How can you reduce license fees without losing access to tools and services?




There are a number of tips, tricks and strategies you can use to lower license fees across the lifetime of a piece of software—without harming support. From the procurement process to licensing to utilization, substantial cost reductions can be found, leaving more for other value-added activities. In general, access to tools and services is a function of how many licenses you purchase—and the price you negotiate for those licenses.

When you are in the procurement stage, remember the “Amdahl Coffee Mug Effect.” As legend goes, Amdahl sales representatives used to leave behind one of their branded coffee mugs. When visiting IBM salespeople saw the mug, they would immediately offer to drop their price by a million dollars. Which is all to say that one of the first ways you can lower license fees is to negotiate for discounts. For example, this Wikibon article on negotiating with Oracle reports discounts running as high as 70% off list price for deals more than $2 million and up to 50% for smaller deals.

Often, if you negotiate early in the quarter, sales reps feel less pressure to meet their numbers, have more time on their hands and are more willing to see your sale as a way to build their pipeline. It is also a good time to negotiate your maintenance fees along with your license fees. If a license sale hangs in the balance, vendors can be more willing to give on the cost of maintenance. Also, some vendors send individual salespeople into individual departments to negotiate for just the licenses that unit needs. To get the best deal, organize your internal teams (business, legal, applications, IT operations, compliance and procurement) so that you can present the vendor with the biggest number of seats to get the best volume discount. And have a good understanding of your projected future needs so that you can negotiate the best price for the optimum number of licenses. 

To save money on software, buy more of it

Unforeseen license-related charges can occur when you go out of compliance with a vendor’s licensing agreement. Using third-party software to automate your license compliance validation can not only save you money but give you greater control over how software is being used across your organization.

Furthermore, pay attention to duplicate licensing. This can occur when individual users within your organization are represented in multiple ways within the system. One result can be that several licenses are assigned to one single user. Investment in third-party software can analyze this information, identify duplicate user ID assignments, consolidate them into a single license and reduce your license count.

You may also find you have many versions of the same application, purchased from a variety of sources with varying prices and maintenance agreements. The more you can rationalize versions and update them all at the same time, the more you can save.

Make sure that people you’ve provided tools to are actually using them

Save on license fees over time by making sure you are not paying for licenses you don’t need. One way to do that is to allocate software costs back to individual business units. Essentially charging each unit for licenses can instill a greater sense of accountability at the business unit level, drive more efficient usage and make sure someone is using each license it is being charged for. If you find applications that no one at all seems to be using (AKA “shelfware”), cancel your maintenance agreement for immediate savings and, obviously, do not renew the licenses.

If you have internal resources to conduct software usage analysis, use them periodically to make sure you are not paying for unneeded licenses. If you don’t have the resources, consider using third-party applications that manage everything from license compliance to versioning to usage. To save money on licensing without losing access to tools and services, make sure your buying licenses for real people sitting in real chairs.

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