Here is another in our series of articles designed to tell end-users how to deal with resellers. Knowing these tricks ahead of time might turn negotitations back to your advantageRegardless of its financial profile, the typical IS organisation is promoting the concept of "cutting costs without cutting corners" as critical to the planning, design, implementation, operation, management and evaluation of enterprise-wide technology. As a result, financial belt-tightening has evolved into an issue of not only how to save more money but also how to do better with less.
Customers should plan equipment or software purchases carefully to gain additional discounts. There may be slight increases in discounts at the end of each month. The discounting by suppliers is often even better at the end of a sales quarter. Traditionally, suppliers are most aggressive with discounts at the end of their fiscal years. Other events can increase negotiating leverage, too. In the notebook computer arena, for example, enterprises get the best prices when they time their purchases to correspond with trade shows and expos. At these events notebook manufacturers typically make price/performance improvements to their lines.
Buyers must be aware that timing applies to software negotiations too. Knowing the "tricky quarters" for each supplier and negotiating at these times or at the vendor's fiscal year end improves the chances of getting favourable terms and conditions.
Consider buying through the secondary market, users are told. The secondary market for used IT equipment is often overlooked. Enterprises can use the secondary market to sell older IT equipment or check the trade-in values offered by a supplier. The secondary market is also viable for procuring entire systems, such as telephone systems or add-on components. The secondary market frequently offers good used equipment, complete with guarantees, for far less than regular retail channels. For example, in situations where 14-inch screens are adequate, consider buying used 14-inch monitors, which are available for up to 60 per cent less than the average cost of a new monitor.
Customers can prenegotiate trade-in values. IT financial managers and network planners are aware of the ever-shorter life cycles of the equipment being installed. The majority of equipment used in client/server applications, for example, has a useful life of three years or less. If a department elects to purchase client/server equipment, costs are often depreciated over a five-year period by the accountants, even though the department's budgets may be adjusted to the shorter useful life. When it comes time to install next-generation products, the enterprise is faced with unamortised value, which may inhibit the equipment replacement. By negotiating preset trade-in allowances at purchase time, managers can overcome such challenges.
Reading the small print
Buyers are warned to include a grandfather clause in contracts. A pricing-model change can cause a standard contract item to become an optional feature or function for an additional cost - hitting an unprepared enterprise with an expensive surprise when it tries to upgrade the product. When a system is purchased with a grandfather clause pertaining to price/capacity model, the full capacity and functionality is implied. If a feature or function becomes optional, the enterprise is not charged for actual usage levels when it upgrades. Additionally, the enterprise receives significant discounts until the full original feature or function levels are achieved. This gives the enterprise the option to select either the grandfather or the new pricing model.
Similarly, enterprises are told to include a transferability of licensing clause in contracts. Transferable licensing protects equipment residual values by giving an enterprise the ability to transfer some portion of its software licensing fees when selling or buying equipment from the secondary market. Customers are advised to stick with the LAN management tool leaders unless a niche product's payback is within 12 months. LAN management toolsets, which were low-level utilities a few years ago, are evolving into comprehensive management suites that incorporate a range of functions for local and remote management.
With this shift, IS organisations are beginning to get the kind of tools they need to manage LAN environments properly. By the end of 1996, enterprises will be looking to get tools with even more functionality as vendors in the highly competitive LAN management market enhance their products to stay ahead of the market curve. But along with that competition, mergers, buyouts and consolidations will make most of the niche utility vendors obsolete in the next couple of years. As a result, if an enterprise cannot afford to throw away the niche product in a year, it is told not to buy it.
IS managers are warned against accepting a software vendor's first offer. Because of mergers, buyouts and continuing pressure from Microsoft, the software market is more competitive than ever. Customers are told to push back on terms and conditions offered by market leaders. They will deal. Even if one vendor's product is favoured, customers should get a bid from another vendor. If a better deal is found, the customer will then go back to the first vendor and ask it to match the bid. More than likely, the vendor will.
Organisations should buy automation products or process management products - centralised backup and restore processes, centralised software distribution, inventory and software metering packages - whenever possible. Such tools simplify operational procedures and often pay for themselves in one execution. For example, in the help desk arena, automation tools give help desk analysts powerful tools for solving problems, increasing the first-call success rate, retaining the knowledge gained in the organisation and leveraging that knowledge. These tools also improve the quality and consistency of support and help pinpoint end-user training requirements.
Customers are advised to recognise the emergence of desktops as user interface servers. User interface server technology delivers benefits in the form of increased manageability and network flexibility. This technology is particularly applicable for corporate back-office environments, where users need little off-line processing and share most application needs. Limiting the role of the desktop to the user interface server will become the physical architecture of choice for fully connected back-office systems by 2000. Back-office organisations should plan to migrate to this technology through commercially available products and through adoption of these concepts in application designs. For many environments, this will break the cycle of endless desktop upgrades as the only way to deliver advanced functionality to end-users.
Organisations should install a software metering package to reduce licence fees. Asset and network managers can reduce software licence fees and support costs by using a server-based software metering package to measure usage levels on distributed client/server networks. In addition, metering plays a complementary role in security, distribution and inventory control and can be used to enforce limited-use and site licences in desktop software licence fees.