We all know there are a many keys to a successful negotiation, regardless of what you're buying - IT is one of those categories where this is especially true. Managing vendor communications, leveraging competition, and staying internally aligned throughout the buying process are all important factors. But my recent experiences helping clients with VMware renewals have highlighted another critical success factor: ensuring transparent commercial terms on all your vendor purchases.
Before delving into a few ideas to share in preparation for your next VMware transaction, there are two things you should know. First, many buyers don’t really think about the extent of detail that a reseller, OEM or software publisher can or will furnish in their quotes and contracts. NPI has the benefit of seeing all shapes and sizes of quotes from vendors across our client base, and that’s a valuable benchmark we use to set best-in-class standards across a very broad sample set. On your own, you can look across your IT partner portfolio to highlight the differences in what some providers are able and willing to share in a commercial quote,identify the ones that work best for you, and start to hold all vendors accountable to that standard.
Second, unlike the stock market, the past is a predictor of future performance in the world of IT sourcing. In our context, this means past discounts, terms and conditions are key factors affecting future purchase pricing and Ts & Cs. When amendments, addendums, out-of-ELA purchases, original ELAs, etc. have mismatched levels of detail and transparency, this dearth of detail can hinder how well companies can evaluate a current offer from that same provider, identify leverage and build a case for the current transaction.
Here are a few observations to guide you through your next VMware transaction:
- Don't accept aggregated quotes that include either one cost for the three-year term (typicallength) 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.
- Ensure both pre-ELA SnS (maintenance) and new ELA SnS are reflected separately and annually.Customers should be clear on how maintenance is being calculated in the ELA and if any reduction to pre-ELA-SnS is being offered.
- VMware will furnish an out-year SnS cost that governs the cost as you emerge from the ELA, but itwill combine all the spend. It's important to gather that detail at the front end of the ELA process.
- Ensure services costs (PSO credits and TAM costs) are broken out and clear, especially as itrelates to follow-on purchases.
- Require VMware to show the software costs by license type, displaying list price and the discountbeing offered.
One final note – every purchase is different, and variables specific to each purchase may challenge your ability to obtain the most transparent terms. The good news is that knowing what to push for can be half the battle! If you’d like help navigating your next VMware purchase or renewal, NPI has you covered.
Gregg Spivack, Director of Client Services, NPI
July 15, 2014