Filed under: IT Financial Management, IT Strategic Planning, Negotiations, Outsourcing, Risk Mitigation, Service & Support | Tags: Pareto Optimal, sustainability
Major technology providers are beating street estimates lately as technology spending is seemingly on the mend.
As spending picks up and market conditions change, will Clients and suppliers be able to develop and maintain sustainable agreements that offer best in class pricing, flexible terms and conditions, and serve as a guide on how to do good, long term business together?
The major tenants of IT Sustainability are timeliness and they are published for anyone to see right here http://tinyurl.com/yd7ckf5.
If you are making an investment in IT, find out how you can get maximum value and keep it by clicking the link above.
The Sustainability of your IT investments and relationship is our mission.
Full Article Availble at:
http://www.netnetweb.com/index.php/blog/entry/is_your_deal_sustainable/
Filed under: IT Financial Management, Microsoft, Negotiations, Software, Total Cost of Ownership
Microsoft’s Select and Enterprise Agreements have long provided for a 30-day grace period at the expiration of the Agreement, for customers to decide whether (or not) to renew Software Assurance.
However: In the latest version of Microsoft’s Agreements, the 30-day grace period was eliminated. This now means that Software Assurance must be renewed before the expiration of the enrollment or customers may be required to purchase new licenses to remain in compliance with their Agreements.
The apparent goal of this change is to shift the balance of negotiations power to Microsoft at the time of renewal. Clients should be in a position to make final decisions 90-days prior to Agreement expiration, and the time required for a Client to fully review its Microsoft investments averages 90 days.
As a result, NET(net) now recommends an engagement start date of no less than six months prior to Agreement expiration for Clients to perform an initial assessment of their Microsoft Agreements and/or renewals.
In addition, the Change of Channel Partner (COCP) form for your Large Account Re-Seller (LAR) is also changing. The time between the date a customer signs the COCP and the day the COCP takes effect will increase from 30 to 90 days. This is another good reason why Clients want to be prepared to implement all changes 90-days in advance of Agreement expiration and/or renewal.
With the COCP change, we now recommend that EA customers review their LAR relationships annually, and if dissatisfied, there will be ample time to either remedy the LAR relationship or to change LARs before the next annual True-Up.
NET(net) will help Clients perform Microsoft Investment Optimizations and/or annual LAR evaluations, at least six months prior to Agreement expiration to ensure Clients have enough runway to achieve their Microsoft Investment goals and objectives.
Note- many Clients have annual true-ups in June, so January is a great time to get started.Stay tuned to this blog for more information on how you can make the most of your technology investments.
Scott Braden
Filed under: Data Center, IT Financial Management, IT Strategic Planning, Microsoft, Negotiations, Oracle, Outsourcing, Risk Mitigation, SaaS, Software, Subscriptions, Total Cost of Ownership
Microsoft is aggressively discounting its hosted / SaaS solutions in order to gain market share, and I suspect, to sway customers from the EA / Select / perpetual license model, onto the rental / cloud / SaaS model.
Microsoft cuts prices on BPOS, to issue refunds –
http://ct.zdnet.com/clicks?t=475224883-f5935ee3a0b078029592318f09b1ea8e-bf&brand=ZDNET&s=5
Microsoft seeks to lure Salesforce, Oracle users with six months free of CRM Online
Microsoft chops prices of its hosted enterprise cloud offerings
But you’ll note that’s only on the hosted offerings.
Also of note, Microsoft’s huge new billion $ datacenters in Chicago and Dublin are now open for business. With more coming soon.
http://ct.zdnet.com/clicks?t=475224883-f5935ee3a0b078029592318f09b1ea8e-bf&brand=ZDNET&s=5
On the traditional licensing front, Microsoft just announced price increases for SQL Server.
So, clearly, MSFT is betting big chunks of cash on swaying customers to its hosted services, and as a consequence the traditional licensing models are becoming slightly less attractive. I would advise Microsoft customers to consider the true costs and benefits of moving from a traditional licensing approach, to a model such as BPOS. As in most things regarding Microsoft’s sales practices, there are hidden factors that may not come to light unless you ask the right questions.
-Scott Braden
Filed under: Convergence, Data Center, Hardware, IT Financial Management, IT Strategic Planning, Outsourcing, Telecommunications, Total Cost of Ownership, Universal Communications, Voice Over IP | Tags: co2, Data Center, energy efficiency, EPA, Green, smart data center, smart grid, sustainability
According to the U.S. Environmental Protection Agency, “energy consumption by servers and data centers in the United States is expected to nearly double in the next five years to more than 100 billion kWh.”
This is the first in a series of blog posts that will be exploring the topic of developing, managing, and sustaining a resource efficient enterprise data center and the related infrastructure around us. We will be exploring the responsible consumption of resources that make up the IT environment for the enterprise, examining the popular notions of the “Green” data center and going beyond the mainstream in tackling topics that have an important impact on IT related resource consumption.
We have a responsibility to be good stewards of the resources contributing to our consumption of information technology. As global citizens we are on a collision course that is unsustainable, given the rapid consumption of energy across the planet as underdeveloped countries advance their economies and developed nations continue to grow and increase their use of automation and other energy consuming conveniences. Our planet’s uses of energy through non-renewable fossil fuels will likely outpace our ability to find new sources if we don’t reduce and improve the efficiency of our consumption first. In the most recent U.S. Energy Information Administration International Energy Outlook report in 2009, total world consumption of marketed energy is projected to increase by 44 percent from 2006 to 2030. The largest projected increase in energy demand is for the non-OECD (Organization of Economic Cooperation and Development; developing countries) economies (http://www.eia.doe.gov/oiaf/ieo/world.html).
An unfortunate and vitally important consequence of this energy consumption is our output of Carbon Dioxide emissions. Scientifically regarded as a contributor to climate change, total CO2 emissions—as calculated with all projected full measures of CO2 emission reduction programs underway or planned—are projected to increase by 17 percent from 2010 to 2020 (http://www.state.gov/g/oes/rls/rpts/car/90324.htm).
We clearly still have our work cut out for us.
According to the U.S. Environmental Protection Agency, “energy consumption by servers and data centers in the United States is expected to nearly double in the next five years to more than 100 billion kWh, costing about $7.4 billion annually”. Similar energy cost increases are expected in Europe, Asia, and elsewhere. (http://www.energystar.gov/ia/partners/prod_development/downloads/EPA_Datacenter_Report_Congress_Final1.pdf).
However with data centers, and the other information infrastructure we have in businesses and the homes to support our information and communication needs around the world, it is still a drop in the bucket compared with overall energy consumption. What we do have is the capability to turn the information technology into solutions for energy savings.
We see this today with smart grid technology applied by the utility companies to manage home energy usage and provide bi-directional communication between the home appliances and the energy company to manage energy usage wisely and efficiently. Applied to the data center, smart energy technology can be timed with the business cycles to reduce energy consumption on resources that don’t have to run full throttle for supporting a business application that is comparatively idle.
We will explore these ideas and more in upcoming blog posts, as we delve into improving our information to energy ratio; squeezing more information out of the energy necessary to produce it—and, perhaps taken to the extreme, spending less energy on information that has less value. Now that’s a tricky topic!
Stay tuned for future posts.
Filed under: IT Financial Management, IT Strategic Planning, Microsoft, Risk Mitigation, Service & Support, Software, Total Cost of Ownership
Microsoft is entering a period of new product releases; Windows 7 is widely expected to ship in time for Christmas 2009, and Office “14” along with refreshed versions of key products, such as SharePoint, are expected as well in late 2009 or early 2010.
Since many Microsoft customers are evaluating their Microsoft agreements in the next few months, as many Microsoft deals come due at the end of the calendar year, customers are again being asked to pre-pay Microsoft for planned innovations that may or may not ever reach a product release, and when or if they do, may or may not be of interest to customers, who may or may not be able to effect meaningful ROI by upgrading.
Which key product upgrades should customers expect in the next few years? How can customers best optimize Microsoft investments in light of the coming planned upgrade cycles?
NET(net) has researched and summarized the key upcoming product releases so you can effectively plan your organization’s IT rodamap.
Filed under: IT Financial Management, Microsoft, Total Cost of Ownership, Uncategorized
Microsoft reported earnings for their fiscal 3rd quarter.
– The big news is that this is their first ever year over year decrease in revenue and earnings (as a public company).
– “Unearned Revenue“ is Microsoft’s bucket for future Software Assurance (SA) / Payment obligations, usually via Enterprise Agreements that are in flight. This number went from $12.2b to $9.6B (-21%) from June 30 2008 to March 31 2009.
o Unearned Revenue is down across all of their key product segments, even Servers which is their strongest at the moment.
o This is one of the key numbers to watch in their financials and being so significantly down it means that customers in droves are defecting partially or wholly from the EA / SA model, which is bad news for Microsoft’s annuity business and thus, its stock price.
o It also casts doubt on the typical MSFT story about EA renewal rates being “in line with historic” which they are on record as saying recently.
o This number is mainly disconnected from PC shipments so they can’t use that excuse either. I view this as one of the most significant numbers reported.
– Random note – they settled with the IRS re: the 2000-2003 audit, paying $3.1 billion during 1Q09.
– $1.4 b to the EU for antitrust settlement, more pending.
– Class action suits re: the “ready for Vista” pc scam: up to $2.7b
– You may recall their share buy-back program; they announced up to $40b in spending on that, so far they’ve actually only spent $5.5b. hmmm, maybe they need to use their cash elsewhere?
– In the usual note about forward looking statements, MSFT noted “intense competition across all markets”. Perhaps some clients should note that as well?
– They’re still in fine shape re: cash, with $40b or so current assets and cash flow of $6b./qtr. But I noted that they started up a couple of lines of credit, maybe for insurance purposes?
Filed under: IT Financial Management, IT Strategic Planning, Outsourcing, Total Cost of Ownership
Let’s face it; the current economic environment is creating trying times for many organizations. With cutbacks in the supply chain and decreased consumer confidence, nearly everyone is looking for ways to help improve the bottom line and maximize value, especially in the IT organization.
Over the past 6 to 12 months, many of our Clients have come to NET(net) looking for ideas to improve the overall value proposition for their IT investments. We have been able to help our clients achieve cost savings in a lot of areas, and one area which is often overlooked is Portfolio Rationalization. Many Clients have all their portfolios increase in number and complexity over the past few years, and are now asking if there isn’t something that can be done to help reduce overall IT spend by simplifying their IT portfolio.
The process we have used effectively involves not only identifying and classifying the portfolio of applications and services, but also taking a critical look at which ones can be combined, simplified, replaced, scaled down, or even eliminated. In a recent engagement, we spent time going through the contracts and financial information of a Client organization and conducted interviews with key staff in all areas of the IT organization: mainframe, client/server and web development, infrastructure, testing, finance, and business analysis. This helped us understand the entire IT organization and how it aligned with the business objectives. We documented the spend in each area as well as the staff dedicated to providing support for each of the portfolio components. Armed with this information, we had a series of discussions with the CIO and senior IT team and helped them identify areas where there were opportunities for cost reduction.
One benefit of a portfolio rationalization approach is that it does not necessarily focus on staff reductions; rather, it helps identify where costs can be reduced by simplifying the technology portfolio components. In many cases, our analysis has identified multiple products from different suppliers which perform the same function. By rationalizing these products into a single offering from a single supplier, our team has helped our Clients successfully achieve cost savings and simplified support for the IT organization.
Another area of potential savings in portfolio rationalization involves understanding the costs and benefits associated with outsourcing. Our clients are in different stages of their use of outsourced resources. Some are just entering into outsourcing agreements, and we help them find appropriate partners to perform these tasks from development to maintenance to infrastructure support. Other clients already have long term agreements with outsourcers; however, their business may have changed and they want to take a fresh look at what is outsourced and what remains or can be brought back into the IT function. This aspect of portfolio rationalization focuses on the most cost effective way to develop or support one of the portfolio components rather than combining multiple products into one. The result can be just as effective in terms of overall value realization, and it is another way in which we help our Clients drive value.
One last area for portfolio rationalization comes about when an organization goes through a merger, divestiture or acquisition. Some of our Clients have gone through tremendous growth spurts during the past few years and while organizations are growing, they often do not have the time or resources to look at consolidating applications from the various organizations they have acquired. Now that economic forces have changed, new opportunities have emerged for cost savings and operational efficiencies. Our team of portfolio analysts will dig into the massive amount of data required to fully understand the various portfolio components that exist in the combined organization and identify opportunities for savings through rationalizing the portfolio.
When we get down to the NET(net) of it, we find portfolio rationalization is an excellent way for our Clients to drive value in their organization. Whether they are looking to simplify their current infrastructure or need to restructure after a series of acquisitions, the NET(net) team can help find opportunities for savings.
Filed under: IT Financial Management, Negotiations, Oracle, Risk Mitigation, Service & Support, Software, Total Cost of Ownership
It appears Oracle has increased its due diligence in the area of auditing customers. On the one hand, this exercise may be helpful (as Oracle will profess) in enabling customers to better understand holistically precisely what their entitlements are and to what degree those entitlements are being leveraged. This is useful information that many customers often struggle to reconcile on their own, and could shed some light on where opportunities for downsizing of entitlements might occur.
On the other hand, customers should be cautious. In a down economy, where the volume of deals and overall license spending is lower than desired, auditing is a means by which Oracle may be hoping to find opportunities for incremental licensing events. Especially for customers who either may not have been positioned to actively keep track of utilization trends over time, or who may not be familiar with original agreements and the parameters of utilization in these agreements, Oracle will be seeking to capitalize whereever possible to bring your license entitlements and utilization back into compliance.
Resolving compliance issues is likely to be done through a new licensing event. Unlike a situation where a customer may be giving Oracle an opportunity to earn additional licensing business via a purchase that is not the result of an existing contractual obligation to Oracle, it is more challenging to negotiate a favorable license arrangement to adress compliance matters. In fact, with certain product families, it is likely that the costs associated with the need to add incremental licenses has already been identified. With other product families, Oracle is likely to use its standard list pricing as a starting point, and given that the absence of the licenses constitutes a breach of contract in a compliance situation, they are not under as much pressure to discount. This puts the customer at a disadvantage, not only as it relates to the new license cost, but the associated maintenance costs related with those new licenses too – as the maintenance and support services costs are generally based on the net license value.
Customers would be well advised to invest time in assessing their license entitlements and utilization, and truly ensuring the parameters of their licenses are well accounted for, in advance of Oracle aggressively pursing completion of an audit. If misalignment is identified, and you find that you will require additional licenses to ensure your utilization needs are met into the foreseeble future, it is better to address that with Oracle proactively with bringing a new license opportunity to them. Given the possible stakes, this may be an area where enlisting professional help may be a worthwhile investment to either a) ensure you have no exposure; or b) help you address any potential exposure in a way that is most optimal for your organization.
Filed under: IT Financial Management, IT Strategic Planning, Microsoft, Subscriptions, Total Cost of Ownership | Tags: Microsoft Enterprise Agreement EA ESA Subscription
bullseye
Microsoft Enterprise Subscription Agreements (or ESA’s) as their name suggests are Subscriptions to Microsoft Software. “Enterprise” means the client agrees to cover all of the desktop “qualifying” pc’s in the organization with the same bundle of software, typically Windows upgrade/SA, Office Pro Plus/SA, and Core CAL / SA. This is commonly referred to as a ‘full platform’ ESA.
In the case of the ESA, the client pays an annual fee (typically in a three year deal) to maintain useage rights for the products in the subscription. When the subscription ends, the client no longer has any useage rights for any of the products in the subscription and must remove the software from all the machines.
Microsoft includes “buyout” terms in the ESA contracts for when / if the client eventually decides to exit the ESA. This gives the client the ability to purchase the underlying perpetual license. At that time, the client can decide whether or not to cover the purchased license with software assurance.
Typically the cost of the ESA subscription + eventual buyout adds up to be higher than if the client had simply purchased licenses via other means. This, in my opinion, is the biggest “downside” of the ESA: the cost to exit is usually higher than the cost to purchase and/or maintain, making the real-world TCO higher than conventional Enterprise Agreements (EA’s) or a more optimized approach.
ESA’s are a good fit in a very limited number of cases:
1. Clients that have made a conscious, long-term infrastructure decision to aggressively invest and stay leading–edge on Microsoft products but need to avoid capital costs and would prefer to expense the investments.
2. Clients who need to get / stay current for the next few years but are likely to significantly reduce the size of their business by organic decline (not divestitures), or who experience business cycles of less than 3 years where the infrastructure significantly grows and shrinks.
We frequently see cases where a client needs to get compliant or otherwise upgrade large portions of their infrastructure to the latest Microsoft versions. In these cases Microsoft typically proposes an EA. If the cost is too high for the client, sometimes Microsoft will offer an ESA as an alternative, since the per-year and initial costs are lower. But, if a client simply needs to reduce licensing costs (capital or expense), there are other more effective methods that offer improved beneftis over this approach.
NET(net), Inc. 