Sourcing and Vendor Mgt

Is Software Pricing A Science Or An Art?

Mark Bartrick — Mon, 23 Jan 2012 17:35:40 +0000

I've been with Forrester for just over a month now. It's great to be involved with our clients and communities and to be helping businesses across the world evaluate the quality of software suppliers' proposals from a commercial perspective (e.g., is this a great deal or can the supplier do better?). One of the best parts of being at Forrester now is seeing the continuation of the work I did prior to joining Forrester -- advising businesses on software contract and pricing negotiations. One thing I noticed then, and continue to hear about now, is the reluctance of software suppliers like IBM, BMC, CA, and Compuware to publish meaningful list prices or to explain how their price book worked or how discounts had been determined. Time and again I had to ask suppliers to un-bundle prices and confirm the basis for the net prices they were proposing. Does anyone else agree with me that pricing should be clear and transparent and not a black art?

Here's an example of an "art" that should be science: list pricing. While it's logical to think list pricing is the same foundation upon which all bids are built, that's actually not the case. Often, I found that my clients were being quoted "list pricing" that was different. Isn't list pricing supposed to be the same by definition? Which is why you may with good reason doubt the validity of a list price or the competitiveness of a discount that you're being offered by a software supplier. It's why I love my work, and why you should make sure you get third-party validation of your deals.

How you do validate your software vendors' list pricing and proposed discounts?

Herculean Buyers, Lions, And Hydra — Do You Want One Throat To Choke, Or Reps That Understand The Products They’re Selling?

Duncan Jones — Fri, 20 Jan 2012 12:41:00 +0000

The proposed acquisitions of SuccessFactors by SAP, and of Emptoris by IBM got me thinking about the impact on buyers of market consolidation, in respect of the difference between dealing with independent specialists versus technology giants selling a large portfolio of products and services. Sourcing professionals talk about wanting "one throat to choke," but personally I've never met one with hands big enough to get round the neck of a huge vendor such as IBM or Oracle. Moreover, many of the giants organize their sales teams by product line, to ensure they fully understand the product they are selling, rather than giving customers one account manager for the whole portfolio who may not understand any of it in sufficient depth. Our clients complain about having to deal with just as many reps as before the acquisitions. They all now have the same logo on their business card, but can't fix problems outside their area, nor negotiate based on the complete relationship. It seems that buyers end up like Hercules, wrestling either with a Nemean lion or with a Lernaean hydra.

The acquirers' press releases tend to take it for granted that customers will be better off with the one-stop shop. Bill McDermott, co-CEO of SAP, said, "Together, SAP and SuccessFactors will create tremendous business value for customers." While Lars Dalgaard, founder and CEO of SuccessFactors, talks about "expanding relationships with SAP's 176,000 customers." Craig Hayman, general manager of industry solutions at IBM, said, "Adding Emptoris strengthens the comprehensive capabilities we deliver and enables IBM to meet the specific needs of chief procurement officers."

Mo' Data, Mo' Problems

Clarence Villanueva — Fri, 13 Jan 2012 16:48:41 +0000

Big data is a big topic these days, with companies aggregating consumer data and contracting with third-party marketers to mine it. However, an unforeseen problem arises around unclear data ownership. This is a problem because companies are packaging your data and selling it.

Take the following case -- a client was looking to have a marketing company take its point-of-sale (POS) data to prepare email campaigns. Upon closer review of the contracts, data ownership was ambiguously defined and nested in three separate areas: the Master Services Agreement (MSA), SOW, and an addendum. When you trace the definition through the various documents, the only thing made clear on data ownership was that the campaigns resulting from the ETL (extract, transform, load) process were owned by the client. What about the POS data that was sent over to the marketing services company?

In a conversation with a data expert at a retail-focused marketing services company, they package your POS information and sell it to other buyers, thus creating an additional revenue stream. Disturbingly, clients are unaware this is happening and don't share in any of the profits.

Here's what to do to mitigate the issue:

MNCs Are Trying To Uncover The Value And Vendor Options For 'Global' Mobility Management

Brownlee Thomas — Fri, 13 Jan 2012 16:13:55 +0000

I've had several conversations with Forrester IT clients in sourcing and vendor management and infrastructure and operations roles during the past few months about how-when-why-who to outsource mobility management. The top drivers identified are: 1) concerns over perceived and detected escalating international mobile roaming costs and how to avoid/stop/reduce them; 2) corporate-level sourcing strategies to consolidate vendors in order to reduce the burden on stretched IT and administrative resources responsible for telecom services contract negotiations, and invoice processing and chargeback; and 3) a need to understand whether a move to more individual-liable user (ILU) mobile services to respond to consumerization and user demand for more choice in smart connected devices (including personal) would erode corporate contract price benefits and also increase IT support burden. I generally recommend they start by conducting an audit of their mobile spend using a third-party service, and then poll heavy users and their managers about interest in, and support and subsidy expectations in bring-your-own-device (BYOD) programs. Next, firms should reach out to two or three of their main mobile service providers, like Vodafone, AT&T Mobility, Verizon, Orange, Sprint, and Telefonica about their telecom expense management (TEM) and mobile device management (MDM) capabilities, and about ILU programs that might even benefit rather than erode the company's price discounts for corporate-liable user (CLU) accounts, and even contribute to meeting overall telecom revenue commitments under a Master Service Agreement that includes fixed-line services (if they have any). There are several dozen (albeit mostly small and privately held) pure-play TEM providers that offer telecom audit consulting, either specifically focused on single-country or regional mobile services or more broadly on multicountry fixed-line and mobile telecoms.Read more

President Obama’s Call To Action: A Serious Boost For Domestic Outsourcing . . .

Stephanie Moore — Fri, 13 Jan 2012 15:25:11 +0000

Forrester clients are looking for more options when it comes to IT service and outsourcing providers, and there's a new option available to them: domestic outsourcing.

For many years, India has been the answer for large companies that need to save money and increase their IT bandwidth. Indian vendors, in fact, revolutionized the IT services industry by delivering higher quality, lower cost services with a never-let-the-client-down mentality. Now, however, the market has "overcorrected" in terms of outsourcing IT work. Companies, whether they work with a pureplay Indian vendor such as Infosys or a US-based vendor such as IBM, have to buy the bulk of their programming talent from India.

Unfortunately, today, India is not the best delivery location for all IT work or for all companies.

First of all, India is overworked -- some might even say tapped out. The excess demand for Indian labor has meant that clients are less satisfied with their offshore IT services:

Match Cloud Expectations With Customer Realities In The New Year

Bill Martorelli — Sat, 31 Dec 2011 19:17:44 +0000

Few would dispute that cloud computing has a huge potential for making IT service expenditures more cost-effective and flexible. But as is often the case, what is now possible is not necessarily practical or even desirable from the standpoint of the buying customer in terms of both accommodating longstanding preferences as well as specific contractual terms.

For example, consider these aspects of cloud computing:

IBM's Acquisition Of Emptoris Further Reduces IT Sourcing Professionals' Options

Duncan Jones — Fri, 16 Dec 2011 10:31:05 +0000

Just over a week after SAP published its intention to buy Success Factors, IBM announced yesterday that it will acquire Emptoris, one of the leading ePurchasing suite vendors. My colleague Andrew Bartels has described in his blog some of the implications for other vendors in the ePurchasing market:

http://blogs.forrester.com/andrew_bartels/11-12-15-ibms_acquisition_of_emptoris_moves_it_squarely_into_the_epurchasing_software_market_watch_out_for_f

My interest is in what the acquisition means for sourcing professionals, not just the CPOs who might be Emptoris customers, but the IT sourcing professionals setting strategies for dealing with major suppliers such as IBM and SAP.

· Emptoris customers should give IBM the benefit of the doubt, for now. Craig Hayman, General Manager of IBM's Industry Solutions division, assured me that he would take great care not to damage Emptoris's strengths, the ones that attracted him to the company, as they did you, its customers. Emptoris consistently does well in Forrester Wave™ evaluations, not only for its functionality but also its focus on sourcing and procurement, its emphasis on ensuring customer success, and its consistent record of innovation. The good news is that Hayman doesn't underestimate the challenges of integrating Emptoris into IBM, but is confident he can overcome them. It will take a couple of years before we can judge his success.

Nine In Ten Large Enterprises Will Multisource International Telecom Services - Including Their WANs

Brownlee Thomas — Thu, 15 Dec 2011 21:25:30 +0000

Anecdotal evidence from several dozen Forrester IT client inquiries and consulting engagements during the past two years suggests that large MNCs are almost always multisourcing their international WANs and other global telecom services. We estimate that more than nine in ten large user companies (firms with 1,000 or more employees in overseas offices) buy international WAN, Internet access, and fixed voice services from three or more network operators or specialists. The larger the firm, the more likely they are to use one and sometimes two top-tier global telecoms providers (like AT&T, Verizon, BT, Orange) for multiregional international telecoms, and additional -- often smaller players or VPN specialists (e.g., Level 3/Global Crossing, Azzurri, Virtela, Masergy) -- for important international markets, or regional providers such as in Europe (e.g., BT Global Services, Orange Business Services, T-Systems) and Asia-Pacific (e.g., NTT, SingTel, Telstra). Global firms also increasingly are interested in buying some services from emerging market players like Tata Communications and Reliance Globalcom.

Global enterprises' rationale for multisourcing falls into two broad categories:

1) Global telecoms -- networks and comms apps running over them -- are considered "too strategic" to entrust to just one service provider.

2) As we keep hearing over and over, "There's not actually a truly global network operator -- they all rely on others, sometimes many others."

SAP Buys SuccessFactors, Accelerates Cloud Strategy with Addition of Leading HCM Cloud App

Liz Herbert — Sat, 03 Dec 2011 18:34:15 +0000

Today, SAP announced plans to acquire SuccessFactors, a leading human capital management (HCM) cloud platform with more than 15 million subscribers. This greatly accelerates SAP's move into the cloud and makes it a provider of one of the world's leading cloud solutions. SAP plans to operate SuccessFactors as a separate company.

For SuccessFactors customers, this will create more integration opportunities between their best-of-breed cloud HCM solution with SAP's suite of enterprise applications products, in-memory computing platform HANA, and mobile computing platform Sybase.

For SAP customers, this creates an immediate opportunity to buy an innovative, proven, fast-growing cloud solution from their strategic enterprise software partner. Today, there is only a small overlap between SAP customers and SuccessFactors customers -- meaning most SAP customers do not currently use SuccessFactors (and vice versa).

While there are great opportunities and synergies with this acquisition, it also runs the risk of potential downsides for customers: pricing and contract terms are likely to change and the pace and direction of innovation could slow down as the provider moves from a nimble, niche supplier to a new parent company with many competing initiatives.

Why Does Mobility Need To Be Prioritized In Your IT Planning?

Brownlee Thomas — Fri, 18 Nov 2011 20:44:42 +0000

There are four main business and market drivers pushing IT to put - and keep - mobility front and center in their 2012 planning.

Enterprise mobility will dominate IP priorities in 2012. Moreover, this trend will continue during at least the next three years. Some of the big drivers for prioritizing mobility that we've identified during 2011 include:

1) Users are demanding improved mobility support: This includes supporting more personal mobile devices (smartphones and tablets), expanding use of mobile apps both inside and outside the office, and supporting new mobile operating systems, especially Android and Apple iOS in addition to BlackBerry.

2) The business is finding ways to deploy apps they want without you: IT needs a strategy for prioritizing mobile apps development and deployment. The business also needs updated guidance about who pays for smartphones and tablets, and the associated mobile services, endpoint security, and appropriate use of personal devices.

3) Customers are voracious about multichannel access to your content: Mobility will be key in social computing initiatives to drive deeper customer engagement. Customers (and suppliers) will love you for giving them great mobile apps like a product catalog, maintenance schedules, or project calendars accessible using their Internet-connected mobile device (smartphone, tablet).

Key Areas To Consider In SaaS Contract Negotiation

Liz Herbert — Tue, 01 Nov 2011 02:34:37 +0000

With the Sourcing and Vendor Management Forums coming up next week in Miami and at the end of the month in London, our team is busy finalizing content and rehearsing sessions. Personally the hottest question I have continued to get since the keynote I did last year on SaaS sourcing is the question of SaaS pricing and contract negotiation. So, what can you expect in the track session "Negotiating Cloud Pricing and Contracts" for those of you who can join us?

New data from the Q3 2011 services survey showing:

Sourcing & Vendor Management: A Key Driver In The Customer Experience Ecosystem

Christopher Andrews — Thu, 27 Oct 2011 12:25:17 +0000

This is a guest post from Kerry Bodine, a Forrester vice president and principal analyst serving Customer Experience Professionals. Kerry will deliver a keynote on the critical role Sourcing & Vendor Management Professionals play in customer experience at Forrester's Sourcing & Vendor Management Forum on Nov. 7-8 in Miami and Nov. 30-Dec. 1 in London.

Many customer experience initiatives don't meet their full potential -- or worse, fail completely -- because companies don't have a complete picture of the dynamics that go into creating it. In order to break from their tunnel vision, companies need to understand their customer experience ecosystem: the complex set of relationships among a company's employees, partners, and customers that determines the quality of all customer interactions.

In their quest to seek out the root causes of customer experience issues, companies often overlook the impact of sourcing and vendor management (SVM) professionals -- often referred to as "procurement" by the rest of the organization. That's too bad, because these decision-makers influence the customer experience in two key ways.

They influence which technologies and tools will be purchased. Some of these technologies are used internally. One example is: customer relationship management software, which enables employees across the organization to better understand customers and their ongoing relationships with the company. Other tools -- like content management systems -- directly affect the information that customers can access through digital touchpoints like the Web and mobile devices.

Supplier Risk And Performance Management Takes Center Stage At Emptoris’s Customer Event

Duncan Jones — Mon, 24 Oct 2011 09:44:19 +0000

Having attended Oracle's customer event a couple of weeks ago, I wasn't sure I'd be able to make it to Emptoris's Empower event this year, but I'm glad I was able to attend. The quality of the external speakers, the access to Emptoris execs, the content mix (high-level procurement trends and implementation best practices), the plentiful opportunities to chat with customers, partners, and employees -- all these made it an extremely valuable couple of days.

A key event theme was the urgent need for procurement leaders to improve their risk monitoring and mitigation processes. For instance, according to Deloitte Consulting's 2011 CPO survey, nearly 60% of respondents believe their risk exposure is higher than a year ago. Emptoris's President & CEO Patrick Quirk explained his company's response, with an ambitious roadmap to convert the acquired Xcitec product (now called Emptoris Supplier Lifecycle Management) into a comprehensive supplier risk and performance management suite (SRPM), in line with our description of this category: FAQs About Supplier Risk And Performance Management Software.

Mobility Is The Tail That Will Wag The UC Dog

Brownlee Thomas — Thu, 20 Oct 2011 11:43:41 +0000

How much of your IT operating and capital budget will go to UC related investments? I predict that spending by large distributed enterprises (defined as firms with 1,000 or more employees) on communications infrastructure and services will grow between 7% and 10% per year during the next three years. Moreover, there will be a gradual shift away from hardware to software, and wireless connectivity will account for MOST of the growth in communications services spending.

Momentum is building for broader UC adoption, and our Q1 2011 survey of 601 firms that have implemented or are piloting a UC solution showed that 55% of the respondents consider UC a top priority this year.

There are two BIG drivers of widespread UC adoption in large distributed organizations: Mobility and new business models (how UC technology and services are delivered). Mobility will become the "tail that wags the UC dog." Why? Consider the management and usage cost efficiencies offered by fixed mobile convergence (FMC) technology -- least-cost routing savings including reduced international calling and roaming charges, to name one.

What Do You Mean When You Call A Supplier A “Strategic Partner”?

Duncan Jones — Tue, 18 Oct 2011 20:00:36 +0000

I handle many inquiry calls from clients asking for help negotiating with large suppliers, and often they claim the supplier is a strategic partner. I've noticed that many clients use that term, but when I ask them what it actually means in practice, I get varying responses. So Forrester recently surveyed over 150 sourcing and vendor management (SVM) professionals to ask them what they expect to get from strategic partners, and what they offer in return. I was bit disappointed with the results. For instance, while 68% said they would always expect partners to give them the best possible discount, only 6% said they would always make the partner their sole source for specific technology categories.

What's wrong with this picture? Well, to quote Godfather 2, when explaining Hyman Roth's longevity, Johnnie Ola says, "He always made money for his partners." That concept doesn't seem to apply in the technology world. On the one hand, buyers complain about vendors' unfair policies (see my recent report Buyers Should Reject Unfair Licensing Rules) and transactional sales approach. Yet OTOH they want to squeeze their partners' margins while still expecting them to sell their wares site-by-site and product-by-product around their enterprise. As one senior software executive told me the other day, "Sure, I'll waive my usual policies for partners, but only if they let me off the huge cost of supporting individual, small product buying decisions."

Sourcing and Vendor Mgt

Is Software Pricing A Science Or An Art?

Categories:

Herculean Buyers, Lions, And Hydra — Do You Want One Throat To Choke, Or Reps That Understand The Products They’re Selling?

Categories:

Mo' Data, Mo' Problems

Categories:

MNCs Are Trying To Uncover The Value And Vendor Options For 'Global' Mobility Management

President Obama’s Call To Action: A Serious Boost For Domestic Outsourcing . . .

Categories:

Match Cloud Expectations With Customer Realities In The New Year

IBM's Acquisition Of Emptoris Further Reduces IT Sourcing Professionals' Options

Categories:

Nine In Ten Large Enterprises Will Multisource International Telecom Services - Including Their WANs

SAP Buys SuccessFactors, Accelerates Cloud Strategy with Addition of Leading HCM Cloud App

Why Does Mobility Need To Be Prioritized In Your IT Planning?

Key Areas To Consider In SaaS Contract Negotiation

Sourcing & Vendor Management: A Key Driver In The Customer Experience Ecosystem

Supplier Risk And Performance Management Takes Center Stage At Emptoris’s Customer Event

Categories:

Mobility Is The Tail That Will Wag The UC Dog

Categories:

What Do You Mean When You Call A Supplier A “Strategic Partner”?

Categories: