7 ways to cut your software costs during the economic downturn

Global recession gives IT execs an opportunity to gain pricing edge on software vendors

3) Bring hard business data to the negotiating table

Sharing internal financial data may seem like a surefire way to lose the upper hand in vendor negotiations. But some analysts said that when done in good faith, it often is more effective than simply claiming corporate poverty or making empty threats to migrate to other vendors. Good vendors, they noted, will respond to calls for pricing that's more in line with the economic value you get from products.

For instance, if your company pays US$100,000 a year for an application that you estimate saves a million dollars annually, Geisman advised that you take the data to the software vendor and tell it that the current cost "is a little too rich for our blood." By doing so, he added, "it becomes a negotiation, rather than you squeezing them."

Colon agreed, citing the experience of a large retailing client. "They told Oracle they were in financial disarray and had a bleak outlook for the next year or two," he said. "Oracle didn't budge at all." But when the retailer went back to Oracle with data showing how low its usage of the vendor's software was apart from the 10-week holiday shopping season, Oracle responded by drawing up a less expensive custom contract, Colon said.

4) Look for other concessions besides price discounts

In lieu of discounts, a popular incentive during the dot-com crash was for vendors to help arrange financing at low interest rates. In a similar vein, Microsoft last month announced a zero-percent financing promotion for new buyers of its Dynamics ERP and CRM applications. But, in general, deals of that sort have either "dried up or the terms aren't going to be all that attractive," Fauscette said.

That's partly because of the tightening of credit markets, according to Colon. "Vendors used to be able to get you approved for several million dollars [of financing] if they just knew your name," he said. "Now banks are asking for audited financials and calling trade references."

So what are some realistic concessions that may be available to IT buyers? One is asking vendors to provide free installation and training, something that Oracle has been agreeing to do, Colon said.

Menefee said he has found that, in general, vendors try to avoid giving buyers discounts on their core applications whenever possible. But they're often willing to discount add-on modules or even throw them in for free, he said. They've also become open to doing "a lot more legwork" on things such as evaluating Schumacher's business processes and how the use of software could save the company money, Menefee said.

For their part, users should consider things that they would be willing to trade away as part of the bargaining process, or agree to do for vendors -- for instance, appearing on trade show panels or talking about a product to the media. "You've got to be more clever in how you negotiate what you give and what you get," Geisman said.

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