The analytics giant Teradata is combating falling revenues and the painful transition from on-premise to cloud delivery and fee models. This is one of the factors that have driven changes to Teradata’s pricing strategy. The vendor began launching the ‘TCore’ pricing metric in early 2017 to replace the previous ‘TPerf’- based model. These vendor-created metrics are supposed to offer an easy way to measure potential throughput and capacity. In reality, they allow the vendor to control what’s essentially a ‘black box’ pricing metric, as only Teradata uses it.

One element that calls for particular caution is Teradata’s new IntelliFlex (and the entry-level IntelliBase) platform that utilizes term subscriptions measured in TCores for hardware, software and maintenance. Touted as a new model that’s more “transparent and consistent,” NPI’s experience with TCore pricing is anything but.

Not only are offers for these new TCores highly variable on a price-per-unit basis, NPI is seeing major inconsistencies in how the vendor is converting old TPerf capacities to the new TCore model customer by customer. This inconsistency becomes more pronounced for customers on the short end of the stick when considering that this new model removes perpetual rights altogether and shifts to ongoing subscription payments in order to keep the solution running.

Teradata Pricing: Financial Reports Shed Light on Their Strategy and Spell Caution for Customers

Reviewing Teradata’s financial reporting adds to the story. The Q&A section from a recent earnings call includes the usual vague language, but an analyst question around pricing in particular drew an interesting response from the vendor’s CFO:

“I think it’s also true to say that the new customers who are coming through, with the high visible impact, the technologies we’re working on with them, and how we’re winning them as a result of that, you’re seeing better pricing on the new customers coming through. And so, that’s helping lift the overall pricing picture.” 

Indeed, margins continue to go up for the vendor despite lagging revenues. Total first-quarter 2019 revenue was $468 million, compared to 2018 first-quarter total revenue of $506 million. Meanwhile, 2019 first-quarter gross margin reported under GAAP was 47.9 percent versus 44.1 percent for the first quarter of 2018. Of interest also is the trajectory of U.S. revenues, which have been down as much as 25% in recent reporting cycles as international revenues have stayed mostly flat. While difficult to pick apart because of the way these reports group and disclose specifics, the reporting plus the CFO’s comments could suggest Teradata is offering new customers (and specifically new international customers) higher pricing to offset declining business in more established areas.

To be fair, the transition from on-premise to cloud pricing models is tough for all legacy IT vendors from a revenue perspective. But once they make it to the other side, the recurring revenues make the company more valuable. Most vendors’ pricing is volatile as they feel their way through this transition. That creates risk – and opportunity – for savvy customers.

Teradata customers should be cautious when looking into this new TCore model, and should avoid being forced to shift away from perpetual TPerfs without close analysis of the situation. Teradata is struggling as a whole, and the vendor has shown it isn’t afraid to offer inconsistent pricing to major customers.

Whether an existing customer or new, it’s imperative to conducting price benchmark analysis on all Teradata transactions. As the vendor’s pricing strategy evolves, it’s the only way to ensure the price you pay is at or below fair market value.

Are you a large enterprise client with Microsoft who hasn’t bought off on the concept of Software Assurance? If so, the Microsoft Product & Services Agreement (MPSA) may be for you. The Microsoft Products and Services Agreement is a transactional licensing agreement for commercial, government, and academic organizations with 250 or more users/devices. MPSA works best for organizations that want to license Microsoft on-premise software, cloud services, or both under a single, non-expiring agreement with no organization-wide commitment. Software Assurance is optional.

In contrast, the EA program requires you to purchase both licenses and Software Assurance. Most customers embrace the notion of the EA program and receive discounted pricing to reflect the enterprise-wide commitment being made. But sometimes even EA customers need to make purchases outside of the EA.

The MPSA program is similar to the Select (since discontinued) & Select Plus programs offered by Microsoft in that these programs permit the customer to purchase for less than the entire organization and offer the ability to purchase a license-only product. Why would you want to purchase a license-only product? Perhaps it’s a one-off situation, where you need a particular product, know that you do not plan on upgrading the product anytime soon, or perhaps there are separate legal entities that are not participating in your EA and they need to acquire Microsoft product. 

Like the EA program, the MPSA has four price levels – A, B, C, and D. Each purchase (license, license & software assurance, etc.) under the MPSA program has an associated point value and you must attain the minimum number of points throughout the year.

Microsoft has an annual compliance check to ensure that you are meeting your forecasted consumption. If you do not meet the consumption levels, Microsoft will bump you to the next lower level (only one level, regardless of consumption). Similarly, if your purchases attain a higher level, Microsoft will price the order that brings you over the next threshold at the higher level. 

To purchase under the MPSA, you must first submit a Purchasing Account Registration form to create a Purchasing Account. This is analogous to an Enrollment under the Select or Select Plus program. A Purchasing Account is a buying entity within your organization that you create to order and manage products and services by registering them to an MPSA. This account can be a department, an affiliate, a subset of personnel, or your entire organization. The Purchasing Account Registration Form connects both the purchasing entity and the legal entity to the MPSA terms. 

The MPSA program is an indirect purchasing agreement with Microsoft – you must first select a Microsoft Partner to manage the agreement. This reseller partner sets the price and invoices you. A welcome addition to the MPSA program is that you are able to have multiple partners on your Purchasing Account.

As a best practice, NPI recommends that all EA customers also have an MPSA on the side so they have the flexibility to purchase under it when needed. It doesn’t require any firm purchase commitment (any minimum purchase threshold is typically waived for EA customers), so there’s no downside – only the upside of being able to make one-off purchases without Software Assurance.

On the surface, the goal of software license optimization (SLO) is simple enough: buy only the licenses/subscriptions needed based on current and future business requirements.

Cost management is the most obvious driver. Software vendors are notorious for trying to sell you more than you need, sometimes to the tune of millions of dollars. But what about the other benefits of software license optimization? There are more advantages of software license optimization than meet the eye. In this blog post, we’ll explore 5 advantages that go beyond cost.

1. Reduced software license audit risk

To optimize software licensing, companies first need to collect actual software deployment data and compare it against entitlements to identify usage gaps (over- or under-utilization). Companies also must determine if the licenses are being used in accordance with the vendor’s product terms. This process inherently identifies areas of potential compliance risk, thereby giving the customer the ability to remediate any non-compliance before the vendor initiates a software license audit.

Here’s another way to think about it. Essentially, SLO is preventative maintenance to prepare and protect your company in the event of an audit. When a software audit does (inevitably) occur, consider these three software audit management tips:

• First, conduct internal license position assessments annually on your top three software vendors, by spend. This serves as a pre-season analysis for the real audit. Often, a company’s unintentional compliance issues are uncovered and can be rectified.
• Next, prioritize license management education. Of course, most companies do not have time to educate everyone on the ins-and-outs of software requirements, rights, restrictions, etc. However, choosing a few on-premise software estates – such as Microsoft or IBM – and educating teams through ongoing communications is critical to improving your organization’s audit readiness.
• Finally, determine your rules of engagement for all interactions with software vendors that are prone to audit. Unfortunately, almost any engagement with a software vendor representative can trigger an audit. Thus, be clear who is permitted to communicate with your representative and what can and cannot be shared. Clear and detailed instructions can help eliminate unnecessary audits.

2. Faster, More Effective Renewals

Whether an EA, ULA, EULA or some other flavor of enterprise agreement, renewals can be painful. These agreements are complex and intentionally confusing, and typically require multiple iterations in the negotiation cycle. Furthermore, they happen every 3 to 5 years, which means companies must understand all the various licensing, subscription, offering and pricing changes that have occurred during the duration of their agreement. Oh, and let’s not forget changes in the company’s own requirements during that timeframe. It’s no wonder NPI recommends companies prepare at least 6 months in advance of a large software renewal event.

Software license optimization eliminates much of the pain in the renewal process by establishing a true baseline to feed into renewal requirements. By knowing what you need (and don’t need), you can approach renewals with accuracy and expedite the buying cycle.

Fact: you can’t manage what you don’t know you own (hence the rise of software asset management as a discipline). Another fact: by 2025, worldwide cybercrime damage is expected to reach $10.5 trillion. This equates to 15% year-over-year growth. Given the expansiveness of the typical enterprise software estate, this is a concerning reality.

As discussed in this HBR.org article, organizations must have a complete picture of their infrastructure (including software). Organizations should know what’s deployed, how it’s being used and by whom, and if it’s up to date.

Once again, license optimization of your most important software estates inherently provides a layer of visibility into software deployment so that organizations can identify potential areas of vulnerability.

4. Increased Leverage During Software Negotiations

There’s a saying in enterprise software sales: “Mystery equals margin.” Enterprise software vendors have long benefitted from complex, confusing, and always-changing licensing models. For most customers, it’s difficult to stay up to speed on the hundreds or thousands of SKUs and licensing permutations offered by even a single software vendor, much less the hundreds of vendors they do business with. And, while many vendors offer guidance on how to manage software assets, they also know a lack of understanding ensures the deck is stacked against customers during negotiations.

One way to level the playing field is to demonstrate a strong understanding of your software estate as well as the vendor’s software licensing – which (you guessed it!) just happens to be a byproduct of software license optimization.

A few additional negotiation leverage tips include:

• Validate your software usage and propose a right-sized renewal. Unused licenses lead to spend waste, and enterprise vendors profit from this extra fat.
• Develop and analyze scenarios. There are many ways to configure your future state to (1) meet your usage rights needs, (2) optimize license and support/maintenance costs, (3) build in future flexibility and (4) avoid unexpected costs. Build models for various scenarios – each of which will have pros and cons. This exercise will help you make the best decisions for the business.
• Beware of the grey areas surrounding compliance. Just because you’ve read your vendor agreements and usage rights documents doesn’t mean you have full understanding of that vendor’s licensing and compliance requirements. This is an area where expert assistance is not just valuable – it’s critical. Don’t wait until an audit to clear up any confusion.
• Enlist help. Do you have Ph.D.-level licensing knowledge for each of your software vendors in-house? Do you have visibility into each vendor’s product roadmap? Are you 100 percent confident in your ability to spot compliance gaps as you optimize your software estate? If you answered no to any of these questions, consider providing your IT buying team with licensing expert resources to turbo-charge effectiveness and accelerate confident decision-making.

5. Future-Proofing for Flexibility

Part A of the software license optimization exercise is buying the best-match SKUs for your current requirements. Part B is anticipating future-state requirements and building in as much flexibility as possible while you are at the negotiating table. This is especially important for businesses with M&A activity on the horizon, businesses with seasonal workers and/or user requirements, and companies undergoing IT transformations that will lead to material expansions or contractions in licensing demand. Software license optimization in effect helps “future-proof” the software estate so it can respond to changes in licensing demand with more agility and less negative cost impacts.

Software Licensing Optimization Tips to Consider

To optimize licensing across the software estate, companies need to understand the different licensing and subscription offerings that a vendor offers and the various permutations available to them. This intel is dual-faceted in that it’s not just about understanding the options available, but also about analyzing them in context of the business’s broader IT and business strategy:

• What are the user requirements today versus three to five years from now?
• How can usage profiles be utilized to best advantage?
• Will demand for the solution expand or contract due to seasonal demand, M&A, or other factors?
• Does the business plan to move this piece of the IT ecosystem to the cloud in the long or short term?

The challenge for most companies is that vendor-specific license optimization insight is not typically found in-house. That’s why many turn to NPI’s vendor-specific licensing “Ph.D.s” who have extensive understanding of a vendor’s licensing and/or subscription programs, and understand how to best map them to the buyer’s unique situation and requirements.

Here are some additional software license optimization tips:

• Use your reseller wisely. Resellers should be relied upon to help manage inventory and increase knowledge of a vendor’s technology and products, but not to provide licensing optimization guidance. Remember, their goal is to maximize vendor revenue – they are usually driven by financial incentives and are just not objective enough to be your only resource for asset planning.
• Develop and analyze scenarios. There are many ways to configure your future state to (1) meet your usage rights requirements, (2) optimize license and support/maintenance costs, (3) build in future flexibility, and (4) avoid unexpected costs. Build models for various scenarios – each of which will have pros and cons. This exercise will help you make the best decisions for the business.
• Beware of the grey areas surrounding compliance. Just because you’ve read your vendor agreements and usage rights documents doesn’t mean you have full understanding of that vendor’s licensing and compliance requirements. This is an area where expert assistance is not just valuable – it’s critical. Don’t wait for an external audit to clear up any confusion.
• Enlist help. Do you have Ph.D.-level licensing knowledge for each of your software vendors in-house? Do you have visibility into each vendor’s product roadmap? Are you 100% confident in your ability to spot compliance gaps as you optimize your software estate? If you answered no to any of these questions, consider providing your IT buying team with licensing expert resources to turbo-charge effectiveness and accelerate confident decision-making.

NPI: Software License Optimization Specialists

At NPI, our software license optimization specialists can help you proactively identify areas of over- and under-utilization across your large software estates as well as spot areas of compliance risk. From there, we can help you right-size your deployments according to you your organization’s current- and future-state requirements, and remediate any compliance issues before they become a larger headache.

As server hardware becomes increasingly commoditized, NPI finds enterprise clients looking for ways to lower costs in this area. One solution is buying from white box server vendors.

White box servers are data center servers that are not manufactured by a brand name vendor such as Dell, HPE, Cisco UCS, or Lenovo. However, plenty of brand name companies use them to reduce costs – including the likes of Google and Facebook – and that’s opened the door for white box servers to enter the mainstream enterprise IT ecosystem.

SuperMicro is one of the most frequently purchased white box platforms and represents the standard for this class of servers. In fact, many other white box server vendors out there package a SuperMicro solution into their own chassis and essentially create a re-packaged SuperMicro system.

Benefits of White Box Server Vendors

There are numerous benefits of taking the white box route. Lower costs without sacrificing stability, coupled with a more highly redundant server environment, are typically the primary drivers. But one issue persists – and that’s long-term support, a benefit that’s historically been tied to the brand-name vendors that cater to enterprises’ support requirements.

Fortunately, we’re seeing progress in this area. A somewhat new entrant in the white box server vendor arena is Intel. Yes, Intel. The introduction of Intel’s servers brings not just a brand-name manufacturer (and the validation and credibility that comes with it), but one with a product roadmap and support lifecycle that was previously absent in the market.

Unlike SuperMicro, Intel guarantees availability of replacement parts for 5 years after the end-of-life date. As a result, companies can safely continue to use white box systems well past the typical cost amortization period without fear that spare part unavailability could render their investments worthless.

NPI continues to see improvements in the white box server space. Procurement teams now have a compelling argument to consider the technical and financial benefits their organization may reap by considering non-traditional compute systems.

Have a Cisco purchase or renewal coming up? Here are four questions to ask prior to any Cisco contract negotiation.

4 Cisco Contract Negotiation Questions to Ask

#1: Is your reseller incented to get you the best deal?

Resellers get paid a percentage of the list price of your purchase. Their compensation is the same no matter the discount you receive. Also, Cisco protects their resellers. Once one is chosen, other resellers will not receive the same discounting, so receiving multiple bids from resellers will not result in better pricing or leverage. Cisco’s Partner Program rules and their “OPC” (Other Product Clause) state that only the incumbent partner will receive the full discount for the 1st year of a support contract sold. One of the keys to successfully negotiating a large Cisco purchase? Work directly with your Cisco sales representative.

#2: Before going into a Cisco contract negotiation, do you have viable and credible alternatives?

Credible is the key word here. Once you become a Cisco shop and continually refresh equipment, Cisco effectively becomes an order taker – and that means you lose a ton of leverage. Cisco, like many other vendors, is well versed in handling objections during negotiations and, unless they feel they have to increase discounting to get the deal done, they won’t. Therefore, looking into alternative solutions and even performing a proof-of-concept can be very beneficial during a Cisco contract negotiation.

Speaking of alternatives…is third-party support on non-critical equipment (or equipment reaching end of life) a viable option that can be separated from your SMARTnet renewal? This can be a cost saving measure and help to keep Cisco on their toes.

#3: Is Cisco looking at your total annual spend during refreshes, or at individual purchases?

Many customers receive erratic discounting based on the size of each individual deal. Pushing Cisco to look at the total annual spend could result in better discounting as long as there are alternatives or other leverage points as discussed above

#4: Have you discussed receiving a standard set of discounts with Cisco regardless of the size of the individual purchases throughout the year?

Depending on your volumes and credible alternatives, Cisco does have the ability to put together a customer agreement with consistent discounting that’s based on each product family or bundles most frequently purchased by your organization. The best time to bring this up is during a large negotiation when you have the most leverage.

As always, don’t forget to conduct price benchmark analysis on every Cisco purchase and renewal to ensure pricing and discounts are at or below fair market value pricing targets. It’s tempting (and easy) to go on autopilot with a legacy IT vendor and assume your next deal will be as fair as your last one. Unfortunately, it’s also a fast path to overspending.

The two largest U.S. cellular carriers, AT&T Mobility and Verizon Wireless, have slowly been trying to wean enterprise customers away from subsidized phones and other mobile devices. It is a program first initiated by T-Mobile and quickly followed by Sprint. The idea is to offer a much lower cost of monthly service in lieu of providing a fully or partially subsidized device.

But are their offers to end device subsidies really a good deal for the enterprise customer?

Subsidized Phones: The Evolution of Mobile Financing

It was a given over most of the past 20 years that the cellular carrier would provide a device for little or no money in exchange for a commitment to use their network for 24 months.

As we all know, nothing is free. The cost of the device was simply embedded in the monthly cost of service.

Over the past two years, especially as smartphones started costing $800 or more at retail, the carriers are less amenable to subsidized phones, providing a new device at a deeply discounted cost or at no cost upfront. Most enterprises can still negotiate to get a device one version back from the most current at no cost, but the carriers are promoting plans that separate the phone purchase from the monthly service.

As a result, they either provide financing for a new device or they offer a different monthly plan for devices that are purchased at full retail. But is this a good deal for the enterprise customer?

Device Subsidies vs. Lower Monthly Service Charge: Which Yields a Lower TCO?

The answer depends on the overall structure of the contract. Most contracts include several incentives that impact the total cost of ownership (TCO).

• Monthly service charge
• Activation credit
• Retention credit
• Early termination fee waiver pool/early upgrade waiver pool
• Possible growth credits

An average enterprise customer with subsidized phones (or other devices) might experience the following costs:

• Monthly Service Charge: ~$55.00 per month for 24 months = $1,320
• Activation credit: ~$135 one time (-$135.00)
• Retention credit: ~$25 one time (-$25.00)
• ETF / EU Waiver: ~$2 per month (-$48.00)

Total cost for a two-year service term = $1,112.00 or $46.33 per month

Un-subsidized Devices with Lower Monthly Service Charge

Carriers may offer the same commercial incentives and credit for an un-subsidized device except that they may lower the monthly service charge to $35. Therefore, there is also no need for an ETF or EU waiver pool since the device was purchased.

In this case, the TCO model looks like this:

• Monthly Service Charge: ~ $35.00 per month for 24 months = $1,225
• Activation credit: ~$135 one time (-$135.00)
• Retention credit: ~$25 one time (-$25.00)
• ETF / EU Waiver: ~$0 per month (-$0.00)
• Purchase cost of device: $600 one time ($600.00)*

In this example, we compare apples-to-apples using the same $600 cost for an older version smartphone. The two-year cost under the un-subsidized model is more expensive and represents incremental margin to the carrier.

Optimizing Enterprise Wireless Spend Starts with Data

Managing enterprise cellular costs is a complicated process and begins with understanding the business requirements for device profiles, frequency of churn, consumption, and several other factors. These can then be modeled against what the carriers are offering to understand the true total cost of ownership.

However, most enterprises lack the bandwidth and internal expertise to adequately collect and analyze this data, then compare it to best-in-market carrier pricing and terms. In these cases, NPI can help – our wireless cost optimization analysts can help you uncover non-disruptive ways to drastically reduce your wireless spend.

ServiceNow has emerged in the market as the leader in IT and Enterprise Service Management (ITSM). Over recent years, ServiceNow has grown its IT Operations Management (ITOM) suite of products to complement how customers respond to incidents and manage their environments. Two ITOM products that help customers realize this value are ServiceNow Discovery and Service Mapping.

Both products improve environment awareness, enable customers to become more predictive, help pinpoint where an outage occurs, and illustrate the effects of an outage on the organization in terms of cost and user impact. Both Discovery and Service Mapping can be bought together or separately depending on the needs of the customer. To make that determination, it is important to know what is needed for them to successfully function in the customer’s environment.

• ServiceNow Discovery: The Discovery product engages a “horizontal” method of uncovering customer devices that are on the network. These devices include desktops, laptops, printers, servers, routers, and switches. The Discovery product updates the Configuration Management Database (CMDB) with the information that it uncovers. Customers primarily use the Discovery product to improve asset management compliance and cost management as well as for preventive maintenance of devices that contribute to frequent incidents.
• Service Mapping: In contrast, Service Mapping utilizes a “top-down” approach to map the underlying components that comprise a business service. These components include applications, services, data storage and infrastructure that are needed to enable a service such as Payroll, Claims Processing, or Customer Service to successfully be executed. “Top-down” means that the Service Mapping product maps dependencies between these components based on connections between them. Like Discovery, Service Mapping populates the CMDB with business service components. Customers typically acquire Service Mapping to monitor the health of critical business services, minimize business service outages, and to be predictive in how they support and maintain key services.

Sourcing and Implementation Implications for ServiceNow Discovery and Service Mapping

Discovery and Service Mapping are typically not part of the initial implementation of ServiceNow in an organization. A customer should have the core ServiceNow ITSM product implemented before taking on implementation of either product. The CMDB should also be ready to be populated with the device and business service data.

It is also worth noting that while Discovery and Service Mapping are excellent products, they are not plug and play; they require oversight from technical staff in the beginning to ensure the services are returning accurate results. Some customization may be required to ensure accurate results. It is important to note that both products require the installation of a MID server that requires network access to perform its device and business service discovery.

Both Discovery and Service Mapping are licensed “per node,” which means that the customer pays a fee per virtual or physical server under customer management.

In the end, it makes sense for customers to acquire both Discovery and Service Mapping to gain a full view of their enterprise. Both products complement each other based on the view of the organization that they present, but do require up-front work and setup to enable the quality results.

Want to know if you’re getting a fair deal on your ServiceNow purchase? Contact NPI.

Telecom expense management provider Global Sourcing Group (GSG) recently rebranded itself to Sakon. Sakon is also the name of the company’s new expense management portal. Sakon is already a market leader in delivering expense management solutions for fixed and mobile communications. The established solutions – WirelineManager™ and MobileManager™ – are now supplemented by the next generation platform that integrates those two cost categories with a new one: Cloud service providers.

Key Elements of Sakon's (Formerly GSG Telecom) Solutions

Sakon, similar to Tangoe’s Matrix platform, promises to bring all of the familiar elements of telecom expense management to the challenge of managing the SaaS spend category. Key elements of Sakon include:

• Inventory of services
• Contract inventory
• Invoice processing and cost allocation
• Cost auditing and contract compliance
• Service optimization
• Management reporting

GSG Telecom Reinvents as Sakon, Expands into SaaS

Sakon responds to a need for more visibility and greater control over the cloud-based services that enterprise users consume. Just as MobileManager delivers detailed information about the cellular minutes, data and messages that a user consumes, Sakon will consolidate similar information with respect to an employee’s consumption of Office365, Salesforce.com, Box and other SaaS service providers.

The first step in driving savings in any cost category is having visibility into what is being bought and how much it costs – that is the basis for revalidating the need, consolidating buying power and negotiating the best deal with the provider. Sakon has skillfully provided that visibility for network spend, and has expanded their focus to encompass the growing SaaS spend category.