Negotiating a fair deal with Adobe can be tough. With a product portfolio that includes everything from creativity and design apps to document and PDF Management to full scale marketing platforms, Adobe’s products are pervasive within the enterprise sector (Acrobat has a whopping 96% share of the PDF market). This large-scale proliferation of solution adoption across the enterprise has created a challenging IT buying environment where negotiation leverage can often feel out of reach.

But is it impossible? Certainly not. While navigating an Adobe renewal negotiation can be difficult, our recent observations on Adobe’s sales behavior may be helpful when formulating a go-forward strategy with the vendor.

Adobe currently has two main families: Creative/Document Cloud and Marketing/Commerce Technology (MarTech). Here are some key observations around both:

Adobe Renewal Negotiation Dynamics for Creative/Document Cloud

Adobe’s Creative Cloud portfolio, which includes household names like Acrobat and Photoshop but also lesser-known design apps like Illustrator and InDesign, is a preferred solution amongst many professionals on the creative side of business. Adobe has been consistent in providing functionality refreshes for each of these product families as time goes on. However, with that mindset also comes a tendency to enact price increases and the last couple years have seen multiple instances of upticks.

2023 is no exception. Clients will see an increase ranging from 15% to 40% on Creative Cloud licensing fees. Functionality updates and the addition of new license titles will be Adobe’s go-to justifications when rationalizing the price increases, and their sales teams have shown a tendency to dig their heels in when it comes to negotiating the increases.

With that said, leverage creation is key (especially during a renewal) when transacting on Creative Cloud titles.

CCE Pro Upgrade and the Addition of Frame.IO and Substance 3D

Adobe has recently been promoting its upgraded functionality within Creative Cloud for Enterprise Pro (CCE Pro) subscriptions and pushing clients to CCE Pro Plus licenses. The Pro Plus licenses come with access to all of Adobe’s Stock assets in an unlimited capacity, but also include a high price point. While the price increase may not be appealing at first, moving to the upgraded license type could present itself as a form of leverage creation when negotiating the deal as a whole.

Adobe has also been actively buying select competitors and have begun adding their product sets into the CCE portfolio as another revenue stream. Products like Frame.IO and Substance 3D are examples of these “new offerings” and agreeing to transact on a new product like this could also create extra leverage when trying to secure a competitive overall offer.

Adobe Renewal Negotiation Dynamics for Marketing/Commerce Tech

Adobe’s MarTech portfolio is a robust collection of product sets that encompasses the full gamut of tools that an enterprise-level marketing team would need to manage campaigns, establish a customer targeting strategy, and analyze data pulled from specific customer sets. With functionality improvement and innovation being a priority for Adobe’s MarTech product teams, products like the Adobe Experience Platform (AEP) and Adobe Experience Manager (AEM) have had various rebranding and license functionality changes.

New product adoption and continued license growth continue to be viable and effective levers when negotiating with Adobe, and the AEP product set has been a trending priority for Adobe sales teams as of late. Real-Time CDP, Customer Journey Analytics, and Journey Optimization are becoming increasingly common alongside AEM and other MarTech products like Target and Audience Manager. Clients who have chosen to include these products in their MarTech stack have been successful in negotiating competitive overall MarTech agreements.

Adobe has also recently shifted its enterprise-level support offerings. In late 2022, Adobe phased out its Premier Support program (that included Elite Support options) and rebranded everything. The two support options are now called Expert Support and Ultimate Support. Most enterprise clients are electing to move to the Ultimate Support option. While it affords the functionality that best fits more sophisticated marketing teams, it does come with a higher price point than the legacy Elite Support options.

Tips for Negotiating a World-Class Deal with Adobe

Frequent license rebranding, functionality upgrades, and consistent price increases are all part of Adobe’s sales identity. Familiarization and preparation around these items will go a long way towards helping IT procurement teams secure world-class negotiation outcomes with Adobe.

It’s important to request granular pricing detail. This can be a valuable tool when analyzing an Adobe deal and pushing for it to be included in proposals up front will provide transparency into how Adobe is structuring a deal.

Also, don’t forget to negotiate caps on price increases. Caps are a must have for Adobe transactions and help to guard against future price increases. Price benchmark analysiscan help you establish a fair cap.

Finally, make you’re purchasing only what you need and at a fair price. License optimization across your Adobe estate will ensure you’re not paying for unused or under-used licenses, and that you are matching best-fit license types to actual usage requirements. This, along with IT price benchmarking, can eliminate toxic spend that can account for as much as 30% of your Adobe spend.

It may be tough to move the needle on price negotiations with Adobe, but it’s not impossible. Armed with the right pricing analysis and vendor negotiation intel, material savings and concessions are achievable.

If you have an Adobe enterprise purchase or renewal on the horizon, NPI can help. Contact us today.

Microsoft announced an overhaul of its endpoint management products during Microsoft Ignite 2022 including the introduction of a new family of products. While Microsoft introduced Microsoft Intune as the new name for all endpoint management-related products, the name itself is not new. The cloud-based endpoint management platform has been known as Microsoft Intune since it was rebranded from Windows Intune in 2014. Now all of Microsoft’s endpoint management solutions are under the Microsoft Intune umbrella.

The other change is the introduction of the Microsoft Intune Suite, a collection of new advanced endpoint management and security tools. These offerings are designed to help organizations simplify their endpoint management experience, improve their security posture, and create a better user experience. They introduced platforms for supporting remote users, securely accessing on-premises resources, providing advanced insights on devices, controlled local administrator permissions and more. With a new naming convention and suite comes a new licensing model.

Microsoft Introduces New Licensing Model for Microsoft Intune

All the existing functionalities are still available for the same price, just renamed as Microsoft Intune Plan 1. This plan includes all the existing features in Microsoft Intune and is included in Enterprise Mobility & Security E3/E5, Microsoft 365 E3/E5, and the Frontline offerings of M365 F1/F3. Microsoft Intune Plan 2 is an add-on to Plan 1 and offers advanced endpoint management capabilities such as Microsoft Intune Tunnel for Mobile Application Management and Management of specialty devices.

Tunnel for Mobile Application Management (Tunnel for MAM) is a lightweight VPN for Android, iOS and iPadOS devices that provides secure remote access to on-premises corporate resources. This enables organizations to be more flexible with the devices that users can work from, enabling IT to provide that lightweight VPN on personal devices without needing to manage the entire device. Just managing the app will now be sufficient to provide secure remote access to on-premises corporate resources.

Microsoft Intune Management of specialty devices is a set of device management, configuration and protection capabilities for special, purpose-built devices such as augmented reality and virtual reality headsets, large smart-screen devices, and conference room devices. IT can now also achieve a zero-trust security model by relying on the management capabilities for specialty devices. Those capabilities enable IT to provision, manage certificates and Wi-Fi, improve security with conditional access, verify compliance, manage the app lifecycle, and provide remote actions.

The full Microsoft Intune Suite is where advanced features are introduced and are also available as add-ons. These include:

• Microsoft Intune Remote Help enables IT administrators to provide remote assistance to their end users, a critical component to get remote
  workers as productive as possible by allowing IT to remotely troubleshoot issues on the desktop of a user or remotely assist a user with a technical question. As a standalone offering, it may not be in the same playing field as competitive products yet, but with the announcement of support for Android and Mac devices, that might change in the near future.
• Endpoint Privilege Management (EPM) is probably the most important platform that has become available with the Intune Suite. EPM enables organizations to rely on the least privilege principle in their zero-trust model. EPM provides a controlled elevation of standard users on Windows devices. That allows IT to provide users with standard permissions without getting int the way of user productivity. IT can configure the elevation settings and rules for the user, and the user can run the required installation or process with elevated permissions. There is no longer the need for providing those type of users with additional local administrative permissions, meaning a lower attack surface by introducing the least privilege for users on their corporate devices.

With the Microsoft Intune Suite, Microsoft introduced many new utilities and has already announced new features and entire new components of the product family as a whole. The first additional component that Microsoft has announced is Advanced App Management, which will offer organizations an enterprise app catalog with controls for easy app discovery, deployment and automatic updating. This will help organizations with mitigating risks that are introduced with outdated applications.

Another component that Microsoft has announced for later this year is cloud certificate management, which will offer the ability to issue and manage certificates to devices without the need for an on-premises infrastructure. This could apply to certificates that can be used for connecting via VPN or WiFi and could benefit organizations that are now still relying on that on-premises certificate infrastructure for providing certificates to end-user devices.

Changes to Licensing Reveal New Opportunities for Leverage

According to Microsoft, this is just the beginning for its Intune Suite of offerings. More additions and capabilities are anticipated for later this year. These developments are welcome as organizations try to improve their security posture and stay ahead of a constantly evolving and highly sophisticated threat landscape.

However, changes to Microsoft licensing typically imply some degree of buyer risk. There is opportunity to overspend and/or overbuy if you’re not fully up to speed on Microsoft’s licensing terms and their implications for new and existing security product customers. Additionally, many organizations with a multi-vendor approach to security may have an opportunity to consolidate disparate vendor footprints and/or introduce new competition for added negotiation leverage.

Qlik recently announced it has completed its acquisition of Talend, an open-source data integration platform. This acquisition aims to bring together a shared vision and a rich portfolio of solutions for data integration, quality, and governance. As reported by Diginomica, Qlik CEO, Mike Capone shared some highlights of the acquisition:

“Qlik, together with Talend, will bring significant benefits to customers, including expanded product offerings, enhanced support and services, and increased investments in innovation and R&D. Qlik’s broad expertise in data integration, analytics, AI and machine learning combined with Talend’s data integration and data quality solutions, will provide customers with the most comprehensive solution in the industry.”

The acquisition has given rise to a few customer concerns. One is around Qlik’s commitment to an open data platform. Qlik has said publicly it will “continue to remain open to virtually any data source, target, architecture, or methodology, ensuring customers always have the data they need, whenever they need it.”

Another concern is pricing. Given Qlik announced its intent to acquire Talend in early 2023, this is fast turnaround time compared to other M&A transactions in the tech sector. Part of that is likely to do with Thoma Bravo’s involvement as the PE firm looks to streamline its acquisitions and accelerate profitability. Such a quick integration could signal changes coming down the line for Qlik and/or Talend pricing, especially with Qlik’s continued buildup of its data integration platform. Because of potential changes, NPI recommends enterprise customers review existing (or prospective) Qlik and/or Talend agreements as soon as possible.

Review Any Existing Qlik and Talend Agreements ASAP

For enterprise customers with existing agreements with Qlik or Talend (and especially those organizations with agreements with both vendors), NPI recommends an immediate benchmark of pricing and cost-related business terms. NPI believes the speedy acquisition signals a good chance that pricing will quickly become dynamic and could increase in the near future. Talend offers some natural synergies with its own solution that will likely create even more data-driven capabilities in Qlik’s platform as well.

As with any acquisition, new ownership is highly motivated to realize the benefits of the investment. Increased prices are a tried-and-true tactic. Performing IT price benchmark analysis and enterprise agreement renewal optimization on existing agreements is one of the most effective ways to minimize or mitigate the impact of pricing changes.

One way customers can fend off short-term price increases is to push for an early renewal of their purchasing agreements. This is especially important for Talend customers. It’s possible that Qlik/Thoma Bravo will not want to honor pricing agreements that are unfavorable for the vendor. Securing favorable pricing now before the vendors rationalize pricing could lead to material savings over the course of the agreement.

Qlik customers have their own reasons for pursuing early renewals. The vendor recently filed paperwork to look at potential public offerings that could lead to some degree of decoupling from Thoma Bravo. This is just one more pricing dynamic that may shift out of customers’ favor, and one more reason to secure best-in-class pricing, licensing and deal flexibility now.

Look for Inroads with Other Thoma Bravo Vendors

Thoma Bravo is a private equity firm with a focus on software and technology companies. Over the last 20 years, the firm has since grown to become one of the largest private equity firms in the world, with over $127 billion in assets under management. Thoma Bravo is known for its “buy-and-build” investment strategy, which involves acquiring companies and then using their resources to acquire other companies in the same industry. This strategy has helped the firm to create some of the largest software companies in the world, including Proofpoint, Sophos, and Instructure.

With that in mind, it’s possible that Talend could see a huge benefit from massive PE resources from Thoma Bravo, and both vendors’ solution sets could see a big jump in quality in the coming years. Because of the number of vendors included in Thoma Bravo’s portfolio, it makes sense to take a look at other vendors under the Thoma Bravo umbrella (when/where appropriate).

Are you looking to optimize an upcoming purchase or renewal with Qlik or Talend? NPI can help – contact us today.

As we approach the mid-year mark, many procurement leaders have been tasked with getting rid of cost waste across the IT ecosystem. This is not a byproduct of any sort of widespread slashing of enterprise IT budgets (most enterprises will spend more, not less, in 2023). Rather, it’s a cautious response to the current business climate, and a doubling-down on good IT budget hygiene.

The challenge for many IT procurement practitioners is where to begin. After all, there are a million ways to cut IT costs. Our advice is to focus on areas that have the potential to deliver the most immediate and material savings with the least amount of disruption.

One of those areas is telecom. Inspection of enterprise telecom costs almost always reveals significant, unintentional overspending. This can be surprising to those enterprises that have already invested in telecom expense management tools. It’s not that these solutions are ineffective; it’s that they primarily focus on spend visibility – and that’s only one element of telecom spend management.

Meaningful enterprise telecom cost reduction requires getting to the root of the problem, which requires continuous usage/plan alignment as well as understanding where (and how) carriers are extracting unplanned revenues. Also important is optimizing usage and cost at a regular cadence.

The good news is telecom cost reduction and remediation can be relatively painless when aided by the right resources. Here is a checklist of things you can do right now to eliminate wireless and wireline overspending for the remainder of the year (and beyond):

If you haven’t optimized your telecom carrier agreement in the last 18 months, it’s time.

This is ground zero for savings – 15% to 30% in most cases. That’s particularly true for customers that haven’t optimized their carrier agreements in the last couple of years, have grown or contracted significantly, or have satisfied their minimal annual revenue commitments. Four key questions to ask during carrier contract optimization are: Have we benchmarked pricing/rates to ensure we’re getting the best deal? Are we receiving best-in-class discounts and credits based on current and historical spend volume? Are contract terms and conditions world-class? Are there penalties or fees that we can negotiate down or out of our agreement (such as early termination fees)? And don’t forget reviewing cost-related terms in your contracts (e.g. rebates, credit incentives, discounts) to make sure your carrier is in compliance.

If you have more than 5,000 subscribers, review usage and adjust subscriptions.

If your usage doesn’t align with the right service/subscription, you’re probably overpaying. Best practice is to conduct a review of actual and forecasted usage, then align to best-fit service options. This helps you accomplish two things: (1) determine usage profile of individual users, and (2) groom your telecom estate for zero-use lines and underutilized services. Both can have a powerful impact on telecom costs (an average of 10% to 25%). Once you complete a baseline review, consider ongoing hygiene options such as outsourcing to a telecom expense management service.

Review and rebalance cellular data usage.

As we shared in this post a while back, the easiest way to look for cellular data usage is to download a PDF copy of your bill and review the first few summary pages. Look for usage charges or activity since last bill. These charges typically cover equipment purchases (buying a new phone), roaming charges (International), or excess usage (voice minutes, messaging, or data). Since most current plans have unlimited voice and messaging, charges are most likely due to using more data than is in the data pool. This can be remedied by re-balancing the data pool with a different subscription mix.

Prioritize telecom invoice auditing to identify and remediate billing errors.

Billing errors are surprisingly common, which is why companies should review them regularly. Be sure to review your bills through two distinct lenses. The first is making sure the carrier/provider is adhering to contractual pricing. The second is making sure they’re adhering to discounts and incentives covered in your agreement.

Prepare for spike in T1 Pricing.

This is specific to enterprise AT&T customers that have a renewal coming up in the next 6 months. If you have T1 or NxT1 access lines in your network, you can expect to see price increases of 150% to 300% or more. If you’re negotiating a more forgiving on-ramp to these higher costs, expect a very short grace period, if any. If AT&T extends the current contracted rate, it will only be for six months before the first increase. The best course of action is to immediately begin technology transformation projects that will migrate T1 access to cable or fiber optic media. If your current AT&T agreement doesn’t expire for a while, be sure to secure competitive T1 pricing from AT&T now so you are paying the best price possible while you strategize and execute a transition to other services.

Remember, it’s possible to make a material reduction to your telecom spend in 2023. The key is getting started. If you don’t have the expertise and resources to devote to telecom cost optimization internally, it can be easily outsourced to experts with deep knowledge of carrier contract and service optimization.

In February 2023, IBM unveiled changes to its Passport Advantage Agreement terms that will become effective on May 1 for existing customers. These changes significantly affect customers’ software license compliance obligations. Considering the heightened risk, it’s crucial for customers to do two things. The first is to fully understand the hard and soft implications of these changes. The second is to have a strategy in place to ensure compliance without overburdening SAM and procurement resources.

Over the past decade, enterprise software vendors have deftly shifted more compliance reporting burdens onto their customers. Notable instances include SAP’s annual self-declaration requirement and Microsoft’s Cloud Economics Assessment. IBM’s recent updates to its Passport Advantage Agreement terms aligns with the prevailing trend.

Under IBM’s latest changes, Passport Advantage customers take on increased software compliance reporting responsibilities at a more frequent cadence. Consequently, the possibility of noncompliance discovery is amplified due to more frequent compliance assessment opportunity by IBM. This blog post highlights the updates that will have the most significant impact on compliance risk and reporting. For a more detailed assessment of IBM’s changes, be sure to check out our bulletin on IBM Passport Advantage Agreement Changes: How to Tackle New Compliance Requirements.

Understanding the Implications of Changes to IBM Passport Advantage Agreement Terms

New Compliance Reporting Requirements

One of the most noteworthy changes to IBM’s Passport Advantage agreement terms is the addition of new mandatory compliance reporting requirements. Section 4.1.a of the new agreement terms stipulates clients “create, retain and each year provide to IBM upon request with 30 days’ advance notice: i) a report of deployed Programs, in a format requested by IBM, using records, system tools output, and other system information; and ii) supporting documentation (collectively, Deployment Data).”

Given the vastness of enterprise-scale IBM deployments, few enterprises are currently able to provide this information in a single month’s time. License reconciliation across an IBM estate is a huge undertaking and most companies don’t have the resources to fulfill this request so quickly. NPI recommends customers perform a full license reconciliation (or license position assessment) of their IBM estate now. This will serve as a baseline report that can be feasibly updated upon IBM’s request.

Stricter Language on Reporting

IBM’s new agreement terms enforce stricter language regarding altering approved software reporting tools or reports. This change underscores the need for accurate configurations of IBM’s License Metric Tool (ILMT) to prevent inaccurate reporting, which often favors IBM over customers. The challenge? As of right now, very few enterprises configure ILMT to report accurately. Customers should carefully (and continuously) evaluate their ILMT configurations and reported data for accuracy.

Restrictions on Software Subscription & Support (S&S)

IBM has implemented restrictions on reducing or dropping S&S – a move that’s intended to protect its S&S revenues. If a customer wants to renew expiring S&S at a lower quantity, they must provide documentation that verifies current use and installations at least 30 days prior to renewal date. Failure to deliver required documentation will result in the renewal of all existing quantities. With this in mind, customers that want to drop or reduce S&S must now approach renewals more strategically and much earlier. Be sure to build in enough runway to perform a license position assessment and remediate any compliance risk exposure.

Subscription License Termination Rules

The new terms prevent customers from terminating subscription licenses before their current term concludes, underlining the importance of precise purchasing – make sure buy only what’s needed, when it’s needed, at a fair price, with optimal flexibility. Again, a license position assessment will reveal exactly what is being used and what is not so that you have a fact-based demand definition.

How to Tackle the Challenges of New IBM Passport Agreement Terms

The changes to IBM Passport Advantage agreement terms pose a significant challenge for enterprise customers. These alterations require SAM and procurement leaders to divert resources, money, and time, potentially impacting budgets and tech roadmap execution.

Our advice to IBM Passport Advantage customers is to stay ahead of the risk. One tactic is to adopt a highly proactive approach towards license reporting, compliance, and renewal events. Another is to enlist the help of outside IBM licensing and compliance expertise to minimize both penalty exposure and the compliance burden on internal resources.

Have questions about IBM software compliance and contract optimization? We can help. Contact us.

As enterprise software costs spike, many IT procurement organizations are feeling new pressure from executive stakeholders to reassess and rein in spend. This is especially true for organizations that are also balancing transformation priorities. We’re frequently asked questions like: Where can we reduce IT spend without affecting “X” initiatives? How can we spend less without causing business or technical disruption? Are IT cost-cutting initiatives worth it in the long run?

The truth is not all IT cost-cutting initiatives deliver a material impact on spend. Some are disruptive and counterproductive to strategic business objectives. And many take years to execute, which diminishes the perception of effectiveness.

One tactic that can deliver immediate, significant cost impact without being disruptive is software renewal optimization – particularly for large software deployments (think Microsoft, Salesforce, Adobe, SAP, Oracle, ServiceNow, Workday, etc.). If approached with the right degree of curiosity and inspection, these events can deliver 7- and 8-figure savings. Here is a list of 5 questions to help you achieve material savings on your next large software renewal

1. Before you renew, what’s being used, unused or underutilized in your current environment?

Software overbuying and underutilization are two of the biggest threats to your enterprise IT budget. They account for an estimated 30% of software fees (particularly SaaS) and can be attributed to causes like dormant licenses, unused features, and purchasing higher-level licenses than necessary. NPI has seen scenarios where no-pulse users – printers, conference rooms, etc. – consumed tens of thousands of dollars in licensing and support fees each year. If you haven’t taken a fresh look at renewal demand definition, you’re effectively renewing on autopilot. Conduct a license optimization assessment in advance of your large software renewal to identify material savings as well as opportunities to liberate inactive licenses for redeployment.

2. If your vendor is increasing prices, how does the quote compare to peer purchases in the market?

The Wall Street Journal recently reported that business software price hikes are outpacing the rate of inflation. Corporate technology chiefs are regularly seeing price hikes of 20% to 30% (or more). One of the most effective ways to push back on software price increases is to perform IT price benchmark analysis on renewal pricing. This exercise will reveal how the vendor’s pricing compares to similarly scoped deals in the marketplace and identify any inconsistencies. Armed with this pricing intel, your IT buying team has more leverage to ensure you pay equal to or better than best-in-market pricing.

3. Does your software renewal contract include best-in-class business terms?

Pricing is just one cost lever in a software renewal negotiation. Cost-related business terms are another. Unfortunately, they don’t always get the attention they deserve in the negotiation process – and that’s a huge mistake, especially right now. Most companies and industries are undergoing significant change and transformation, in addition to navigating economic volatility. It’s more important than ever to determine where you can negotiate greater flexibility to ensure your agreement meets changing business and technical requirements over the term of your agreement.

4. What is your software license audit risk?

The frequency of software license audits has risen sharply over the last two years as vendors look to protect revenues and migrate customers to newer offerings. Companies that have a large renewal on the horizon – especially with mega-vendors like Microsoft, Oracle, SAP, Adobe, IBM, etc. – are prime targets. If caught unprepared, organizations can be slapped with 7- and 8-figure penalty fees (in addition to being forced to migrate to new offerings before they’re ready). NPI advises customers to perform a license position assessment before any major software renewal event with an audit-oriented vendor. This will help you spot and remediate compliance issues before the vendor becomes involved.

5. Do you have a competitive beachhead that you can leverage?

Many software vendors take assurance in the fact that it can be disruptively costly and tedious for customers to switch to the competition. But that confidence is shifting as customers encounter historical price increases, a changing competitive landscape, and new business and technical requirements. In the next four years, 30% of IT buyers will seek out other vendors at renewal time compared to less than 5% today. Whether you are legitimately looking to switch vendors, or simply want to apply competitive pressure, it’s important to bring viable competitive solutions to the negotiation table. One of the best places to start is leveraging competitors you’re already doing business with – most large enterprises have overlap that can be used to their advantage. Here’s another tip: Establish a renewal calendar and proactively identify upcoming opportunities to create a competitive threat. It requires advance planning – it’s not a tactic that you can deploy in the final hours of negotiation.

Do you have a large software renewal on the horizon? NPI can help you reduce costs and improve negotiation outcomes. Contact us today.

As economic headwinds gained strength in 2022, many IT and procurement organizations mobilized to execute IT cost optimization exercises that would reduce spend, deliver hard-dollar savings, and establish a more efficient run rate for 2023 IT operations. Now, as we speed towards the second half of 2023, it’s clear these budgets are under attack from an unanticipated adversary: software license audits. And the cost risk is quite grave.

Failure to anticipate a software license audit is very risky, especially at a time when many enterprises are taking extreme cost-cutting measures to protect their bottom lines. Large enterprises must proactively identify which software estates are most vulnerable because unanticipated software license audits typically result in material penalty fees. That outcome can be exponentially worse when the software vendor is in the top tier of the organization’s IT spend. Penalties claimed by vendors like Microsoft, SAP, Oracle, and IBM are regularly 7 and 8 figures – not something anyone wants to have to tell the CFO….

How to Minimize Software License Audit Risk

IT leaders need to take extra precautions to fortify their budget and minimize the impact of software audit judgements. A powerful way to take the offensive is to conduct self-audits of the primary software vendors in your environment. Even if you have invested in a software asset management team and platform, having a third party reconcile your environment and execute a full license position assessment (LPA) is a critically important tactic. The LPA will quickly show vulnerabilities, point to actions you can take to remedy areas of non-compliance, and refine SAM platform configuration and processes to enhance ongoing SAM operations.

NPI recommends IT and SAM leaders take the following measures now:

• Identify those software vendors that present the greatest risk financially and that may be motivated to pursue an audit with your organization.
• Review your audit obligations and deployment complexity to assess probable compliance challenges.
• Utilize multiple system-generated data sources in addition to your SAM platform to identify data gaps and anomalies. These are the same tactics a third-party auditor will use to drive non-compliance findings and establish their view of your license position.

Assess Software Audit Readiness

There are a few other dynamics to keep in mind as you assess software license audit readiness. Most important is that software vendors – particularly legacy enterprise IT vendors – are auditing customers more frequently. As we’ve noted on this blog before, software vendors often turn to tried-and-true tactics to recover lagging profits during market volatility. Near the top of the list is increasing software license compliance audits. Why? Because it works, particularly during times when customers are taking a more cautious approach to spending.

One blind spot for many organizations are “backdoor” audits. These unofficial (but equally risky) audits can be difficult to spot and usually come in the form of an informal request for deployment environment data. Watchwords include “environment review,” “certification,” “measurement” and others. It’s critical for procurement, ITAM, IT finance and IT teams to establish clear rules of engagement that detect a backdoor audit and provide protocol for vendor communications. Vendors know how to sniff out dysfunction and misalignment, which typically leads to the unveiling of noncompliance within the customer’s environment. Here are 3 tips to get your team ready.

Finally, know which vendors are targeting customers more aggressively. Which of your software estates are most vulnerable given vendor behavior, deployment size and spend? For example, if you’re an Oracle customers with a large Java deployment, you may be at considerable risk for an audit. What other software deployments in your environment are at risk?

As the old saying goes, the best defense is a good offense. Execute self-audits now to reconcile your environment and remediate noncompliance before a formal (or informal) audit arises. It’s a no-brainer way to fortify and protect your IT budget.

If you have questions about how to determine and mitigate software audit risk, NPI can help. Contact us to learn more.

In 2022, NPI analyzed over $25 billion in IT purchases made by large enterprises. What does that data tell us about where we’re heading in 2023? Economically speaking, the trend of volatility that shaped much of 2022 is still defining the market as we enter the second quarter of 2023. During this time, most enterprise IT leaders have enacted a more conservative approach to IT spend management. It is important to note that “conservative” does not necessarily mean “reduced spend” – it means a more rigorous approach to how the spend is vetted, approved, and managed.

Understanding where our clients are spending and saving in this type of business climate informs how we can help them as market conditions persist. Below are some data points that may be useful to enterprise IT procurement practitioners as they navigate not only a disruptive economic climate but an IT landscape that is changing faster than many of us anticipated heading into 2023 (hello, AI!).

Fewer IT Deals are Priced Within Fair Market Value Range

In 2022, only 11% of the deals NPI analyzed were determined to be priced at fair market value compared to 13% in 2021 and 15% in 2020. This trend isn’t surprising – the percentage of fairly-priced IT deals has been on the decline for some time. But it does speak to a larger issue in 2023. Market conditions, consolidation, and the AI race will force IT vendors to be more aggressive in their pricing and revenue tactics. These vendors are fighting harder than ever for margins that will neutralize any pullback or increased oversight of IT spend as the economy tightens.

More Enterprise Spend is Undergoing IT Price Benchmark Analysis

NPI analyzed over $25 billion in IT spend in 2022. The majority of NPI’s clients haven’t enacted major IT spending cuts despite market volatility. However, they are taking a more cautious and thorough approach to ensuring they achieve a world-class outcome on every IT purchase and renewal negotiation. Our clients are submitting more of their enterprise IT spend for IT price benchmark analysis, and performing IT contract and license optimization on more of their enterprise agreements. Which brings us to the next point…

For the 87% of purchases that were above fair market value, savings potential ranged from 3% to 50% – and a few outliers were even higher than 50%. These are material, high-impact savings that can be repurposed to fund digital initiatives or sent to the bottom line (the former is more typical for our clients).

• IBM: $7.9M
• HCL: $17.5M
• Rackspace: $8.5M
• AWS: $7.9M
• Adobe: $3.5M
• Netskope: $9.7M
• ServiceNow: $9.5M

While savings are an important direct metric of success, it should be noted our clients typically realize other indirect cost benefits. Examples include eliminating overbuying risk (which leads to higher overspend long term), structuring deals for greater flexibility and agility, increased software license compliance, and others.

Top 10 Vendors by Spend and Frequency

The top vendors analyzed in 2022 are as follows:

Toxic SaaS Spend and Software License Compliance Risks are Higher than Ever

The risk of software license noncompliance continues to be a massive burden for enterprise IT procurement practitioners. Our software license audit specialists identified compliance issues representing anywhere from $1M to $37M in penalty fees. Our license position assessment and software audit defense services help clients minimize these penalties and remediate risk on their own terms.

On the SaaS front, toxic spend is rampant. An astounding 100% of the SaaS license optimization assessments we performed for our clients revealed material toxic spend. For common enterprise SaaS deployments such as M365, Salesforce, Workday, SuccessFactors and Adobe, we identified savings of anywhere from 6% to 23%. Considering the rate at which these SaaS estates are expanding within the enterprise IT ecosystem, SaaS license optimization represents a huge opportunity for companies to save big in 2023.

Enterprise IT Procurement Advisors Are Making an Impact

The reality of enterprise IT procurement is that it’s impossible to keep up given shifting sands in the economic and vendor landscape. Practitioners need access to real-time vendor pricing, licensing, contracting and negotiation intel that helps them be an expert with every vendor during every purchase transaction. There is no room for overspending or inflexibility in this economic climate. Enterprise IT procurement teams need intel that helps them buy and renew with confidence, accelerate, and simplify the purchase process, and align today’s purchases with current and future-state business requirements.

NPI is proud to be a strategic advisor to the hundreds of enterprises we value as clients and partners (including 112 of the Fortune 500). Our 90% client renewal rate is a testament to the work we do together, and the world-class IT purchasing outcomes we help our clients achieve.

At first glance, Microsoft’s Server and Cloud Enrollment is simply another contractual licensing agreement from Microsoft with a three-year term, just like the Enterprise Agreement and Enterprise Subscription Agreement. Indeed, it is often established as a “companion” agreement with the EA and EAS. But a closer look shows that it is a much more versatile licensing vehicle.

“Is Microsoft SCE right for me?” is a question we’re quite familiar with here at NPI as we help hundreds of large enterprises optimize their Microsoft purchases and renewals. It helps to understand what Microsoft Server and Cloud Enrollment is, how it came to be, and its advantages and disadvantages.

How did Microsoft Server and Cloud Enrollment come to be?

The Server and Cloud Enrollment evolved from three now defunct agreements – the Enrollment for Core Infrastructure (ECI), the Enrollment for Application Platform (EAP) and the Enrollment for Microsoft Azure. The ECI was exclusively for Core Infrastructure as the name suggests, and the license offerings were the Core Infrastructure Suite Datacenter, Enterprise and Standard. The Core Infrastructure Suite is a bundle of the Windows Server Operating System and the System Center Suite (Configuration Manager, Operations Manager, Data Protection Manager, Virtual Machine Manager, Service Manager and Opalis, later to be renamed Orchestrator).

The Enrollment for Application Platform had a more varied product offering with SQL, BizTalk Server, Visual Studio and SharePoint Server as establishing products. The Enrollment for Microsoft Azure was self-explanatory and a “uni-tasker” – its short lifespan was no surprise.

Microsoft launched Microsoft SCE (Server and Cloud Enrollment) to provide its enterprise customers with a streamlined and flexible way to purchase and manage Microsoft’s server and cloud technologies. The primary goal of Microsoft SCE is to simplify the licensing and management of Microsoft’s server and cloud products for large organizations.

Offered as an Enrollment under the Master Enterprise Agreement, Microsoft Server and Cloud Enrollment allows customers to purchase a single enrollment that covers a range of Microsoft products, including Windows Server, System Center, and Azure, among others. Microsoft SCE also offers customers the flexibility to customize their purchasing and deployment options to better meet their specific needs. For example, customers can choose to deploy their software on-premises, in the cloud, or through a hybrid approach.

Microsoft SCE does require a commitment to covering specific products with active Software Assurance and/or subscriptions, along with minimum purchase requirements. Here are a few to consider:

• SQL: Customers must cover their full SQL footprint in production with Software Assurance or subscription, with a minimum licensing requirement of 50 Cores (Standard or Enterprise) or 5 SQL Server editions with 250 SQL CALs.
• Core Infrastructure Suite: Customers must license all their Windows Servers (production or dev/test) with the Core Infrastructure Suite license bundle, with a minimum licensing requirement of 400 Cores (Standard or Datacenter).
• SharePoint: Customers must cover their full SharePoint footprint in production with Software Assurance or subscription, with a minimum licensing requirement of 5 servers.
• BizTalk: Customers must cover their full BizTalk footprint in production with Software Assurance or subscription, with a minimum licensing requirement of 24 Cores (Enterprise, Standard or Branch).
• Visual Studio: Customers must license each user of any software licensed through MSDN subscription, with a minimum licensing requirement of 20 subscriptions. The Visual Studio offerings under the SCE are Visual Studio Enterprise with MSDN, Visual Studio Test Professional with MSDN, Azure DevOps Server CAL and MSDN Platforms.

Are there any additional commitments for Microsoft Server and Cloud Enrollment?

Aside from the minimum licensing requirements for the Server and Cloud products above, there is no commitment required to license end users or devices like the Enterprise Agreement and Enterprise Subscription Agreement do. In fact, any license with the “Additional Product” designation can be licensed via the Server and Cloud Enrollment at the same price as on the Enterprise Agreement and Enterprise Subscription Agreement.

Microsoft Server and Cloud Enrollment is best suited for large organizations that require a significant amount of Microsoft server and cloud technologies.

Microsoft SCE is especially suitable for organizations that have complex IT environments, with multiple servers and cloud technologies deployed across different locations. It enables customers to manage and optimize their Microsoft software assets, providing a more streamlined and efficient way to purchase and deploy Microsoft products. Additionally, Microsoft SCE is designed to provide enterprise customers with flexibility and customization options that meet their specific business needs.

Are there any downsides to Microsoft Server and Cloud Enrollment?

While Microsoft SCE (Server and Cloud Enrollment) offers many benefits to enterprise customers, there are a few potential drawbacks to consider:

• Minimum Commitment Requirements: As noted earlier, customers are required to make a minimum commitment to purchase Microsoft products and services for a period of at least three years. This may not be suitable for some enterprises.
• Complex Licensing Models: Microsoft SCE has complex licensing models that can be difficult to understand and manage. Customers may require additional resources and expertise to ensure that they are purchasing and deploying the correct licenses for their organization.
• Limited Scope of Products: While Microsoft SCE covers a wide range of Microsoft products and services, it does not include all of Microsoft’s products. Some customers may need to purchase additional products or services outside of Microsoft SCE, which can create additional complexity and administrative overhead.
• Limited Deployment Options: While Microsoft SCE provides customers with flexibility in how they deploy their software (on-premises, cloud, or hybrid), it does not provide complete freedom in this regard. Customers may still need to purchase additional licenses or services to fully deploy their software in the manner they require.

Overall, while Microsoft SCE can offer significant benefits to enterprise customers, it is important to carefully consider the potential drawbacks and ensure that the program is the right fit for your organization’s needs. It’s also important to perform contract and licensing optimization on your Microsoft SCE agreement to ensure you are purchasing only what you need, identify areas where you may be potentially overspending, and negotiate best-in-class pricing and discounts.

To learn more about NPI’s Microsoft Licensing and Cost Optimization services, contact us today.

Recent news of Silicon Valley Bank and Credit Suisse has taken center stage and drowned out other significant moves in the market. One example is the $12.5 billion acquisition of Qualtrics by Silver Lake and CPP Investments. Qualtrics is a customer and employee experience management company that offers a cloud-based software platform to help businesses collect and analyze customer feedback and employee engagement data.

Qualtrics’ solution capabilities have long attracted fans in the enterprise sector. They include a comprehensive platform for feedback management, user-friendly interface, analytics, strong customer support, and integration with other enterprise-scale tools. Customers include the likes of Uber, Coca-Cola, and Pfizer.

Qualtrics has also been the subject of several high-profile acquisitions in a relatively short period of time – one that may give some customers pause as the vendor finds itself again under new ownership.

A Timeline of Qualtrics Acquisition History

In November 2018, German enterprise software company SAP announced that it would acquire Qualtrics for $8 billion, just days before Qualtrics was set to go public. The acquisition was considered a surprise move, as Qualtrics had been planning an initial public offering that would have valued the company at around $4.8 billion. Instead, SAP offered a premium to acquire the company outright, citing the strategic value of combining Qualtrics’ customer experience insights with SAP’s operational data.

The acquisition was completed in January 2019, making Qualtrics a wholly owned, independently operated subsidiary of SAP. The acquisition was intended to enable Qualtrics to expand its capabilities and reach, while theoretically also giving SAP a stronger foothold in the rapidly growing market for customer experience management software. SAP eventually spun the business out as an independent publicly traded company.

The vendor performed well in its first year as a public company, with shares typically trading above its $30 IPO price. But in the last few years, Qualtrics’ market value has declined precipitously from a high of $28 billion in early 2021 to a low of around $5 billion at the end of 2022. According to TechCrunch, Silver Lake and CPP Investments’ all-cash offer seems like a fair price. The transaction is expected to close in the second half of 2023, after which Qualtrics will once again be a fully private entity.

With SAP giving way to PE firms who were already minority owners, this marks yet another new chapter for Qualtrics and any customers that are invested in its use. What will play out still remains to be seen, but SAP and Qualtrics never seemed like a perfect fit and SAP’s decision to focus on its core business (which will necessitate significant layoffs) underscores a possible win-win for both businesses. In a scenario where the vendors remain solution partners, Qualtrics may benefit from being free to connect to other SAP competitors in the market.

The backing of a major private equity firm could now mean Qualtrics is set to expand capabilities, which could be a double-edged sword for customers. On one side, innovation investment is a positive thing particularly as enterprise IT vendors begin to more fully realize the power of AI, predictive analytics, etc. On the flipside, however, is the likelihood of higher prices. NPI recommends businesses take a look at any existing investments in the CX/EX space as a result.

Qualtrics Customers Should Review Current Agreements ASAP

With the unknowns of this acquisition, NPI advises customers to review any existing Qualtrics pricing and contract terms. If these elements are favorable, now is a good time to renew any agreements ahead of time.

While we don’t yet know the changes the new owners will implement within Qualtrics’ business, the vendor’s leadership looks to be mostly intact. With that in mind, we don’t anticipate any noteworthy shifts in vendor behavior for the next 12 to 18 months – but customers should remain vigilant.

Those Invested in Medallia, InMoment, SurveyMonkey, Adobe Experience Cloud, and Other Competing Solutions May Want to Review Pricing Ahead of Renewals

In many ways, Qualtrics could see a huge benefit from decoupling itself from SAP, a match that many believed never made sense in the first place. Now with massive private equity resources from Silver Lake and CPP, Qualtrics could see a big jump in solution quality in the coming years. However, this means that main competitors like Medallia, InMoment, Adobe, SurveyMonkey, and others will likely see an increase in pricing pressure from the market, especially if Qualtrics becomes more of a standout.

Changes in market pricing will reframe what constitutes fair market value pricing for CX/EX software purchases. Customers should be sure to perform IT price benchmarking on any purchases and renewals to make sure they’re paying a best-in-class price in the context of the most recent market pricing intel.

NPI’s IT price benchmark analysis and vendor negotiation intel can help you secure a world-class outcome for your CX/EX purchase or renewal. Contact us to learn more.