How to avoid IT price rises and renegotiate Microsoft licenses

IT managers are being urged to renegotiate product and service costs with major suppliers for next year to beat an imminent local price rise of between five to 20 percent.

The moves comes as vendor such as Microsoft try to bring next year’s renewals forward to meet current quarter expectations.

According to Forrester Research analyst Tim Sheedy, the ‘massive decline in the Australian dollar’ will push the cost of IT products and services higher ‘for the first time in recent memory’.

Hardware prices – including PCs, printers and servers – along with accessories and consumables are anticipated to be among the hardest areas hit, jumping by some five to 15 percent.

Offshore IT services are also predicted to increase in cost by between 10 and 20 percent – and ‘even global providers whose cost base is primarily in Australia (such as CSC) will feel pressure from headquarters to increase their rates’, Sheedy said in a new research note.

“The IT sourcing game in Australia is about to get messy,” said Sheedy.

“For the first time in recent memory, prices of IT goods and services are going up, or will go up, across the board – and for many products and services the increases will be significant.”

Sheedy urged Australian companies to protect their IT budgets now ‘by fixing rates or prices before the end of December, considering new financing packages, consolidating IT suppliers or switching to local providers where available’.

“Now is the time to sit down with your suppliers and have a detailed discussion about where prices are headed and what you can do to insulate your organisation from some of these price increases,” said Sheedy.

“Many global providers will have their hands tied by their corporate HQ on prices going forward – but if you can help them out (for example, by moving some spending forward to help them hit their current quarter target) then they are likely to be able to help you with attractive prices in 2009.”

Gartner has confirmed to iTnews that Microsoft is hitting up some of its customers early to bring revenues forward – but has warned IT managers to also ask what’s in it for them to sign an early renewal.

“Microsoft is trying to pull deals from 2009 into 2008,” said Frances O’Brien, a research vice president in Gartner's IT Asset Management group in the U.S.

“Clients are being approached on June 2009 renewals now, but in many cases Microsoft aren’t offering any incentives [to sign on earlier] – these are list price deals.

“Don’t be surprised if Microsoft wants you to sign a deal early but do ask ‘what’s in it for me?’. You need to understand, however, that you may be approached to renew licenses before your next agreement expires,” said O’Brien.

Read on to page two for tips on how to get some Microsoft discounts next year.