7 Steps to Negotiating Your Best Possible Deal on Annual Support
Many Customers Believe They're Locked Into Existing Enterprise Maintenance Contracts — But Every Year Is an Opportunity to Negotiate Contract Costs
Most customers reach a point in the ownership life cycle when the ongoing cost of enterprise software support and maintenance no longer provides a proportionate value back to the business. Frustrating realities:
- Legacy applications face forced end-of-life deadlines. And when the cost of an upgrade is equivalent to putting in new software — despite customers having duly paid the vendor significant maintenance fees for years — customers often revolt.
- Market consolidation leads to fewer choices for perpetually licensed software. With fewer options for on-premise software, customers see a dwindling of the core benefit of software ownership.
- Support and maintenance fees go up despite the vendor paying lower costs to maintain mature software. By Year Five of the software life cycle, vendors have worked out most bugs in the software release and reduced the necessary staffing in research and development. However, vendors seek greater fees for support and maintenance just as their costs drop.
In this context, a proposal from Rimini Street gives you valuable bargaining power when you negotiate annual support fees with your vendor. Indeed, third-party maintenance creates counter-balance and customer choice.
Savvy Customers No Longer Pay Oracle or SAP Full-Price for Annual Maintenance
Instead of paying premium prices for lackluster service, customers are negotiating maintenance discounts from Oracle and SAP — or switching to value-based third-party software support and garnering impressive savings while enjoying premium-quality service.
No matter which support option you choose, industry analyst research shows that customers who leverage a competitive proposal for annual support can negotiate a better maintenance deal. Likewise, if you don't have a concrete competitive proposal, you don't have much leverage.
So far so good. But how, exactly, do you negotiate with the vendor?
The Seven Steps to Negotiating Success
In a 2013 InformationWeek webinar, noted ERP industry analyst R. "Ray" Wang — who has years of personal experience helping companies negotiate better deals with Oracle and SAP — presented what he called "The Seven Steps to Negotiating Success":
| 1 | Assemble the right team. Your team should include not only representatives from procurement and IT, but from your legal and business divisions as well. No one group has the complete big picture, so pull together ALL your support contracts and addenda in a single PDF and distribute it to your negotiation team as a starting point. |
| 2 | Identify the key business drivers. What are you really trying to accomplish? Reduce total cost of ownership? Maximize what you've already got from the vendor today? Wean yourself off the vendor and build a best-of-breed strategy over time? Establish what's really driving you to negotiate. |
| 3 | Align with the software ownership life cycle. For example, consider future mergers and acquisitions and their effect on software license allocation and maintenance fees; consider disaster backup and recovery — what happens when your vendor sunsets support for your apps and you need a critical fix? |
| 4 | Determine the adoption plan. Where do you want to go? How are you going to adopt your next set of software products? Going forward, are you going to do more or less business with the vendor? Create an adoption blueprint. |
| 5 | Align contract strategy with product adoption. As one example, if you currently have multiple systems you might consider consolidating all of them on the PeopleSoft platform and running PeopleSoft on third-party maintenance. And now all of a sudden your discussions about maintenance with the vendor are very different. |
| 6 | Identify main leverage points. Leverage point example: You are planning to move spend away from the vendor and attain better ROI by moving that spend to some of the many other state-of-the-art options out there today. |
| 7 | Finalize the negotiation strategy. Combine your real business drivers, your projected software ownership life cycles and your key leverage points. Then you may find you don't feel so locked into your existing maintenance contract. Because you've got a true negotiation strategy for success. |