How To Keep Software Costs Down - InformationWeek

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10/24/2003
02:18 PM
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How To Keep Software Costs Down

Buyers can try these tips to maintain their leverage before they lose it.

As buyers are confronted with software price hikes, it pays for them to do some thinking about how to avoid the problem in the first place.

Ditka Reiner, president of Reiner Associates Inc., a consulting firm that helps businesses negotiate software contracts, says it's important to create solid contracts that lock in specifics. For example, a contract might define a position as an employee, and the company might have three employees in one position. The software vendor could come back and charge the company for three licenses, tripling the cost of the software.

Get everything in writing, too. "Even if a vendor tells a customer that it has never increased maintenance fees, the customer should respond with, 'If you never have done that, then good, you should have no problem telling me that in writing'," she says.

Reiner says if a vendor increases maintenance fees, the customer should look at the service-level agreements. Can the vendor prove that response times are faster to warrant an increase in price?

That said, Reiner says no vendor wants to lose business, so customers do still have leverage. "This is an opportunity to use that leverage to lock in specifics that you might have missed the first time." For example, if a company knows it plans on buying a new product from the vendor in the near future, the company can write into the contract a set price now.

"Since they are redefining the contract, the CIO can suggest taking the time to look at other things. This way you can do the negotiations more amicably, even though it may not taste good," she says. "Lock in some future discounts. Go ahead and let them raise maintenance fees, but ask them to lower the fees for professional services."

Return to main story: "Price-Hike Surprise"

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