Redmond Negotiator

Countdown to Your New Microsoft Deal, Part II

This month, Scott walks you through the next important steps for renegotiating your Enterprise 6.0 licensing deal, including cost estimating and Microsoft contact strategy.

• By Scott Braden
• 04/27/2005

Now you need to assess your technology roadmap to build your Microsoft contract strategy. Here’s how:

Phase 4: Align With Your Roadmap To Define Your Needs
“What do you need, and when will you need it?” Most companies do a pretty good job with this phase. Here’s a simple approach that has worked for my clients:

• Use your executive sponsor, if necessary, and gather up any internal technology roadmaps, company-wide standards, and short/mid/long-term planning documents. You’re looking for an overall three- to five-year picture of the technology roadmap for the organization, and you’ll probably have to do some digging, interviewing and extrapolating.
• Add some columns to the summary spreadsheet you built in Phase 3. For each product, add a column showing whether SA coverage is in place, and the additional quantities you expect to need immediately and one, two, three and four years from now. If you send a blank e-mail to [email protected], my auto-reply will send you a spreadsheet already set up for this, along with the complete list of Microsoft product names and license types.
• Compare the upgrade plans in your roadmap against Microsoft’s published roadmap. For more on this topic, read Doug Barney’s excellent article on Software Assurance, "SA Exposed," in the April issue of Redmond magazine.
• Share the spreadsheet with the other IT managers and planners. Solicit feedback, clarifications and changes to the assumptions. Keep multiple versions if you like—based on different possible scenarios.
• Be sure to run it past your executive sponsor as well, for a macro-level view. You’ll also want to flavor your forecast to match your company’s IT philosophy. Are you bleeding edge innovators? Or squeeze every nickel till it screams cost-conscious? Will your CFO write huge checks when the investment is justified, or have you been coached to keep the spending steady and predictable?

I know … you’re thinking, “There’s no way this will work; too many political players, not enough good data, and plans change too rapidly.” All of these are true. But you still need to do it, and make it as collaborative as you can. This roadmap will help you in your Microsoft negotiations. And consider the alternative: Even incomplete data, partially validated, is better than no data, with guesswork.

We haven’t talked about cost yet. In most places, that’s an important part of the decision-making process. So, how can you get good “starting point” cost estimates? Here are some strategies:

• Get your reseller to build cost models for you.
• Get the master price list from your reseller and build your own cost models.
• Benchmark and estimate your internal or external deployment costs.
• Benchmark and estimate your internal and external support/maintenance costs.

Now you’ve completed your roadmap. Let’s build the ideal contract.

Phase 5: Build Your Contract Strategy
Your contracts and procurement folks are a great help here. They’ve probably been trained in various contracting, negotiation and vendor management methodologies, so make use of their resources and templates.

Formal training in procurement and negotiations is especially valuable in setting goals and benchmarks. Here are some specifics you’ll want to consider in the Microsoft arena:

• Competitors: Linux/open source; commercial competitors such as Oracle, IBM, Novell, Sun and dozens more; and the ever-popular “do nothing” strategy. You should evaluate each of these for the major products in your roadmap. Another “competitor” that’s often overlooked: Microsoft applications provided by a third-party hosting service. You can get hosted email, databases, CRM, Office, SMS, Visual Studio, Windows Server—almost everything Microsoft offers is available as a hosted service. Sure, it’s still Microsoft, and yes there are serious pros and cons. But consider this: Your Microsoft rep doesn’t get commission if you buy hosted instead of licenses. So, exploit your leverage.
• Un-bundling: For example, many Enterprise Agreements that are expiring now, included Systems Management Server (SMS). Lots of companies still use SMS because “we already own it,” even though it’s not the best tool for many purposes. So, why should you buy the suite that Microsoft offers, when the solutions included are not best-of-breed? Explore un-bundling.
• Consider the support components of SA: Are they worth the cost? Are better values available from third parties? Are they duplicated by other support contracts you already pay for?

These are just a few of the dozens of specifics you could set for goals. The point is, plan out a clear description of what the perfect deal would look like—then set that as your benchmark to beat.

Now you’re ready to deal with resellers: the LARs (large account resellers) and ESAs (enterprise software advisors). Are there any real differences between Microsoft resellers? Yes. The most important difference is your reseller’s aggressiveness in helping you, as opposed to protecting Microsoft.

• Does your reseller offer advice that takes money out of Microsoft’s pocket? Or is he/she simply a mouthpiece for the Microsoft party line? One way to tell: Which reseller gets the majority of referrals from your local Microsoft office?
• Is your reseller rep and inside team experienced—and willing to share knowledge gained from other customers’ best deals to help you?
• Does your reseller team help with the difficult, tedious work of analyzing licensing reports, building cost models, and reviewing “what-if” scenarios?
• This should be a given, but it’s not: Do they answer questions correctly? How do you know the answers you get back are correct (hint: ask more than one reseller!)?

Your resellers can also build creative deals that include hardware and services in addition to licenses. I recommend you compete a short list of four or five during negotiations and RFP, and choose at lease two resellers to work with during your contracts.

Next month, we'll cover wrapping up your deal: final negotiation and contract tips, and implementing for success. Meanwhile, send me your questions and comments at [email protected], or post them below.