Muscarella warns users of "friendly" vendor-paid services that assess how well a customer is managing its software. These are often "really not that friendly once you start," he says, because if the vendor finds unlicensed software, the result is an audit. In 80 percent of such engagements he's seen, "the vendor winds up asking for more money."
If you threaten to shift suppliers, prove you're serious, says Blake. Rather than just put together a list of competitors, invest the time to do it right. When an incumbent provider starts seeing proposals from competitors and hears a customer ask about termination rights, "you're really getting its attention" and making it more likely it will compromise, he says.
If you can't realistically threaten to abandon your core software, consider switching subcomponents. Although migrating a large organization from Oracle's ERP applications to SAP's is "pretty audacious," says Blake, an Oracle customer could threaten to move from Oracle to a competitor for just the database that underlies the ERP apps.
Tips for better deals from IBM, Oracle, and SAP
Consultants say that when it comes to price hikes, the most aggressive vendors are those with a large suite of interconnected products on which customers have come to rely. For customers of companies like IBM, Oracle, and SAP, this can make shifting to a competitor too expensive, difficult, or risky.
Negotiation consultants offered these tips for negotiating with several such vendors:
IBM: Customers can get the best deals on agreements for software and services (and combinations of both) because "these represent strategic growth areas with recurring annuity streams" for IBM, says a 2013 Upper Edge PDF report. Companies like IBM are under heavy pressure to show rising earnings per share (EPS), and recurring-revenue deals do that the best, so publicly traded vendors will favor them. Customers that can provide faster payments to IBM "can use this as leverage in negotiations for additional concessions on price and other terms," the report says. IBM declined to comment.
Oracle: Some users delay negotiating with Oracle hoping for end-of-the-quarter deals. But in his September 2013 Wikibon post, Vellante advised against it, at least for customers negotiating deals under $2 million. It instead says such customers should "negotiate hard early in the quarter" when sales reps are less busy chasing larger deals and are trying to build their sales pipeline.
The post also said Oracle was offering "extremely competitive" deals for its Exadata storage hardware, especially for customers buying large bundles of Oracle products and services. But it warned Exadata's appeal will fade "as competitive offerings enter the market and Oracle's terms become more onerous" once users are locked in to it.
SAP: In a blog post, Upper Edge predicts that SAP will begin annual support fee increases after Dec. 21, 2016, the date on which many current "locks" on maintenance fees expires. At that point, Blake predicts, SAP will try to make up for its lower-than-usual maintenance increases during the recent recession. It may do this, he says, by raising maintenance fees based on cumulative increases in the Consumer Price Index (CPI) since the last renewal, not just since the CPI increase in the previous year. This means, he says, that if SAP did not raise its support fees for five years, and assuming the CPI increases 3 percent each year, SAP could argue for a nearly 16 percent increase in year six.
Both Oracle and SAP are also "making it very attractive" for customers to move to their cloud HR platforms (SAP SuccessFactors and Oracle in the Cloud, respectively) due to competition from Workday, says ISG's Feuless.
This story, "Foiled! How to beat software vendors' sneaky price increases," was originally published at InfoWorld.com. Follow the latest developments in IT management and software licensing at InfoWorld.com. For the latest developments in business technology news, follow InfoWorld.com on Twitter.