Bulletin How to Knock Your Office 365 Purchase or Renewal Out of the Park May 3, 2018Microsoft Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Whether you’re already a Microsoft 365 customer or expect to be one soon, optimizing licensing and cost is challenging. To minimize TCO and maximize usage rights, companies need to take preparatory steps in the months leading up to every purchase or renewal. Microsoft 365 is used by an estimated 200+ million people across the globe and is largely responsible for the vendor’s surge in commercial cloud revenues. But despite its popularity, the Microsoft 365 sourcing event – whether an initial subscription or part of an Enterprise Agreement renewal – is still unfamiliar territory for many Microsoft enterprise customers. When purchasing or renewing, there are a variety of important choices to be made that have a major impact on cost. In some cases, customers know about them – and are confused. In other cases, customers aren’t even aware of their options. As companies migrate to M365, there are steps they can take to protect themselves from cost surprises and optimize TCO – during both initial migration and in the months leading up to an EA renewal. Striking the right balance of cost and flexibility requires full understanding of the options, license scenario cost modeling and license scenario cost/benefit analysis. Most of these vendors are still trying to figure out how to protect revenues, and much of that war is being fought on the contract battlefield. Vendors’ terms, conditions, product use rights and negotiation behaviors have become more unpredictable. DURING YOUR INITIAL MIGRATION PURCHASE Choose the right user subscription license (USL) for your risk tolerance. There are four options: the Full USL, the From SA USL, the Add-on USL and the Step-up USL (technically, this last option applies only to existing O365 customers). You can read more about these options here. The Full USL is ideal for customers who haven’t purchased Microsoft’s on-premise productivity solutions or have stopped paying SA on on-premise licenses. Customers that choose this SKU no longer have version upgrade rights to their on-premise licenses. The From SA USL is designed for current Microsoft customers who are currently paying SA on on-premise licenses and want to transition to O365. On the other end of the spectrum is the Add-on USL. This option is designed for current on-premise customers who want to try O365 without fully giving up upgrade rights to their on-premise licenses. Although the total cost impact of this SKU is greater (customers are essentially paying for both on-premise and cloud versions of Office), the protection is worth it in the event that the client wants to move parts of their Office environment back to on-premise. Correctly install Office 365 as click-to-run bits. O365 Pro Plus uses click-to-run bits to install and update Office products. However, some customers have inadvertently installed the incorrect product, which puts them out of compliance with Microsoft’s product usage rights. Protect your discount. With demand on the upswing, big discounts on M365 deals are becoming less and less common. With this in mind, customers should put contract language in place that will protect their current M365 discount. Keep in mind that gathering the leverage to successfully execute this tactic requires a thorough analysis of your current state and future state solution requirements. Determine whether you need to maintain SA on on-premise licenses, and any potential issues that could arise if you migrate to M365 in the future. The move to M365 is rarely a forklift exercise for enterprises and is more often a piecemeal migration. In some cases it may be wise to purchase the Add-on SKU to maintain existing SA on on-premise licenses. While this is more expensive than simply purchasing the From SA USL, the difference can be a point of negotiation in a well-constructed licensing strategy. The benefit? Customers can retain rights to the most current version of on-premise products at the end of their agreement. Plus, even if the customer has no intention of migrating away from the cloud over the current agreement term, it positions them for greater negotiation leverage during future renewals. Note: It’s critical for customers to understand the options available to them, especially as they continue to evolve. This specific area of Microsoft licensing/ subscription can be deceptive and requires deep expertise and careful navigation. Vocalize any concerns and explore credible alternatives. For all of its popularity and performance, most companies will encounter challenges migrating to and using M365. Be sure to make Microsoft aware of these issues and explore credible alternatives. This is a best practice in general, but can also factor into negotiations if you have important concerns. Analyze time-to-value. One powerful negotiation lever with any cloud transition is time-to-value as migrations are typically disruptive to the business. Define reasonable success metrics for your organization’s migration to M365 and track how long it takes to achieve them. Delays in time-to-value can translate into leverage during a renewal event. Map your current subscription level to Microsoft’s newest programs. Changes to Microsoft’s M365 subscription options are frequent, and customers should expect to be pressured to upgrade to Microsoft’s “latest and greatest” option during the renewal event. One example is the current push to move M365 E3 customers to M365 E5, which Microsoft bills as a more complete, intelligent enterprise solution that includes Office 365, Windows 10, and Enterprise Mobility + Security. NPI advises customers to proceed with caution. These newer offerings may provide more functionality than you require, and it’s important to note that Microsoft is continuously adding new capabilities and features. Conduct an “equivalency map” exercise to determine the pros/ cons of upgrading – in some cases, your willingness to upgrade can open the door to deals in other areas of your Microsoft spend. Updating your licensing strategy is critical. AUGMENT YOUR M365 LICENSING EXPERTISE FOR HIGHER SAVINGS, LESS RISK For any Microsoft investment, optimization requires deep licensing expertise, and the ability to explain licensing options – and their cost and usage consequences – to business stakeholders in terms they can understand. This decision support dialogue is an area that most enterprises struggle with. That struggle is heightened for O365 purchases and renewals – an area where most companies have had fewer at-bats at the negotiation table, and subscription options and product roadmaps are quickly evolving. Enterprises have a lot to gain by supplementing their internal Microsoft buying team with external M365 cost and subscription optimization expertise – namely ensuring an optimized M365 purchase and subsequent renewal, and the elimination of cost surprises. A word to the wise: No matter how great your reseller may be, their charter is to maximize revenue from your account – not optimize your TCO. Be sure to look to independent experts for unbiased analysis. Download the SmartSpend Bulletin™ Remember – Microsoft and its resellers are focused on maximizing revenue from your account, not optimizing your TCO. Be sure to look to independent experts for unbiased analysis. NPI is a premier provider of data-driven intelligence and tech-enabled services designed specifically to assist large enterprises with IT procurement cost optimization. NPI delivers transaction-level price benchmark analysis, license and service optimization analysis, and vendor-specific negotiation intel that enables IT buying teams to drive material savings and measurable ROI. NPI analyzes billions of dollars in spend each year for clients spanning all industries that invest heavily in IT. NPI also offers software license audit and telecom carrier agreement optimization services. NPI Vantage™ Pro is the newest addition to NPI’s solution portfolio – a platform developed specifically for IT Procurement Professionals to help them manage growing renewal portfolios, prepare for negotiations, and achieve world-class purchase outcomes. For more information, visit www.npifinancial.com and follow on LinkedIn. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Bulletin 5 Microsoft Enterprise Agreement Renewal Tips for Cost Savings May 3, 2018Microsoft Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Changes in the current business climate combined with Microsoft’s mission to move enterprises to the cloud is altering how it does business with its largest customers. Companies that plan to renew their Enterprise Agreements, or purchase the vendor’s offerings for the first time, can leverage the forces driving Microsoft’s behavior at the negotiation table. Microsoft’s transformation from an on-premise software giant to a cloud leader has been nothing short of impressive over the last several years. The company’s perseverance and focus have been rewarded by soaring quarterly profits and stock prices, and a successful reorganization of its business. While the vendor is committing its most powerful R&D, sales and marketing resources to the cloud, some Microsoft enterprise customers are still operationally and contractually locked into on-premise implementations. This has prompted the vendor to take aggressive measures to migrate these customers to the cloud. Outcomes include several pricing and licensing changes, a spike in formal and informal license audits (often disguised as Software Asset Management engagements), and increased contractual complexity and inflexibility. The Microsoft Enterprise Agreement has always been a potential hotspot for overspending – and that is truer than ever today. The sheer volume of subscription and licensing choices for Microsoft’s offerings are overwhelming. Microsoft Enterprise Agreement renewals and first-time negotiations have never been more complex. And a volatile business climate has added new fiscal pressure to both customers and Microsoft. There are an increasing number of license and subscription optimizationchallenges to navigate when doing business with Microsoft, as well as new cost, flexibility and licensing/subscription opportunities on which to capitalize. As Microsoft continues its metamorphosis and enterprises’ budgetary and usage requirements rapidly evolve, customers should prepare for a more challenging sourcing and vendor management environment. While the vendor’s cloud-based offerings may be the future of its enterprise business, most Microsoft customers are still operationally and contractually locked into on-premise deployments. MICROSOFT ENTERPRISE AGREEMENT RENEWAL: WHAT'S DRIVING MICROSOFT'S FRAME OF MIND The conditions that have precipitated more aggressive contract negotiation behavior from Microsoft are varied. NPI has identified the following five factors: Pressure to move customers to subscription-based offerings. Microsoft is on a mission to move its enterprise customer base away from traditional on-premise software to its subscription-based cloud services. Revenues for its commercial cloud offerings are experiencing substantial growth, while traditional software revenues decline and the mixture strains Microsoft’s ability to support a multifaceted business. Microsoft’s success is being judged on how well it achieves this mission, and customers will find themselves under greater pressure to move to the cloud or pay the price via more contractual and pricing complexity for on-premise solutions. Most customers have made the leap to 365 and are at least experimenting with Azure. The good news is the deal window is still open for any new cloud spend with Microsoft. Pressure to stick to standard pricing, terms and licensing practices. Microsoft has a very structured hierarchy for approving deviations from standard pricing, terms and licensing. Sales reps and account managers have little influence in the matter, and decisions are ultimately made at the licensing desk where customer relationships and requirements have little bearing. Microsoft aims to further standardize these practices, most obviously noted when the vendor released its Online Service Terms – a single, standard set of terms that replaces its multiple Product Use Rights documents for online services. While Microsoft touts the benefits of a more centralized and simplified approach to contractual documentation, the reality is that these measures are making it more difficult for customers to receive concessions from Microsoft based on their unique user environment. Pressure on sales reps and channel partners to forecast revenues accurately. Microsoft is putting unprecedented pressure on its sales teams and channel partners to improve revenue forecasting and enforce on-time renewals. In fact, sales commissions and fees paid to resellers are negatively impacted when EAs are not renewed on time. Pressure to manage contractual and licensing resources against quarterly and annual pipeline. As a public company, Microsoft is tasked with accurately predicting revenues. To do so, the company must have clear visibility into their selling pipeline and be able to close purchases and renewals faster and earlier in quarterly sales cycle. There are a limited number of legal and licensing desk resources available to process these transactions, and it is nearly impossible to process paperwork less than two weeks prior to a calendar year, fiscal year, or quarter end. Handling these peaks in deal volume is a challenge for Microsoft’s enterprise business and delays in this pipeline can have a domino effect on quarterly and annual revenues, stock price and overall market perception.Customers need to leverage the vendor’s desire to prevent spillover and leverage purchases and renewal timing accordingly. Contrary to common wisdom, Microsoft may be more flexible in negotiations outside of their peak sourcing times. Pressure to reduce quarterly revenue disparity. Across NPI’s client base, more than 40 percent of Microsoft Enterprise Agreement renewals occur in Q4 of Microsoft’s fiscal year (i.e., April/May/ June). This contrasts with Q1, which typically accounts for less than 20 percent of EA renewals. This creates lumpy demand for licensing and legal resources, lumpy forecasting risk and lumpy cash flow. One of the objectives of moving to subscription based licensing is to smooth this pattern. The factors previously discussed have introduced new dynamics to the Microsoft EA negotiation. They’ve also exposed new pitfalls that can lead to higher costs and less contract flexibility. Potential mistakes to be avoided include the following: Waiting until the last minute to renew. In the past, Microsoft customers have gained negotiation leverage by waiting until the very end of their EA term to renew, especially if this timing coincided with Microsoft’s quarter or fiscal year-end. This is no longer the case – especially for fiscal year (June), calendar year and quarter end purchases and renewals, when volume chokes the system. Microsoft is going to great lengths to get customers to renew much earlier in the quarter, including offering better pricing and discounts or allowing clients to adjust contract dates. Customers need to know how they can leverage deal timing to get more favorable concessions and greater flexibility. Failure to rationalize and optimize discounts. Microsoft’s “best-offer” discounts are rarely best-in-class. The difference between the discount one customer receives and what another customer with similar requirements receives can be substantial. When a subpar discount becomes the foundation for future EA renewals, overspending grows exponentially. Customers should perform price benchmark analysis on all facets of their Microsoft estate to validate they are getting a fair deal and ensure they pay a price that’s at or better than market. Over-focusing on pricing and under-focusing on programs and terms. Having visibility into what constitutes a fair price for Microsoft’s offerings is the first step in reducing EA costs. But it is only half the battle. To effectively lower costs, customers must understand how their unique business requirements align with standardized terms (especially for cloud offerings), the dozens of licensing/subscription permutations and the options available to them. With more options available, it is important for customers to understand which licensing and subscription programs best support their technology, business and cost management requirements; and the compliance and cost details surrounding migration from current states to future states. Furthermore, companies must understand where Microsoft is willing to be flexible as it relates to terms governing price protection and usage elasticity – particularly amid economic volatility – and negotiate those terms into their EA accordingly. Believing that Microsoft EA negotiations are a one-time event. Most companies view the Microsoft EA renewal as a single event. They deploy their brightest IT and sourcing resources to handle the EA, but once it is signed, these resources are effectively “off the case.” This is a mistake. Before the ink is dry on a renewal, Microsoft’s account team is working on the next one. Informally referred to as “T minus 36” (a three-year countdown until customer renews again), Microsoft follows a cyclical and successful methodology for ensuring each customer expands their Microsoft estate and spend at the next renewal event. For example, once the EA is purchased/renewed, companies must be prepared for the next event – the true-up. Following the true-up is auditing, which has become very common for Microsoft customers. Customers that have not recently been through an audit should expect to undergo one in the near term. In most cases, this will drive another round of negotiations which will require skillful interpretation of licensing programs, terms, and conditions. Relying on your reseller (LAR/LSP) or account rep to optimize your licensing/subscription. There are a variety of ways to license and/or subscribe to Microsoft products. A particular enterprise’s Licensing Solutions Provider or account rep may not be well versed in all the options available. However, they are well trained (and motivated by incentive) to take customers down a path to higher licensing costs. Be sure to question Microsoft’s licensing specialists on how to better structure licensing for lower spend and consider getting unbiased expertise to assist the sourcing team with vetting the recommendations. Download the SmartSpend Bulletin™ Microsoft customers have gained leverage in the past by waiting until the very end of their EA term to renew. This is no longer the best tactic. Clean house before you renew. It’s not uncommon for a material portion of licenses and/or subscriptions to be dormant or underutilized – even in environments that are meticulously managed. NPI is a premier provider of data-driven intelligence and tech-enabled services designed specifically to assist large enterprises with IT procurement cost optimization. NPI delivers transaction-level price benchmark analysis, license and service optimization analysis, and vendor-specific negotiation intel that enables IT buying teams to drive material savings and measurable ROI. NPI analyzes billions of dollars in spend each year for clients spanning all industries that invest heavily in IT. NPI also offers software license audit and telecom carrier agreement optimization services. NPI Vantage™ Pro is the newest addition to NPI’s solution portfolio – a platform developed specifically for IT Procurement Professionals to help them manage growing renewal portfolios, prepare for negotiations, and achieve world-class purchase outcomes. For more information, visit www.npifinancial.com and follow on LinkedIn. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog Microsoft License Downgrade Rights – Know Them! Mar 30, 2018 Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Did you know that Microsoft only sells current versions of its products? What happens if you purchase a current version of Office Professional, yet your firm has not yet deployed that version throughout the organization? What are your Microsoft license downgrade rights? Well, like a lot of things licensing-related, it depends. If you purchased the software license through Microsoft’s commercial licensing programs (Open, Select, Microsoft Product & Services Agreement, Enterprise Agreement), you’ve done well as downgrades are permitted for all products purchased under these programs. As an aside, if you’re not purchasing under a commercial licensing program, you should probably ask yourself why not, as these are the most efficient ways to purchase from Microsoft. If you’ve purchased OEM licenses, the application products (Office, Project, Visio, etc.) do not include downgrade rights. The server products after 2003 typically do include downgrade rights, and the Windows Operating Systems from Windows Vista through Windows 10 Professional do include downgrade rights. It is important, though, to read through the EULA or OEM License Terms document that ships with the product to understand the specific downgrade rights offered with the product, edition, and version you have purchased. Full Packaged Products do not include downgrade rights. As the name implies, these are those products that include the retail packaging (but not just sold in retail establishments – you could purchase FPP from Large Account Resellers). We most often see purchases of FPP when clients need to purchase older versions of a product for one reason or another – perhaps they’ve found “a deal” on the internet. But we strongly urge companies to think twice. The potential for counterfeit software when purchasing outside of typical reseller channels looms large. Don’t Assume Microsoft License Downgrade Rights Apply Universally Once you’ve determined that your purchase vehicle supports a downgrade, you need to ensure that you downgrade from “like” editions. Downgrading from Windows 10 Professional to Windows 8 Enterprise is not an authorized downgrade – you must downgrade to Windows 8 Professional. Similarly, a downgrade from Visio Professional to Visio Standard is not permitted. A downgrade to Office Professional 2003, 2007, 2013 would be a permitted downgrade from Office Professional 2016 – but be careful. Downgrading to an earlier version of Office Standard won’t be allowed. Confused yet? This is just one of many reasons why it’s important to consult Microsoft licensing expertise before making any material changes of this nature to your Microsoft estate. Interestingly enough, Microsoft does not sell “Step Downs,” but they do sell “Step Ups.” If you’ve purchased a license with software assurance and you want to “step up” from, say, Visio Standard to Visio Professional, Microsoft actually sells SKUs to facilitate the upgrade. You’ll find these step-up licenses for most higher-edition products. Microsoft recently upgraded their Downgrade Commercial Licensing Brief (you can access the PDF under “Downgrade Rights” on this page). It’s well worth a quick review. Just make sure you’re clear on the interpretation! If you’re not, contact NPI to learn more about your Microsoft license downgrade rights. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog Has Your IBM Enterprise License Agreement (ELA) Lost Value? Mar 27, 2018 Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Has your IBM Enterprise License Agreement lost value? Are you still paying maintenance on licenses you don’t need or use? These are two questions IBM customers need to ask. Maintenance is valuable recurring revenue, especially for legacy vendors like IBM, and they work very hard to preserve the run rate with each customer. One tactic common among vendors has been the continual changing of licensing models. Added complexity means confused customers and that almost always leads to overspending. Another tactic is providing little to no transparency into how pricing is derived. IBM is no exception to this – especially when it comes to license swaps. The ability to swap licenses within an Enterprise License Agreement can be very valuable to customers. Customers’ priorities and needs change and having this ability should help to minimize or eliminate paying maintenance for shelf-ware. But is that always the case? IBM does not like to provide transparency into the value of licenses within amendments for the swap. This can create an imbalance and cause customers to overpay for the new licenses. IBM will get creative in distributing the costs among the new Bill of Materials in order to maintain the total maintenance revenues. Inspect Maintenance Spend Before Your Next IBM Enterprise License Agreement Renewal NPI has worked with our customers on evaluating their Enterprise License Agreement amendments and have uncovered many cases of significant “lost value” during license swaps. Some have lost over 70% of their license value during these type of transactions, but continue to pay the same maintenance costs. Determining whether you have lost value, and then regaining the value by either adding more licenses or getting IBM to adjust the pricing to the appropriate level during an ELA renewal is not a simple task. The vendor’s sales teams are well trained to push back aggressively. In response, persistence and the presentation of potential technology replacement alternatives are key to right-sizing an ELA renewal – as is a deep understanding of which point-in-time market-pricing and negotiation levers to use with IBM. NPI’s IBM licensing experts help clients tackle these challenges successfully and bring the cost/value equation back into alignment. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog Data Center Pricing – Know the Four Basic Elements Mar 8, 2018 Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. More enterprises are migrating their corporate data center(s) to external co-location facilities. One of the many challenges they face is navigating disparate and confusing pricing models. Some providers only charge for power and network while others charge for power, space and network. Some charge different rates for cooling power versus cabinet power and all charge for cross-connects. What should an enterprise client expect? And, in a competitive sourcing process, how do you compare apples-to-apples? There are four basic elements to all data center/co-location transactions: power, space, network and remote hands. Power: All data centers consume power for two purposes: first to power the servers and other IT equipment and, second, to power the air conditioning to cool the equipment (which is considerable) and the general environment. Enterprises can determine IT power requirements by summing up the consumption of the equipment. This can be found in equipment specifications and is generally a range depending on processing loads. If total consumption is more than 300kW, then enterprise customers may consider buying actual power consumption (metered, like at your home). Otherwise, they will pay a fixed fee for the power available to the equipment. Enterprise customers don’t have much influence on the power consumed by non-IT equipment requirements (office cooling, lights, etc). But they can request to know the data center’s Power Use Efficiency. The closer that PUE number is to 1.0, the more efficient the data center. The more efficient, the lower the overall cost. Space: The area required for housing IT equipment has a cost. The cost of commercial office space in the U.S. can range from $6 per square foot in low cost regions to over $12 per square foot in New York City. On average, a 50-cabinet data center will occupy about 1,700 square feet. At a median cost of $8 per square foot, the space alone would cost about $13,600 per month. The power required to cool the 1,700 square feet can be roughly determined by the formula: Cooling Power = (PUE – 1)*Power Consumed. Multiplying this cost by the cost of power and adding it to the cost per square foot gives a rough estimate for the total cost of space. Network: Network access consists of two components: Internet Access (IP) and cross-connect charges. IP access is typically expressed in cost per megabytes. In most cases, this is a fixed consumption (i.e. 250Mb, 500Mb, 1,000Mb (GigE), or even 10Gb). Cross-connect charges are priced depending on the type of media used in the cross-connect: copper for POTS, DS1 / E1 or Coax, or Fiber. Remote Hands: This category is also known as “smart-hands.” These are technicians hired by the data center operator to deliver limited technical support within the data center. They are mostly used to perform visual and manual tasks that cannot be completed through remote management. Remote hands can be sold in various units (from 0.1 hour [12 minutes] to 15-minutes, or more) and either on an as-used basis or a pre-purchased package. Enterprise customers need to thoroughly understand the above metrics when specifying data center (co-location) requirements and evaluating responses from multiple providers. All data center providers have the ability to respond to a specific format in the customer’s preference. Even if the final agreement is written using a different pricing model, asking for pricing in a standard apples-to-apples format allows for easier evaluation of options. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Bulletin Four Ways to Save on IBM Passport Advantage Renewals Mar 3, 2018IBM Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Volume purchasing programs may make it easier to buy a vendor’s offerings—but they also make it easier to overspend. IBM’s Passport Advantage program is no exception. NPI estimates a large percentage of enterprise customers overpay on IBM Passport Advantage purchases and renewals. Here are four ways to avoid that outcome. Compared to other legacy IT mega-vendors, IBM’s evolution over the last decade has been less cohesive. The company has made more than 80 acquisitions across various IT subsectors since 2010, and has always had a broad product and service portfolio. The restructuring of IBM (both in 2014 and the more recent spin-off of its IT services business) has done little to abate concerns that the business still seems fragmented to many – a dynamic felt acutely by those responsible for sourcing IBM’s offerings and keeping spend with the vendor in check. One way that IBM makes it easier for its customers to procure solutions and services is through its IBM Passport Advantage program. A relationship-based program for larger and multi-site enterprises, Passport Advantage uses a common set of agreements, processes and tools to facilitate the buying and renewing of certain IBM offerings. Eligible products available under the Agreements include software licenses (one-time charge and fixed term), software subscriptions and support, and IBM’s appliances and SaaS offerings. But like many volume purchasing programs, Passport Advantage can open the door to overspending for many enterprise customers. NPI estimates a large percentage of companies materially overspend during Passport Advantage renewal events. TIPS FOR YOUR NEXT RENEWAL EVENT Make sure your initial buy price is at fair market value. If it’s not, calibrate during renewals. The most common contributor to overspending during IBM Passport purchase and renewal events is an initial buy price (from way back when you first purchased the item) that is above current fair market value. This overspending is compounded when IBM tacks on its annual maintenance/support price increases (typically in the ballpark of 5 to 7 percent). If companies want to avoid significant overspending, they need to perform price benchmark analysis to determine whether their initial purchase prices were aligned with fair market value. If not, this information can be used during renewal negotiations to bring current maintenance and support fees into alignment with current rates. Manage your IBM estate cost to market – not budget. The typical IBM estate within an enterprise is large, decentralized and spans multiple layers of the IT stack. As a result, many customers manage costs to budget and in the process lose sight of savings opportunities such as leveraging total revenue commitment and capacity optimization. This cost control “blind spot” is only becoming larger as IBM’s offerings, pricing and licensing/subscription models evolve at a faster pace than many customers can keep up with. It’s important to remember that most IT vendors view a budget number as a revenue target. Customers that want to keep IBM spend in check need to regularly evaluate their entire estate for savings opportunities—especially in anticipation of renewal events. Price benchmark analysis at the line item level is critical for both new purchases and renewals. Continue to bring competitive pricing to the table. IBM’s Passport Agreement makes it easy for enterprises to purchase/renew IBM products – but it also breeds complacency in price negotiations. Customers should continue to apply pressure on IBM by leveraging competitive bids on new purchases, and on renewals of “classic” products for which there truly are apples–to–apples replacement products on the market. Even if the enterprise doesn’t elect to change to the competitive offering, IBM will recognize it as a true threat because many companies have made the switch. Keep an eye out for discount erosion. It can be stealthy. The Passport Agreement renewal process has become automatic for both IBM and its customers. The vendor’s licensing desk automatically generates a renewal agreement (usually inclusive of a modest annual cost increase) and submits it to the customer, which usually performs a rudimentary inspection and approves it. However, upon closer inspection of these renewal agreements, some customers have discovered that certain elements of their renewals that have been previously discounted are now priced at list price. For this reason, customers should carefully review their renewal agreement to ensure its integrity. Once these “mistakes” are hardcoded into the renewal cycle, they can be difficult to fix. UNDERSTANDING IBM'S MOTIVATION IBM finds itself in a precarious position in today’s technology and business landscape. Its commercial cloud business hasn’t grown as successfully as many of its competitors, yet the vendor remains on the innovation forefront in areas like machine learning and blockchain. Meanwhile, it’s impossible to ignore that entire industries like finance and transportation still rely on IBM’s mainframe offerings to run their business. This position is forcing IBM to improve upon what it has always done well – extracting large amounts of revenue from each and every customer. To counterbalance this dynamic, enterprise customers need to avoid the complacency that accompanies many Passport Advantage purchases and renewals, and perform rigorous price, discount and business term optimization for every transaction. Download the SmartSpend Bulletin™ Like many volume purchasing programs, Passport Advantage can open the door to material overspending. NPI is a premier provider of data-driven intelligence and tech-enabled services designed specifically to assist large enterprises with IT procurement cost optimization. NPI delivers transaction-level price benchmark analysis, license and service optimization analysis, and vendor-specific negotiation intel that enables IT buying teams to drive material savings and measurable ROI. NPI analyzes billions of dollars in spend each year for clients spanning all industries that invest heavily in IT. NPI also offers software license audit and telecom carrier agreement optimization services. NPI Vantage™ Pro is the newest addition to NPI’s solution portfolio – a platform developed specifically for IT Procurement Professionals to help them manage growing renewal portfolios, prepare for negotiations, and achieve world-class purchase outcomes. For more information, visit www.npifinancial.com and follow on LinkedIn. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog What You Need to Know About Windows Server Licensing and External Users Feb 14, 2018 Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Microsoft has made many changes in the last several years relating to Windows Server Licensing – specifically as it relates to external user access. Keeping up with numerous updates and changes can be difficult! We get it. In this post, we hope to help businesses better manage their Microsoft licensing by discussing everything you need to know about Windows Server licensing and external users in simple terms. We should begin by defining a few key terms. Look to the Microsoft Product Terms document for the definition of an external user: “External Users means users that are not either Customer’s or its Affiliates’ employees, or its affiliates’ onsite contractors or onsite agents.” Microsoft has historically addressed external user access to its server products via “External Connectors.” What is an External Connector License? An External Connector license is an additional license assigned to a server that permits access to that specific server. One example is the Windows Server External Connector license. This license is required if any external users will access or consume any services provided by a particular Windows Server. What does “consume any services” really mean? As NPI works with clients to optimize licensing and cost across their Microsoft estate, we find many of them need help understanding how “consume any services” applies in their unique environment. Many large businesses think that an External Connector license is not required because their external users are not accessing file shares on a specific server. But what about VPN services? What if an external user accesses applications like Epic or SAP running on a Windows Server? By Microsoft’s definition, those servers would also require an External Connector license. What Are the Cost Implications of Windows Server Licensing? If an External Connector license is required for any service consumed by external users, how should you prepare to budget for your license? The License & Software Assurance cost for a typical Windows Server (2 processors, 16 cores) under the Enterprise Agreement program at Level B pricing is approximately $400 annually. The cost of the External Connector license for that same server is an additional $900 a year! Unfortunately, little thought is often given to external users when budgeting across the entire Microsoft estate, which can expose customers to compliance and cost risks. External Connector licenses are required for Windows Server products like Windows Server Remote Desktop Services and Windows Server AD Rights Management Services, as well as other products like Microsoft Identity Manager. In some cases, customers with a small number of external users may find it less expensive to simply purchase CALs for external users. In this case, Microsoft’s 90-day rule on license reassignment would apply. The Future of Microsoft’s External Connector Licensing Policy We should note that Microsoft’s policy on External Connector licensing is still evolving. Microsoft Exchange and Microsoft SharePoint previously required External Connector licenses. However, since the 2013 versions, Microsoft has included standard CAL access rights with those servers, and basic external use is permitted with these server products today. Our advice to customers is to gain a firm understanding of which server products require External Connectors given their unique Microsoft footprint, usage requirements, and technical environment. Furthermore, know your options and model out the cost implications of various scenarios. As mentioned above, an External Connector license can sometimes be more expensive than CAL licensing options. Help With Windows Server Licensing at NPI At NPI, we know that Windows Server Licensing is complex, and almost every enterprise has big Microsoft spend. Overpayment is extremely common. NPI is the Microsoft licensing Ph.D. you need on your side of the table. The caliber, breadth and provenance of our team of Microsoft software licensing experts is unparalleled – they are elite Microsoft licensing desk and audit alums that help you get maximum value at minimum cost for every Microsoft purchase and renewal. Interested in bringing a Microsoft licensing consultant to your side of the table? Let us know how we can help. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog Software Procurement Advice for MongoDB Buyers Feb 2, 2018 Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. Software procurement is tough in the best of circumstances – layer in the complexity of open source database software and it’s even more daunting. NPI is seeing an increasing number of these purchases – particularly with MongoDB. MongoDB is a New York-based “startup” that just recently completed a $192 million IPO. The company, which finds itself amid stiff competition like Oracle, Microsoft and Amazon, has carved out a place in the market with a document-oriented database that leverages the JSON standard (more detail here). Like most database technologies, its popularity among the developer community differs according to who you ask (some developers love it, others don’t). However, MongoDB does provide an increasingly popular and viable alternative to solutions offered by legacy IT vendors like Oracle. That being said, through the client deals it has reviewed, NPI has observed aggressive posturing from MongoDB that warrants inspection. If you’re in charge of database software procurement, and MongoDB is in mix, take the following into consideration: Node pricing is evolving, and the evolution can be deceiving. NPI’s intel suggests that successive price increases have occurred at MongoDB over the past couple of years. The word on the street is that the vendor’s sales team has informed leadership that $12,000 per node is the maximum price the market will bear. Leadership has responded by keeping the per-node price at $11,999 but have reduced the size of the node – be sure to analyze that piece of the equation. Remember, when it comes to JSON, you have options. In the document (JSON) database space, you can add JSON services directly from your IaaS provider. Azure, AWS, and Google Cloud Platform – all have JSON database services as part of their portfolio. If you’re more comfortable with a directly supported relationship with a database vendor, you can choose from Couchbase, CouchDB, Neo4j and Riak. Pay attention to renewal rates. MongoDB has a lower renewal rate than others in this space, which can provide leverage during renewal negotiations. Know the mechanics of how deals get done at MongoDB. Some discounts are approved at the local rep level, but others have to be approved up further up the chain of command. Don’t be afraid to push beyond your sales rep. Also, time your negotiations around MongoDB’s quarter and fiscal year-ends (1/31). Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog What is Microsoft Volume Licensing? Jan 24, 2018 Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. With Microsoft, you must get the right type of licensing for your organization to optimize utilization and cost. You also need to understand the terms and conditions of each type. Microsoft volume licensing lets you acquire software in bulk to use on multiple computers within your organization. You do not need to buy separate software or documentation for each installation. This can reduce the cost significantly versus buying individual licenses. What Are the Benefits of Using Microsoft Volume Licensing? Microsoft volume licensing simplifies the process of allocating software, provides deeper levels of assurance and support, and reduces costs. Managing your software through Microsoft volume licensing is easier for administrators. For example, you only need to keep track of one software key rather than keys for each piece of software. You can also manage user permissions and activate Software Assurance through the Volume Licensing Service Center (VLSC) — part of the Microsoft 365 Admin Center, allowing you to manage on-prem software, online services, and subscriptions with a single login ID on one site. With volume licensing, you can also get Software Assurance from Microsoft. This is comprehensive maintenance and support to help you optimize your investment. It includes the latest software and phone support, IT tools, and training along with: Fail-over rightsLicense mobilityRoaming use rightsDisaster recoveryStep-up license availability Besides reducing overall costs, you also have more flexibility in your software licensing. For example, you can choose the number of devices, length of agreement, payment methods, and which optional add-ons you need for your organization. You can get exactly what you want without having to pay for options you will not use. Which License is Right for Your Business? Which Microsoft license is right for your business will depend on the number of users and devices you have. The Enterprise Agreement provides the best pricing, discounts, and benefits for either server or cloud services. This enables organizations to minimize upfront costs and lock in prices over multiple years. This level is designed for organizations that have at least 500 devices. While pricing is locked in for three years (or longer), you can also adjust products or services over time and increase or decrease subscriptions annually. As you add or delete products or services, you pay for any differences at an annual true-up. Typically, an Enterprise Agreement reduces costs from 15% to 45%, depending on the size of your organization. For mid-size companies, the Open Value program also provides bulk licensing, Software Assurance, upgrades, and training. While the Open Value program only requires the purchase of at least five software licenses — making it an option for smaller companies — it is an option for mid-size companies with up to 500 licenses or devices. Microsoft Products and Services Agreement (MSPA) Microsoft has phased out its Select Plus program for commercial agreements. However, it is still available for volume licensing for public sector organizations. Enterprise Agreement Enrollments When evaluating licensing, you will want to model different scenarios to understand the financial implications. It helps to work with a company like NPI that benchmarks dealsacross organizations to ensure you are getting the best possible pricing and terms. The Server and Cloud Enrollment (SCE) is an enrollment under the Microsoft Enterprise Agreement that allows highly committed customers to standardize broadly on one or more of the four server and cloud technologies from Microsoft: Core Infrastructure, Application Platform, Developer Platform and Microsoft Azure. In exchange for making an installed base-wide commitment to an SCE component, you receive a range of benefits, including new cloud-optimized licensing options, simplified license management, and the best pricing and terms. Why Regular License Optimization is Critical for Managing Microsoft Volume Licensing Costs Companies regularly overpay for software licenses. They either wind up purchasing the wrong type of license, make costly errors in accounting and managing licenses that lead to audits or simply overpay. For example, NPI worked with one company on a Microsoft EA renewal totaling $51 million. With the right data and negotiation intel, NPI was able to save the company $11 million. If you continue to renew the same licensing deal year after year, it’s time for a fresh look. Deconstructing your organization based on job function and the needs of users can produce significant savings. Getting the right licensing that matches your unique requirements can reduce costs in some cases by up to 70% by carving out users who don’t need enterprise products beyond core licensing. There is also a wealth of information including in Microsoft Licensing Statements (MLS), but you will benefit from an independent assessment. It’s a crucial document and interpreting and applying the information contained can also help you optimize costs. How NPI Can Help Optimize Cost and Compliance for Microsoft Volume Licensing Customers Microsoft licensing is a big investment and it’s easy to overspend. Over the next year, companies will overpay for about 85% of their IT purchases. NPI can help you avoid such expenses with unparalleled knowledge and insights into licensing trends to achieve best-in-class purchasing: Validate: Provide an objective assessment of your pricing to close any gapsOptimize: Define the licensing, subscriptions, and terms that fit your company bestNegotiate: Provide vendor-specific intelligence and benchmarking to leverage better dealsAlign: Get your IT team working on the same page, toward a defined target goal Contact NPI today to discuss your Microsoft volume licensing needs and start saving money. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Bulletin Which Telecom Cost Control Tactics Yield the Biggest Savings? Jan 4, 2018Contract Negotiation, Price Benchmarking Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. For many enterprises, telecom is a notoriously difficult spend category to manage. Voice, data and network costs span multiple providers and geographies. Invoicing is usually decentralized, and the details are unintelligible to the average A/P department. Usage is highly variable and carrier offerings evolve daily in a wildly competitive marketplace. Even with commoditized pricing for most services, the majority of enterprises still overspend by 30 percent or more on telecom. So, where can companies find material savings? Which cost control tactics yield the biggest impact? Telecom cost control has never been an easy mission for enterprises. Despite carrier price wars and the introduction of new expense and device management tools, most businesses continue to be on the losing side of the battle. The battlefield itself is an expansive one as the scope of telecom has grown. Visibility into voice, data and network spend is low and the line between traditional IT and telecom services continues to blur. Add to this a myriad of vendors – some pure-play (AT&T, Cisco), some not (Microsoft) – and the challenges to telecom cost control become apparent. There are two “atmospheres” of telecom cost control, most easily characterized by the following questions: Should we change what we’ve got in order to cut costs?Given what we’ve got, is everything cost-optimized? Any “Yes” answer to the first question is usually high risk and disruptive. This bulletin focuses on the second question – let’s call it “as is” telecom cost management. In order for enterprises to fully rein in “as is” telecom spend, they must understand the four primary areas where savings can be achieved, and establish a cadence for cycling through these tactics on a regular basis: Carrier Contract Optimization: The optimization of pricing/rates, discounts, credits and business terms. If you haven’t optimized your carrier agreements in the last 18 months, if you have grown significantly or if you have satisfied your minimal annual revenue commitment (MARC), now is the time to re-optimize your carrier contracts! Subscription and Service Optimization: The optimal selection of provider/vendor plans and services based on actual and forecasted usage, and grooming of zero–use lines and services. While some businesses can get away with performing this exercise on a quarterly or semi-annual basis, it’s best done monthly for most enterprises. Compliance Monitoring: Invoice auditing to identify and remediate billing errors. In addition to adherence to contractual pricing, compliance monitoring should also cover adherence to discounts, penalty waivers, incentives and other cost-related contractual terms. This is an ongoing management activity — meaning telecom costs need to be monitored in real time (“Are our invoices correct?”) as well as ad hoc based on customer- specific triggers (“Did we receive new activation credits for last quarter’s account growth?). Demand Management: The optimization of internal policies related to service usage and device management to deter rogue spending. This should be performed monthly. WHEN IT COMES TO AS-IS TELECOM COST REDUCTION, SOME TACTICS ARE MORE POWERFUL THAN OTHERS The average savings yielded by each of the aforementioned tactics vary widely. This is an important point for enterprises that often approach telecom cost reduction initiatives with limited resources. Where can they drive the most savings over the longest period of time for the least amount of effort? Here is how these areas of focus stack up: Based on NPI’s experience, most enterprises focus on a subset of these tactics; and not always the ones that deliver the most savings. Even when executed flawlessly, Compliance Optimization and Demand Management typically yield savings of less than 10 percent. To really move the needle on telecom cost reduction, companies should perform Contract Optimization right away, then do an immediate Service/Subscription Optimization pass. For NPI clients, this one-two punch typically drives 25% to 50% savings. PRICE BENCHMARK ANALYSIS AND NEGOTIATION INTEL CREATE A FAST PATH TO MATERIAL SAVINGS Contract Optimization has the biggest potential to yield savings, but companies usually leave a lot on the table in this area. They also tend to miss mid–term opportunities to renegotiate. How can enterprises verify whether they are getting best–in–class pricing, discounts and terms? How can they choose the best service/subscription given the numerous plans and bundles available across multiple vendors? These are just two examples of the limitations facing most telecom sourcing teams – and the role outside experts can play in keeping telecom costs under control. Consider getting expert assistance with Contract Optimization and the first pass of Subscription/Service Optimization. These important first steps yield the most savings over the longest period of time for the least effort, and position you well to establish a cadence for ongoing tuning and control of “as is” telecom spend. Download the SmartSpend Bulletin™ The majority of enterprises overspend by 30 percent or more on “as is” telecom. To really move the needle on telecom cost reduction, companies should focus first on contract optimization and service/ subscription optimization. This one-two punch can easily drive savings of 25 to 50 percent. NPI is a premier provider of data-driven intelligence and tech-enabled services designed specifically to assist large enterprises with IT procurement cost optimization. NPI delivers transaction-level price benchmark analysis, license and service optimization analysis, and vendor-specific negotiation intel that enables IT buying teams to drive material savings and measurable ROI. NPI analyzes billions of dollars in spend each year for clients spanning all industries that invest heavily in IT. NPI also offers software license audit and telecom carrier agreement optimization services. NPI Vantage™ Pro is the newest addition to NPI’s solution portfolio – a platform developed specifically for IT Procurement Professionals to help them manage growing renewal portfolios, prepare for negotiations, and achieve world-class purchase outcomes. For more information, visit www.npifinancial.com and follow on LinkedIn. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog Microsoft Contracts 101 Oct 5, 2017 Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. It’s no secret that sourcing Microsoft contracts, products and services is a complex undertaking. One of the first things IT buyers should get their head around are the various Microsoft contracts – and the multi-level “architecture” of how they relate to each other. There are several different types of agreement documents to review: The Microsoft Business & Services Agreement (MBSA) is an evergreen document with no fixed expiration date and contains the bulk of the terms and conditions that apply across all Microsoft agreements and enrollments. In section 2 of the MBSA, you will typically find language regarding use, ownership, rights and any restrictions. Section 3 of the MBSA details how both parties should handle Confidential Information. Warranties, Defense of Third Party Claims, Limitation of Liability and Verifying Compliance are also addressed in the MBSA. The next set of documents, which can change monthly (and are incorporated into your agreement by reference) are the Product Terms document and the Online ServicesTerms. These are the documents that explicitly state the use rights that Microsoft grants a licensee for a particular Microsoft product. Note that all uses not explicitly granted are reserved by Microsoft. We will often have a client express frustration by saying “Microsoft doesn’t say that I can’t do…” – but that’s not how it works. Vendors don’t have to describe all of the prohibited use cases. All they have to do is articulate the specific use rights they are providing to a licensee. The program level documents include the Select Plus or MPSA Agreement, and the Enterprise Agreement. These documents articulate the program rules for the licensing program. For example, under the Enterprise Agreement, the Agreement outlines the License Grant, Duration of the License Grant, the fact that Software Assurance is a required component of the Enterprise Agreement program, and more. These documents are also generally considered evergreen in duration and have no fixed end date. However, customers should remember that Microsoft will often roll out a new agreement and prohibit new Enrollments from being signed on the old agreements. Finally, there are the Affiliate Registration Forms, the Enterprise Enrollment or the Server & Cloud Enrollment. The “Enrollments” are the actual vehicle used to implement a purchase. These documents outline any minimum order requirements, as well as any specific definitions or terms for the program. One example for the Enterprise Enrollment is the definition of a “Qualified User” and a “Qualified Device.” These are important definitions because by virtue of signing an Enterprise Enrollment you are agreeing to purchase an Enterprise product (Office Professional, the Windows Operating System, the Enterprise or Core CAL, and some O365 SKUs) for every Qualified User or Qualified Device within the organization. It is important to understand this liability and to take steps to modify this contract language if you have large groups of users or devices that will not be participating in the agreement for any reason. Microsoft contracts demonstrate various levels of flexibility depending on a variety of factors. As part of your licensing and cost optimization strategy, it’s important to map out the levers you can use to induce greater flexibility from Microsoft. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.
Blog What Is “Fair Market Value” When You’re Buying Enterprise IT? Sep 5, 2017 Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend. What is fair market value (FMV)? It’s certainly integral to what we do here at NPI – let’s dig a little deeper. “Fair market value” is a term used in many fields, IT purchasing included, to describe a ‘fair’ price in a market. The IRS defines FMV based on precedent case law from United States v. Cartwright, 411 U.S. 546 (1973). While this case deals with mutual funds and touches on real estate valuation as well, many of the nuances apply to IT sourcing in an identical manner. The decision in the Cartwright case led to how the Code of Federal Regulations defines FMV, stating “fair market value is the price at which [property changes] hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” {26 C.F.R. sec. 20.2031-1(b)} There are some interesting concepts embedded in the definition. In the IT market, “compulsion to sell” is in the eye of the beholder. Of course, the vendor is always highly motivated to sell – sales reps have to make quota and they would tell you that’s a pretty motivating compulsion! But sometimes the buyer is even more motivated to buy. A customer’s internal timing pressure is one area vendors try to determine during negotiations as early as possible, and they’re skilled at using that to their advantage. For example, in categories like storage, vendors know that when a customer hits their capacity limits free will is removed – their data needs hold them captive and they have a compulsion to buy. The third clause in FMV’s legal definition is where things get especially hazy in the IT market. A “reasonable knowledge of relevant facts” is an area where IT buyers can be at a disadvantage when it comes to knowing whether they are getting a fair price. The IT market is notoriously inconsistent in pricing, and it’s hard to find “comparables” to guide the assessment. The good news is that IT buyers can now get access to price benchmark analysis, along with vendor-specific negotiation messaging to influence a vendor’s willingness to do a deal at a fair price that’s consistent with peer purchases in the market. This is an important element of having “reasonable knowledge of the relevant facts.” As we work with clients at NPI, we see that enterprises have a variety of buying personalities. Some organizations want to be sure their purchases are in line with market – FMV for them is making sure they are in line with the averages. Some want to aggressively push for best-in-class deals – every time, or just for the largest deals that represent the bulk of their spend. These clients want to push the envelope, and are able to accommodate the time and energy that adds to buying cycles. In all cases, they find that price benchmark analysis helps them eliminate vendor over-charging, and stretch their budget across a wider array of projects. Share This Article Subscribe For Updates Uncover negotiation leverage and unlock savings across your IT spend.