Spend Matters welcomes another guest post from Gregg Spivack of NPI, a spend management consultancy focused on eliminating overspending on IT, telecom, and shipping.
Transparency has always been an issue in IT sourcing. Not only is there no “Kelley Blue Book” for pricing, the degree of detail provided in one customer’s agreement terms compared to the next (even with the same vendor) is often inconsistent.
Let’s take VMware for example. Many IT buyers don’t take into account the extent of detail that VMware or its resellers can or will furnish in quotes and contracts. Some wonder if they’re getting enough detail but have little understanding of what a healthy amount of detail looks like.
To overcome this challenge, buyers need to have best-in-class standards for what level of detail should be included in their VMware purchase quotations and agreements. At NPI, we see all shapes and sizes of quotes, which gives us the benchmarks we need to establish those standards for our clients’ purchases. Buyers can also look across their IT vendor portfolio and highlight the differences in what info is provided in a quote to get a feel for what transparent terms and conditions should look like.
Lately, we’ve seen several common “transparency pitfalls” in enterprise VMware purchases. Here are a few ideas to guide you through your next VMware transaction.
Just say no to aggregated quotes. Don't accept aggregated quotes that include either one cost for the three-year term (typical length of contract) or even an annual breakdown of the costs. This is a common starting point for VMware but does not reflect the detail they can provide.
Hone in on maintenance, especially for ELAs. Ensure that both pre-ELA maintenance and new ELA maintenance are reflected separately and annually. Customers should be clear on how maintenance is being calculated in the ELA and whether any reduction to pre-ELA maintenance is being offered. Also, pay attention to how out-year maintenance costs will be structured. Don’t wait until you’re at the end of your ELA term to gather this information.
Demand clarity on professional services fees. Ensure services costs (PSO credits and TAM costs) are broken out and clear, especially as it relates to follow-on purchases.
Require license-type level detail in your quote. Require VMware to show the software costs by license type, displaying list price, and the discount being offered.
A final piece of advice – no two vendors are alike (much less purchases). Variables specific to each purchase and unique vendor/reseller behaviors can challenge your ability to obtain the most transparent terms. Just knowing what to push for is half of the battle and sets the expectation for the role that transparency will play over the course of your vendor relationship.