How to avoid IT price rises and renegotiate Microsoft licenses

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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.O’Brien said IT managers need to do their homework on Microsoft licensing before entering re-negotiations – but it can be worth it.

She said Microsoft has already created 54 exceptions to its nine licensing models and 27 different licensing programs, and there’s no reason why your business model can’t potentially lead to another exception being granted.

“Never say never with Microsoft – if you have a defined business case on why you want something they might do it,” said O’Brien.

“The 54 exceptions came about because people did things with Microsoft technology that Microsoft did not see. If you run Microsoft tools in different scenarios to what Microsoft offer, build a business case around it and ask for an exception.

“They may not agree to it but you may get some concessions to make the existing licensing model cheaper,” said O’Brien.

She also said becoming a reference account for Microsoft was a way to get further discounts. However, threatening to move to an alternative productivity suite to get cheaper Office licenses isn’t a viable strategy ‘because Microsoft don’t view any alternative on the desktop as a competitive threat’.

“You can’t use it as a leverage point,” said O’Brien.

To Microsoft’s credit, they are one of several IT vendors to offer new finance packages on their kit.

Their offer is zero percent interest over 36 months for new purchasers of selected Microsoft Dynamics ERP and CRM software. It’s valid until mid- March to approved customers on purchases between $30,000 and $1.5 million.

The minimum purchase price can be made up of both approved software and partner services, but only the software component gets the zero percent financing, a Microsoft spokesperson confirmed to iTnews.

HP this week also announced globally it will offer zero percent lease financing for qualifying customers of its business technology optimisation and information management software.

Steve Dixon, A/NZ managing director at Riverbed, told iTnews that Aussie IT managers are getting the message on price increases and are negotiating harder for the best deals.

“Desperate vendors are also trying to slash their prices to get revenue,” said Dixon.
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