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Foiled! How to beat software vendors' sneaky price increases

Robert L. Scheier | Jan. 14, 2014
Between complex licenses and the cloud, Microsoft, Oracle, and SAP have lots of ways to hike up prices. Here's how to fight back

SAP declined to comment, but its website says any access to SAP "directly and through any intermediary technology layer" requires an SAP license.

Watch out for pricing tricks in the cloud
Many software vendors are aggressively promoting software-as-a-service (SaaS) cloud offerings and subscription pricing, in which the customer never owns the software but pays for its use (and for updates) as long as it need the software. Both models can save you money, at least in the short run, but analysts warn they can also carry hidden costs and dangers of lock-in.

With an on-premises implementation, you can stop paying maintenance and still run your current version. But if you want to leave a SaaS platform over a price hike, you own neither the software nor the infrastructure on which to run it. That makes moving off the SaaS vendor more complex, expensive, and risky.

Also, don't assume SaaS is always cheaper, says Scott Feuless, a principal consultant at Information Services Group (ISG), an IT consultancy. Be careful to factor in the full implementation costs, such as for configuration and building interfaces to other systems. Also factor in the expected future price hikes. If the ability to scale up and scale down is important to you, push back on vendors that urge long contracts with baseline volume commitments and limited options to terminate for convenience, he advises.

Microsoft, for example, "is doing a very good job of getting a foothold for Office 365," its subscription version of Office, SharePoint, and Exchange, says Ulman. The risk, however, is that the price can go up in the future "and you're locked in." That doesn't mean Office 365 is always a bad choice, he says, but "overall, Microsoft is increasing its long-term recurring revenue, and you need to be aware of this."

Feuless recommends fighting for the option of moving your current licenses at will from your on-premises infrastructure to the cloud (a shift that open source vendor Red Hat recently made easier). He also recommends making sure your charges for the cloud service begins only when you enroll users, not before.

IT needs to work harder to get a good deal
Knowing whether and when you can walk away is essential to any negotiation. But with today's more complex terms and changing delivery models, IT customers need to do more and better preparation than historically have.

Most consultants recommend starting three to six months in advance to understand exactly what functionality you need now and in the future, and how hard and expensive it would be to shift vendors in each case. The preparation might include deciding if your users can skip a generation or two of software upgrades to avoid a price hike, or whether a desktop virtualization license justifies the cost of continuing Microsoft's Software Assurance program.


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