Redmond Negotiator

Getting Serious About Microsoft Alternatives

Scott offers realistic steps for gaining the ultimate bargaining chip when dealing with Microsoft: a willingness to move to something else.

A client recently recently called me for advice on negotiating an Enterprise Agreement renewal. After we covered the basic demographics and the company's current situation relating to Microsoft licensing, it was time to plan a negotiating strategy.

There was one big problem, however: This particular client didn't have a whole lot of leverage available.

There aren't a lot of secrets in this regard -- any good book or course on negotiating can give you a list of the usual sources of leverage. Here's a list of sources for negotiation power that I use for reference:

  • Competition/choices/alternatives
  • Legitimacy (i.e., "being in the right")
  • Commitment – to your course of action, to a great deal, to a particular requirement
  • Knowledge
  • Risk-taking
  • Time
  • Effort – willingness, ability to do the homework
  • Money
  • Negotiating skills

This is just a short list; I'm sure you could come up with more. By the way – do you routinely build and use a list like this for every major negotiation? If not, I strongly urge you to do so.

Notice that the first item on the list is competition/choices/alternatives. It's first for a reason: Your single biggest source of leverage is the ability to walk away, or at least write your check to a different vendor.

Sounds great in theory, but in practice it's not so simple. After all, most shops these days are running a nearly complete Microsoft stack: Windows, Office, Exchange, Windows Server, SQL and so on.

Your people are trained, your infrastructure is designed, everything is running along, and the pain of change would be huge for most of these products. Not to mention that they are pretty good products to begin with, or you wouldn't have deployed them in the first place. If you were to make a change in vendors for any of these products for the sake of saving some money on licensing, it would be a case of the tail wagging the dog, and hardly worthwhile (at least that's the assumption).

Nevertheless, the boss wants lower costs, and those checks you write to Microsoft are a high-profile target. So here are some steps to get you thinking about ways to reduce those costs, without blindly ripping and replacing your hard-won infrastructure.

Warning: This process won't be helpful for you if you have only a few days or weeks before you have to sign your next Microsoft deal… it will take weeks or months to effectively complete..

  1. Break down your annual or three to five year licensing spending on Microsoft, by product. For example, go total up how much you've spent on Office over the last three to give years, or whatever range matches your lifecycles. Repeat this step for every Microsoft product that's in significant use in your environment.
  2. Forecast this cost into the future. Come up with a net present value of that future (negative) cash flow that you'll likely be spending as long as you stay with a particular Microsoft product.
  3. Stack-rank your products according to the "amount we'll spend." For most companies, Office is near the top, along with Windows Server, Exchange, perhaps Windows Desktop, etc. This becomes your priority list. It may also serve as a good wake-up call when you realize how much you're spending on some of these products. (Here's a gut-check for you: How would you feel about sharing this list with your Board of Directors, or your most challenging customer over on the business side?)
  4. What's your biggest expense? Let's say you spent more on Office over the past three to give years than any other Microsoft product, and your projections are that will continue. That's your biggest single opportunity for savings.

Now it's time to ask the critical question: "How big is this number to us?" Is it chump change? Or is it big enough that you would be glad to shave even 10 percent to use on more productive things like headcount or equipment or projects to grow the business?

If the answer is "chump change" then move on to another project, secure in the knowledge that you've done your due diligence. But if the answer is "Let's shave," then start a new list, titled "Alternatives to Office Spending."

Alternatives to Office Spending
Sure, this is an easy list to build. And yes, every alternative has a trade-off, which you'll want to honestly identify, and if you can, place a value on. Here we go:

  • Free/cheap alternatives: Hint: Google search for "alternatives to Microsoft."
  • Stay put: Don't renew Software Assurance (SA); skip a few years of SA coverage and a version or three.
  • Buy less: Limit the number of users who get the full Office suite.Move some users from Office Pro to Office Standard, or even limit them to Word or Excel only. Note the upcoming Office 2007 will have a “Basic” edition.
  • Go for free: Use the free readers available from Microsoft to avoid license spending.
  • Change your source: Consider buying Office via OEM editions preloaded on your new PCs. Sure, it's still Microsoft butit's a different sales channel, so your local rep doesn't get commission. And, your lifecycle total cost may work out to be less.
  • Go hosted: Yes, you can get Office (and most other Microsoft products) from an external service provider on a hosted model. Again, it's a different sales channel, so your local rep doesn't get commission. And, your lifecycle total cost may be less.

And Now, the Real Stuff...Realistic Steps
So far this has just been a data gathering exercise, which is a good idea (see the sources of negotiation power list above), but the real power comes from ACTION.

  1. Short-list your alternatives.
  2. Run some spreadsheet cost models, read the whitepapers on TCO, get an idea how much of that future negative cash flow you might be able to avoid.
  3. Begin testing and evaluation.
  4. Keep close eye on total cost, including soft costs.
  5. Keep your specific vendors/tools and findings secret from Microsoft. But be sure to let them know you're doing this.

Now you can decide what to do about what you've learned. You can quietly shut it down (i.e., "We're staying with Microsoft" -- but don't tell them just yet! This tail won't wag that dog) or, if one of your approaches looks interesting, move into a pilot test to gain some solid info before your current Microsoft contract needs replacing.

So now you have a simple, step-by-step guide to seriously improving your negotiating power with Microsoft. The ball is in your court!

About the Author

Scott Braden has helped more than 600 companies negotiate Microsoft volume license deals. For a free case study, "How a Mid-size Company Saved over $870,000 on a $3 million Microsoft Enterprise Agreement, in Less Than Three Weeks," visit www.MicrosoftCaseStudy.com.

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