A clause for alarm
Published: 17 Jul 2002 08:50 BST
Many companies find themselves negotiating numbers in the dark because most suppliers do not make their price lists public. Commercial and government customers need to secure bids from several companies and shop for the best deal.
"I had one major financial institution client tell me they thought they got a great deal," DeSalvo said. "They said the vendor was giving them a 75 percent discount off the list price. But I told them that discount was actually more like a 10 percent discount off of list, based on what I knew others were getting. They're now in a whole new renegotiation effort."
A critical question customers must ask software makers is what happens at the end of a term license. Many buyers do not know if they must give back the software or what consequences they face if they choose to continue using it.
Software manufacturers will often try to persuade customers to upgrade their software to new licenses, but analysts say customers should think twice to make sure they are getting a good trade-in value.
Sometimes, however, a customer has little room to negotiate if a product is deemed an absolute necessity. As a case in point, many companies and agencies that use Microsoft software are bracing for a change that calls for them to commit to a certain level of annual spending.
Under its controversial licensing plan that takes effect this month, customers need to pay an annual fee that commits them to buying operating system and application upgrades ahead of time. The old system allowed customers to upgrade their software whenever they desired or when their budgets allowed.
Microsoft customers may face an increase in fees, ranging from 33 percent to 107 percent, if they do not sign aboard by the July 31 deadline, according to Gartner. The research firm is advising Microsoft customers to either join the program or use a provision in the older licensing plan to avoid a substantial cost increase should they miss the deadline.
That could present a no-win situation for customers, particularly in these times of economic uncertainty and budgetary constraints.
"In 1998, customers may have projected an increased need for capacity -- but then suddenly, with the downturn, they don't see the same growth line going up," said Mike Chuba, an analyst with Gartner.
Others agree that the possible turns of the future are often overlooked.
"An overarching consideration is to provide for changing business conditions," said Barney Kantar, a committee member and former head of the Society for Information Management's IT Procurement Working Group Steering Committee. "One should try to anticipate as many contingencies as possible...Too many times people have found themselves in cases where the parties never contemplated the changing circumstances of their business or the particular uses of the software."
In such circumstances everyone involved could find themselves at risk.
"Vendors like to sell these things as partnerships and partner with customers -- partnering means if I run into problems, you share my pain," Chuba said.
Such pressures are likely to escalate as software manufacturers make an even greater push to land a sale in this market downturn.
"All customers should read their contracts," Leslie Rubin, director of Oracle's global pricing communications, said. "When you buy a car...you read the contract...Same thing holds true with software. We encourage our customers to read their license agreements and ask questions of us at any time."
Industry veterans say customers must not be deterred from doing whatever they can -- and more often than not, that means exercising common sense.
As Curtis Wolfe, chief information officer with the state of North Dakota, said simply: "The key to getting a good contract is knowing what you need to buy, defining it well, and then matching it up to the vendors that will fill your need."
Previous
Did you find this article useful?
201 out of 337 people found this useful
Digg
Slashdot
Del.ici.ous
Stumble
Reddit
