Kifer also targeted ERP annual licensing, negotiating about a 10 percent discount in exchange for a three-year contract renewal. That was about two and a half years ago and she now is renegotiating again, she says.
With Simonds' phone and WAN vendor, Kifer renegotiated with about six months left on the contract. She went through a full RFP, competitive-bid process, which helped convince the existing vendor to lower pricing. "Not everybody's willing to [renegotiate]," she says. "We have found if we have a longstanding relationship [with a vendor] they have been willing to help us through."
Vendors won't make it easy
Despite Kifer's success, renegotiating contracts is extremely difficult, Gartner analyst Jane Disbrow says. "I cover Oracle and SAP. Both of those companies are very, very difficult to deal with when it comes to taking partial licenses off the board, she says. "They fight very hard against customers coming back and trying to reduce maintenance and support. It used to be you could just drop support."
A decade ago, dropping support for a particular product was as simple as writing a letter, Disbrow says. Today vendors are more likely to take an all-or-nothing stance. If you have bought five products from a vendor and want to drop support on one, the vendor will insist that you either maintain support on all five or stop getting support entirely, she says. This makes it difficult to get rid of ongoing costs related to shelfware. "A lot of these companies have ended up with shelfware, products they've never used and never put into production," she says. "The vendors are just not cooperating."
IBM is wary of renegotiating existing contracts with customers, says that company's software chief Steve Mills. "In general, no," he says when asked if IBM is willing to renegotiate contracts. "But you have to get down to the specifics of what the client situation is."
If customers say a product is not working out, IBM tries to help them make better use of the technology, or use it in a different way to gain more value from it, Mills says. "Our response is not 'let's lower your bill.' It's 'let us come up with more creative ways to use the equipment we have,'" he says. "We're not inflexible in that context but we're also not giving customers their money back."
Mills says he hasn't noticed any increase in customers wanting to renegotiate contracts.
Today's economic conditions could make it harder to renegotiate signed deals, but customers looking to spend new money should be able to get a great price, Gartner's Disbrow says. "Certainly it is a buyer's market. If you're negotiating a new deal, credible competition is your primary leverage," she says. "Right now, Oracle and SAP can't stand each other. They'll discount tremendously to keep the other company from winning that deal."
Some users, such as Simonds' Kifer and William Gallagher's Catalani, negotiate contracts on their own, but enterprises also can hire expert negotiators to help them through the process. Illinois attorney Sam Conforti, for example, negotiates contracts and writes a blog on software licensing. The ability to renegotiate software maintenance and support fees has been hindered by vendors not offering the option to "park users," he says.
ERP vendors, for example, used to allow customers to reduce their user counts for specified periods of time, usually not more than 12 to 24 months, Conforti says. This occasionally was done in the early part of this decade, but is not an option with ERP vendors today, he says.
"Looking forward, we could ponder if such a mechanism will be allowed again by the ERP vendors," Conforti writes in an e-mail. "This may depend on how bad the economic conditions are and how long they persist. The original intent was to temporarily help out a customer experiencing significant economic hardship, not to allow a revolving door for ERP customers to turn users on and off during normal seasonal or business-cycle downturns. Will ERP vendors need to resort to such mechanisms? Only time will tell."
Give-and-take required
In a worsening economy, it appears some customers are taking longer to pay money they owe from contracts negotiated in better financial times.
CRM vendor RightNow Technologies, for example, recently reported losing revenue because of "lengthening of payment terms and slower cash collections," according to Goldman Sachs.
Contracts typically have cash penalties for non-payment, AMR's Brown notes. Getting relief from expensive contracts is particularly tough for small customers. If you lack clout, have signed an ironclad contract and don't have a great relationship with the vendor, "you could end up yelling at each other and that's the end of it," he says.
The key for customers is to call the vendor, state your case in business terms and act professional, Brown says. There has to be some give-and-take, with each side giving up something. "This is about business. This isn't personal. Where people get into trouble is they make it personal," he says.
In today's economy, many vendors are ready to be flexible, Catalini says. "The good ones are expecting my call," he says. "They're prepared for the discussion, they are willing to be flexible and act as my partner." On the other hand, "I've had some that are not really offering a lot of flexibility. We don't necessarily have a lot of leverage in those cases," he says.
If dropping support for a product is an option, sometimes it's worth the risk, Kifer says. "I self-provide a spare router for example and don't pay maintenance on my other remote-site routers. We can get them back up and running next day, and we've decided that is good enough," she says. "We also dropped maintenance on some equipment that is stable and maintenance cost is too high to justify -- VoIP phones, for example. They are durable and not worth paying maintenance on each device."