This document contains tips from JoAnn Rosenberger, Gartner’s Distinguished VP Analyst, for negotiating better deals with IBM, as presented by JoAnn during EMPOWER 2021. Origina does not give or purport to give any advice on the same.
How do enterprises get the best software and hardware deals from a technology giant like IBM? JoAnn Rosenberger, Distinguished VP Analyst at Gartner, says it comes down to speaking the same language as – and picking up on the habits of – the technology vendor you’re working with.
Rosenberger laid out the tips Gartner gives its clients in her keynote speech at EMPOWER 2021, a virtual event dedicated to enterprise IBM software users. In it, she emphasized the need to tailor negotiations to specific vendors and showed attendees how to "IBM-ize" their contract discussion by drawing from Gartner’s T4 Framework.
What is the T4 Framework? It’s a methodology companies can use to gain leverage and bargaining power in their negotiations, and it draws from four key focuses:
- Terms and Conditions
Here’s a quick overview of the T4 Framework and some takeaways your company could use to improve its negotiations with IBM if you missed Rosenberger’s keynote speech at EMPOWER 2021.
Tactics: Tips for Creating Leverage and Bargaining Power
IBM has a long history of delivering quality enterprise products whose functionalities and reliability are difficult to replicate. But the digital landscape has changed greatly over the past few decades and your business should be using IBM’s competitors to its advantage.
Before engaging with IBM on renewal or trading up, engage IT to research alternatives to your software and hardware. Send out a Request for Proposal (RFP) to each of these companies to prove to IBM that there are other sellers in the market with viable offers.
Every IBM software application will have at least a couple competing products which could be used to create leverage. Examples include:
- Db2: Microsoft, Teradata, SAP.
- Cognos: Oracle, Tableau, MicroStrategy.
- Rational: Atlassian, Akamai-SOASTA, HPE.
- WebSphere: Informatica, Dell Boomi, Software AG.
“Years and years ago, people thought the switching costs and the ability to move off products were insurmountable, but that’s not the way it is anymore,” Rosenberger said. “It’s not easy but it is doable in many cases.”
Rosenberger also finds that simply asking the IBM sales team how they’re compensated can yield valuable insights for your negotiations. Inquiring about the products or types of deals they’re compensated on – or even how regularly they receive their bonuses – can partially explain why you’re seeing the offer you’re seeing.
“Knowledge is always power when you’re negotiating, so knowing these strategic products and services that IBM will get more highly compensated on – and what they’re doing in wanting you to buy and how to buy it from a contractual basis – is very good for you to know so you can plan the negotiation,” Rosenberger said.
Lastly, Rosenberger recommends keeping an eye on IBM’s quarterly results. Understanding where the company is meeting financial expectations and where it’s missing them can clue your team in to what products Big Blue may be willing to bend on price so that it can deliver revenue to meet analyst expectations.
Templates: Ask IBM-specific Questions to Expose Ambiguous Details
Enterprise software and hardware agreements are complex instruments and without a deep understanding of the vendor and how it operates, there’s a chance you could miss hidden and missing costs.
Develop a checklist (or work with Gartner to use its own checklist) to make sure you’re asking IBM the right questions during negotiations. Making these inquiries early on can save your team from having to scramble for the answers later.
When it comes to IBM® Passport Advantage Software or IBM® Subscription & Support for instance, Rosenberg recommends asking the following:
- Request Site Report: All PA sites and PoEs per site.
- Request Entitled Pricing: Provide all active “E” S&S and “D” SaaS part number pricing.
- Total Points/RSVP Level: Request total enterprise points and current RSVP level.
- Part Number Itemization: Request entitled pricing report to list SRP and entitled pricing.
- FCT Entitlements: List flexible contract type entitlements by site.
- IPAA Number: Provide IPAA number assigned to each enterprise site.
- Annual Price Changes: Request annual published price change policy from IBM sales.
JoAnn’s questions go hand-in-hand with her customized RFQ template, which helps her “unbundle” the bundles IBM sells to its customers. Attendees of EMPOWER 2021 received this template, however interested parties who did not attend will need to work with Gartner to take advantage of this tool.
The template is important because it allows companies to drill into the finer details of the contracts, especially multi-year bundles. In her example, Rosenberger was able to help one company compare a multi-year bundle to the true cost of a pay-as-you-go deal for its Cognos software. In doing so, the customer found that the multi-year bundle would have only saved the company $100,000 on the multi-year bundle, which made the large financial payment that needed to be made upfront less attractive.
Terms and Conditions: Avoiding Risk in IBM’s Governing Agreements
How well does your team understand its governing agreements for IBM? When it comes to IBM® Passport Advantage, you might be surprised at what's not common knowledge.
“When I’m sharing things with clients, I think what they find the most interesting is the fact that these governing agreements, for the most part – particularly around Passport Advantage – do not require signature,” Rosenberger said.
Rosenberger notes that when your team asks IBM for the agreements, such as IPLA or IPAA, IBM will most likely send you back the links to view these documents on their website. These will be the latest versions IBM has published – but they might not be the version that was effective when your contract was signed.
Maintaining efficient asset management practices is critical if you want to request changes to these terms and conditions to better suit your business. Request that IBM provide its governing agreement copies and reports with links and version numbers included and compare these with the copies you have in your contract database.
When your internal ITAM and contract management tools are capable of tracking IBM terms and conditions across different versions, you’re able to request specific changes to ICA, IPLA and IPAA, such as:
- Matching IBM’s enterprise definition with your corporate structure.
- Ensuring no changes happen unless parties agree in writing.
- Customizing so version cannot change by 90-day notice.
- Attach LI documents to all orders – LI documents are version-specific.
- State that non-subscription-based licenses are perpetual.
- Attach website temporary use and HA/DR policies.
- Attach IBM AECI as exhibit to include confidentiality terms.
Timing: Using Fiscal End-Year Dates to your Advantage
Timing should play an important role in your negotiations both from the perspective of your company’s needs and resources, but also the software vendor’s fiscal obligations.
For the former, you want to ensure your team has allocated enough time to the contract renewal process, whether that’s negotiating directly with IBM, reviewing competitors or turning to another alternative like third-party software support.
Rosenberger recommends the following timeline when you’re in the final year of your IBM contract:
- 12 Months Out: Select your negotiation team and identify responsibilities and priorities.
- 9 Months Out: Validate your portfolio entitlements and pricing by requesting IBM portfolio reports, review your technology roadmaps and evaluate viability as well as alternatives.
- 6 Months Out: Use your IBM portfolio reports to forecast upcoming years, understand IBM usage policies and conduct a risk assessment on existing agreement terms.
- 3 Months Out: Engage IBM to discuss your requirements and use IBM-specific negotiation tactics as part of your final phase.
- Execute: Record IBM agreement of pricing and any special considerations, ensure agreement of IBM governing documents and they are attached as exhibits, and “IBM-ize” your SAM and ITAM tools to handle unique IBM requirements.
Understanding a software vendor’s fiscal year-end dates is also important because it can help you time your deals for maximum bargaining power. IBM’s fiscal year-end date is in December – and it can be a powerful negotiation lever for your team.
Be sure to keep an eye out for EMPOWER 2022 for more enterprise IBM software user-focused content such as the above information given out by JoAnn Rosenberger during her keynote speech. You can watch recordings of the other sessions at EMPOWER 2021 here.