This post marks the continuation of the first installment of a discussion with Forrester's Duncan Jones on the subject of enterprise application cost reduction.
Jason: What is the best way to pursue cost reduction if you don't have any immediate spending requirements that are unmet?
Duncan: Vendor account executives always care first about new revenue. But if you don't have this, it is still possible to dangle a carrot for future projects. This sometimes requires that you go slightly higher up in the organization by suggesting that "we need some help this year" and "if you want to be in the game, then you can give us a maintenance cut." Essentially, you create the position that when we have discretionary projects, you will be with us or against us based on your behavior now.
Jason: How much can companies save?
Duncan: Percentage amounts are highly dependent. One option for savings is that companies often find they have shelfware that they're paying maintenance on currently. Taking maintenance off shelfware is one option. If you don't have shelfware, then it's hard to achieve this. Sometimes there is room to maneuver for some type of discount (e.g., 10%).
Jason: Are there any other negotiation tactics that you recommend?
Duncan: One tactic involves leverage and competition. Get all of your large vendors into a room and let them know you need to cut maintenance costs. Then say: "the first one to agree a 10% cut in maintenance will get a check right now for maintenance for the rest of the year. The last person to agree to cuts today gets maintenance cancelled all together."
Jason: That sounds like a Dutch auction, albeit not one I'd like to be on the other end of.
Duncan: The attitude towards maintenance is changing.
To be continued...stay tuned for further discussions / Q/A with Forrester's Duncan Jones.
- Jason Busch