Mega-vendor negotiation has fundamentally changed, do you understand how cloud changed the rules?

By Gareth Redshaw

Director of Public Sector for Microsoft and Cloud Consulting

Cloud Optics, a Livingstone Group company.

I have worked across a wide range of Public Sector organisations with a multitude of software licensing programs throughout my career.  Common themes always remain “am I getting a good value from my investment” and “do I have enough confidence in my current & future requirements to make such a large spend”.  I want to share some useful insights from my wealth of experience, which could help answer these key questions for you.

Contract negotiations, commercial terms and packages are notoriously complex to navigate, not all amendments or contract concessions work cross verticals and several existing terms already exist through CCS negotiations.  Even here, a Public Sector wide negotiation does not consider the unique nuances of your organisation, or a specific use case, whereby a well targeted contract concession could make a multi-million cost impact to your organisation.  

Data is powerful!  Often mega-vendor negotiations are entered into without 100% confidence in the data behind the contract.  Many organisations conceded on price in exchange for favourable contract amendments.  For example, contracting at a higher financial package or term than desired, for the assurance that no audit will take place in order to minimise resulting financial risk.  This must be avoided through effective and robust planning; the commercial impact of good useable data can lead to leaner contracts and a much more empowered negotiation cycle.   

Another often overlooked consideration is future use cases.  Contracts typically run for between 3 to 5 years but are agreed based on current usage and short-term strategy.  Forward looking contracts need to be structured around the future state, factoring in new technology adoption and the evolution of user requirements.  If you are reading this thinking “we will not change”, simply look back over the past 3 years and consider what’s different today.  Three years ago, did the same attitude to cloud exist?  Did you have workloads in IaaS and PaaS platforms?  Did your EUC security plan look the same as todays? Understanding and planning for change is critical.

To really be effective, it is important to know where your negotiation leverage exists, but equally where it really doesn’t.  If we consider the importance of 1st generation cloud within your contract negotiations three years ago and compare this to today, we see very difference leverage.  Three years ago, just having Cloud technology within your BOM was enough for most vendors to offer contract amendments, today however this needs to be actual consumption, growth, spend commitment or net new technology.  

Similarly, the way your vendors negotiate is very different from three years ago, when the focus was on planning and traditional sales led offerings.  Today confident sales teams often delay the sale, penetrate organisations at multiple points and levels, offering discounts and concessions based on a firm commitment to consume (i.e. not spend!).

To really be effective in contract optimisation it is no longer a one size fits all.  You must understand how your organisation deploys and consumes technology across the varied user base; you need to map out your investment trajectory.  Our clients leverage our experience and expertise in contract optimisation across vertical sectors, helping them to deliver an average of 38% cost savings on their software mega vendor expenditure.

This topic is discussed in our on-demand webinar “A Blueprint for Public Sector Software Cost Optimisation” -

In this 30-minute webinar I will share insights and recommendations that will show best practices to implement when negotiation with the mega vendors like Microsoft.  In addition, you will learn how to optimise what you are purchasing and reduce what you spend.   I will showcase a recent example of a government project highlighting his methodologies and the results that were delivered.

You will learn the following:

  • A market update on Microsoft’s strategy, their drive to cloud & sales tactics
  • Methodologies that will reduce your mega vend spend significantly using a Microsoft approach as an example
  • How to optimise your licensing successfully ensuring you are only purchasing what you need
  • The importance of cloud in mega vendor negotiations
  • Tips for developing an accurate consumption forecast
  • Recent examples of commercial outputs that have delivered significant cost savings & can be easily replicated.

To view our on-demand webinar, please visit our website. Alternatively, to discuss any of the above contact us by email.