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Many people have strategies for negotiating a lower price when buying a new car, but how many folks take the same approach to renewing software licenses or buying a new hypervisor? While buying or renewing a hypervisor is not the same as buying a new car, we can take a similar approach, using the same concepts as we shop.
While the number of partners and value added resellers (VARs) that can sell hypervisors is large, the limited pool of vendors that offer enterprise-grade hypervisors means the competition isn't as aggressive as for some other products. This is very similar to car-buying, where you see many dealerships and models but only a few manufacturers.
When you start to look at hypervisors, you should focus on three key considerations as you make your purchase decision:
- The initial cost of the hypervisor software, including licensing, support and maintenance
- Conference events, trade shows and staff training
- Professional services, local and remote support and architecture design services
Shop around and try to negotiate a better price
Depending on the number of licenses you purchase, you may be eligible for discounts.
It is common for a VAR or vendor to offer a percent discount based on the volume of licenses. Many companies are hesitant to list or publish these discount levels for many reasons. One reason is that it allows the competition to undercut their offerings, which removes part of the role of the VAR. Usually, this discount is very black-and-white when it comes to what volume levels equal what discounts. However, that doesn't mean negotiations are over -- this is where the VAR or vendor sales representative can truly come into play.
Don't assume that the number they give you is the best deal you will get.
Most people don't purchase a vehicle at the first dealership they visit without trying to negotiate a better deal or comparing the price to that offered by other dealers. However, many companies have existing relationships with VARs and rely on them without comparing costs or services.
Once presented with a price, there is nothing wrong with asking for additional discounts. Sure, it might seem awkward, but remember that the sales folks are not doing you a favor with this initial volume discount. Don't assume that the number they give you is the best deal you will get. Of course, this is not an open invitation to abuse these folks, but as a customer, you have the right to ask for additional discounts and to shop around.
In fact, I have seen VARs charging higher than a vendor's list price for equipment, and then when confronted, using the excuse that they didn't update their prices this month. Was it just an innocent oversight? In my case, it didn't really matter, because management had forced us to use that VAR, so they really had no reason to be afraid of making a mistake. In the end, I was able to work out a healthy 20% discount from the "updated" list price by encouraging management to at least let me talk with another VAR.
Keeping an eye on your discount levels, challenging them with your current vendor and even comparing your costs to those of competing VARs and vendors is not a crime. After all, you wouldn't buy a car from a dealership without shopping around. If a VAR decides to stop being competitive, then you need to send a message that your continued business is not guaranteed no matter what they (or your own management) might think.
Ask for conference and event perks
While lower prices are often a primary target for enterprise shoppers, they can be difficult to obtain because discount percentages add up to real dollars that are lost to the vendor or VAR. Depending on the existing discounts, there may not be much opportunity for additional wiggle room. Of course, that does not mean you should give up looking for more discounts or benefits. Many vendors and VARs support vendor or industry-specific trade shows, such as TechEd or VMworld, that offer a wealth of industry information. Attending one of these shows can be cost-prohibitive, with conference passes alone ranging from $2,000 to $4,000. Factor in travel and lodging expenses and it can cost $4,000 to $6,000 for one person.
Vendors or VARs do not have tickets they are waiting to give away, but they can often put in special requests to get them for free or at discounted prices for customers. Of course, this doesn't guarantee you'll get one, but there are a few tricks you can use to your advantage.
Talking about the expansion of your environment with additional hypervisor software features or packages is always something your vendors and VARs like to hear. Of course, they could offer to bring an expert in to talk with you, but there's no substitute for attending these trade shows and networking with customers already using the products.
Negative publicity can work as well. Back when VMware announced the "vTax" licensing scheme (each socket was limited to a certain amount of memory), interest and registration in Microsoft Hyper-V classes exploded. Microsoft and its VARs jumped on this opportunity, offering training to many who were renewing other product licenses. All you had to do was ask. Sometimes timing is everything.
Many vendors also sponsor tickets to local conferences or "lunch and learn" events that allow you to get up to speed on the latest offerings from that vendor while enjoying a nice meal or show. While these are very valuable, you need to verify with your company that you are allowed to accept such gifts to avoid breaking company policies or having conflicts of interest. These types of events blur already gray lines and only get to be more intense with specific events at TechEd or VMworld.
Try to arrange in-house training
When you look to negotiate your next renewal, there is often a new product version or feature available. In an ideal world, you would have plenty of time to send staff for training on the new version, but in reality, it is usually a learn-on-the-fly scenario. However, vendor and VAR representatives can help to fill in those gaps. These "jump-starts" or "knowledge transfers" can provide a better opportunity for your staff, because it will be a focused training in your environment instead of general education. After all, it's not every day you can get a subject matter expert on-site to focus on your environment with you instead of a general overview where only a small percentage applies to you.
Internal personnel at vendors and VARs do have a real cost to their time, but it is a soft cost that can be included in the sale of a product or renewal. Asking for a day or two of onsite knowledge transfer or a health check should be something you bring up when shopping around.
All of the items listed above are suggestions that can work depending your business size and purchasing power. While enterprise companies may have the large dollars and seem to get the lion's share of the attention, it is the growing small and medium-sized businesses (SMBs) that can buy a more varied range of products as they grow. Over time, as a small or medium-sized business grows, it can represent a significant source of revenue for a vendor or VAR, and give the business more leverage when negotiating its next licensing renewal.
What the vendors say
Several of the larger hypervisor vendors declined to comment for this article or offer information on potential discounts. Buying or renewing a hypervisor is very customer dependent, and what is right for one customer is often not a fit for another. While cost is seen as the primary driver, its importance truly depends on the customer's needs.
Customers are not cookie cutters, and they require a unique fit tailored to them, which may be the reason I wasn't able to get quotes for this story. Or, like with a car dealership, maybe the true bottom line is never talked about in public.