With the ever-changing state of technology, it is imperative businesses optimize their output by remaining abreast of the latest trends; one such trend being cloud-based technology. In essence, cloud-based technology allows businesses to store and utilize resources online, as opposed to traditional storage and utilization through external devices like servers. Thus, cloud-based technology is beneficial in that it provides greater storage capacity, it’s easily accessible anywhere at any time through Wi-Fi, and it typically comes with a business-friendly price tag. For businesses interested in procuring cloud-based enterprises into their daily operations to tackle spend, here are seven of our IT strategic sourcing experts’ principal tips and tricks to consider when negotiating contractual agreements:
1. Receive Contracts Early: Cloud-based contracts with major vendors, such as IBM, are long and complex, and typically filled with URL’s and other embedded documents. It’s incredibly important to receive these contracts early as possible within the RFP or sales process, because they require thorough review and mark-up, regardless of whether they are sample documents or a legitimate agreement.
2. Update Contract Terms & Remove URLs: While reviewing the contract, be sure to update the contract terms by having URL’s removed. A seemingly miniscule detail, but removing URL’s from contracts is significant because documents referenced by URL’s have the ability to be changed at any moment’s notice, in turn binding you to potential increases in costs or other unfavorable conditions.
3. Pay Attention to Terms & Conditions: Besides updating terms by removing URL’s, also be sure
to review words and phrasing carefully. Frequently, terms and conditions within a Master Licensing Agreement (MLA) are superseded by the Service Provisioning Document for the specific application that is being procured; meaning, the price-hold protections that were obtained during the MILA negotiations will be useless unless caught before signing the provisioning contract.
4. Recognize the Win-Win: All large vendors have terms and conditions that are negotiable, though some terms will be harder to concede than others. Recognize that account representatives for large vendors may want to close a deal with your business, but may be unable to obtain wiggle room from their legal affairs and sales management teams. Thus, look at the big picture for what it’s worth, and find areas where compromise is possible.
5. Transfer of Ownership: Be aware, most large cloud vendors will not permit the transfer of license ownership in the event of a merger or acquisition. Nevertheless, if your spend amount is great enough, you may be able to influence vendors to permit for a certain period of time for transfer-ability of licenses.
6. Lock-in Pricing: The strategy of the big software companies is to get you into their cloud. Top executives are even basing part of their annual compensation on how many customers they can migrate into the cloud. This provides you with major leverage to move to the cloud at a fraction of the cost of remaining with your on-premises infrastructure.
7. Subscription Licenses: Within standard subscription license agreements, subscriptions can only be utilized in the country where the license was purchased. While this is a customary feature within subscription licenses, nevertheless, this is one of the most easily negotiated features, and can be negotiated to reflect that the subscription license is actually applicable to the country of your choosing instead.
Cloud-based-technology is just one area where strategic sourcing can prove valuable for IT groups. Learn more about effective negotiations between IT and Procurement in Source One's latest whitepaper: Equipping Procurement to Tackle IT Spend.