How to get tough with your tech vendors

InfoWorld's guide to driving a hard, smart IT bargain in a tough economy

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Know thy vendor and thyself
Not every term and condition is as critical for every customer and every vendor, which is why it's so important to understand the vendor, and yourself, before haggling.

Take advantage of vendors' sales priorities. Over the last year, for example, Microsoft has focused on renewals of enterprise maintenance agreements, says Ullman, cutting prices from its original 25 percent per year for servers and 29 percent for applications to a more customary range of 15 to 18 percent. (A Microsoft spokeswoman said the comparison is not "apples to apples" because maintenance offers from various vendors differ.)

Microsoft also "seems to be pushing its BPOS" (Business Productivity Online Standard Suite), says Blake, while "SAP is continuing to push its Business Objects solution," and SAP and IBM are promoting use of IBM's DB2 database with SAP's ERP suite. When vendors are promoting certain products so heavily, they're more apt to be flexible on terms and price.

The art of a long-term commitment. Making a long-term commitment by prioritizing a vendor's products in your architecture can reduce the upfront price, but it also means that vendor will be harder to replace in the future. By linking its products to other widely used enterprise software and by adding new capabilities, Microsoft has managed to make its software harder to replace by customers, and thus boosted its list and street prices despite the downturn, says Ullman.

Many customers buy licenses years before they will use them to get an average 35 percent volume discount, but they end up spending more than the savings on maintenance fees for what is merely shelfware. Knowing your needs upfront helps avoid that mistake, and it lets you sweeten the deal with products or services you can actually use. Be sure to share these details with the procurement staff that negotiates the deal, says McLachlan, so they don't just opt for the upfront discount.

A vendor's culture affects the possible deal. The vendor's culture also affects the bargaining process. Although in the last two years Microsoft has become much more flexible in accommodating buyers' needs, SAP and Oracle "have held their ground," says Nuckles, and IBM and HP "are trying to be more receptive to different ideas about contracting," he says.

Oracle has an aggressive, sales-oriented culture and a large, expensive product set that can get multiple competing salespeople involved in a deal, says Eliot Colon, president of Miro Consulting. Yet smart customers can get a better deal from Oracle than other vendors because it is more flexible on terms such as limited-use licenses for peak periods, he says. An Oracle consulting partner who declined to be identified said Oracle discounts applications up to 65 percent off list and its database up to 35 percent, but it does not discount support. (Oracle declined comment.)

The anonymous EMC customer said EMC has done much in the last few years to ditch the "used car salesman" approach and has "generally removed price as a reason to look elsewhere." EMC understands that "customers are looking for value in their IT investments, and we work with them to ensure that they purchase the right products to meet their needs," a spokesman says.

Some vendors are more consistent than others in price and license terms, which helps determine how flexible a sales rep can be. SAP has the most defined and well-enforced policies, followed by Microsoft and Oracle, says Ullman.

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