagged principal competitors PwC and Deloitte in the scale of its outsourcing advisory service, should benefit substantially from the addition of Equaterra’s resources and capabilities.

Please vote in our Unfair Licensing Policies survey

Duncan Jones

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

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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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