April 8, 2014
Chief information officers (CIOs) are dedicating more of their budgets to what we call “systems of engagement” (technologies that help win, serve, and retain customers) rather than “systems of record” (back-office technologies). According to research here at Forrester, new business investment in the former will be eight times that of the latter in 2014. All of which means CIOs are re-examining their back-office legacy spend to see what savings can be made to fund new front-office innovations.
But releasing back-office spend is not easy. For many companies, most of the ‘easy’ savings have already been achieved – so squeezing even more savings has become a tougher game. For example, you can only try to re-negotiate legacy support costs a few times before the vendors say ‘enough is enough’. While such comments may have discouraged negotiators in past, the advent of third party software support in the last five years has, for Oracle and SAP users at least, kicked the cost savings door back open and given fresh impetus to procurement people seeking to reduce software support costs.
I am sure that many of you have read some of my previous comments on the emergence of the third party software support market over the past number of years. Companies like Rimini Street, Spinnaker Support and Alui have saved some Oracle and SAP clients a lot of money. For companies who have moved to third party support, or who have simply used the threat of moving to third party support in order to drive the vendor’s costs lower, the savings they are enjoying have freed up cash to spend on new innovations and front-office client engaging stuff.
As IBM celebrates the mainframe’s 50th birthday this week, those of you with large IBM software investments have probably been looking enviously at the savings third party support can offer to Oracle and SAP clients. Well here’s something you might be interested in – I recently met a company called Origina who are based in Dublin, Ireland. They have an interesting proposition that claims to help users of some IBM enterprise software products (such as Websphere and Tivoli) to make savings of up to 50% per annum on their maintenance fees. In addition, by delaying or even removing the need in some circumstances for forced upgrades Origina say the savings can soar to 90%.
As I help clients negotiate with big software vendors, I am always looking for negotiation leverage. In some circumstances, third party software support can give leverage where none may have existed before.
In the age of the customer, it’s good to have a choice. And in negotiation, it's good to have leverage.