Presented by: Rich Green [email_address] 860.275.8325 Let’s Make a Software Deal: Negotiating Best Practices in the Economic Downturn Presentation to: SIM Central Connecticut Hartford, Connecticut February 17, 2009
The Microsoft Example Scope of Rights and Use Metrics Information – about actual usage helps decision to renew EA or go Select as well as whether to buy SA versus by-incident Support Timing – sufficient advance negotiation lets you demonstrate willingness to wait for OS upgrade or hardware refresh Alignment – of products licensed to actual business use can save thousands of dollars Alternatives – Microsoft believes you won’t walk away, make sure they know, or at least think, you can (Linux, MySQL etc.)
The Product Agreement Warranty rights, timing and duration can be used to save up to 1 year’s worth of support fees.
Timing Warranty and Maintenance to Drive Savings Key Support Commences / Defects Remedied as Part of Paid-For Support Warranty Expires Warranty Commences Option 2 Support Commences / Defects Remedied as Part of Paid-For Support Warranty Expires Warranty Commences Defects Remediated at No Cost as Part of Implementation Option 1 Support Ends unless Renewed Defects Remedied as Part of Paid-For Support Warranty Expires Warranty / Support Commence Vendor Approach Months 37-60 End of Month 36 Months 25-36 End of Month 24 Months 13–24 Go-Live / Production Use End of Month 12 Agreement signing through Month 12 Red = Fees Charged Green = No Fees Charged
Key Terms Implementation Fee Estimate: Not a fixed amount Milestone Cost: The portion of the Implementation Fee Estimate allocable to each Milestone Event. Is proportionate to the Milestone Event. Calculated as: Estimated Hours of Effort to Achieve Milestone Event x T&M Rates Milestone Event: A naturally occurring project event that does not require separate administration or special oversight (e.g., Entry into UAT and Exit from UAT). No fewer than 4 or more than 12 Milestone Events.
. . . . then the T&M rates from that point until the applicable
Milestone Event occurs, are reduced:
Ex. Milestone Event 1
Milestone Cost = $200k Milestone Date = April 30.
In January 10 resources work 100 hours each at $100 per hour. In February, Customer is invoiced $100,000 (10FTEs * 100Hrs * $100).
Same resources / level of effort in February such that Customer is invoiced for and paid, total Ongoing T&M Payments of $200,000 (i.e., the amount equal to Milestone Cost) even though that Milestone Event is not yet achieved.
In March, 10 Vendor resources work 50 hours at $100 per hour. Without rate reduction, Customer would be invoiced $50,000. This would be a 25% Milestone Cost overage, so the actual invoice will be calculated using 20% discount from the table:
[((10 resources) x (50 hours)) x ($80)] =
Invoice for Ongoing T&M Payments of $40,000
Progressive discounting continues until Milestone Event 1 is achieved
Subject to timely Change Management – dates can be moved / Milestone Costs increased on mutual agreed terms in advance .
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