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Foiled! How to beat software vendors' sneaky price increases

Robert L. Scheier | Jan. 14, 2014
Between complex licenses and the cloud, Microsoft, Oracle, and SAP have lots of ways to hike up prices. Here's how to fight back

If you think software is getting more expensive, you're right. Not only that, it's getting harder to even find the price hikes, so you can avoid them or know it's time to switch to another vendor's software. It's only natural vendors will pull out all the stops to maximize their revenue. IT organizations need to do the same to maximize the value they get from their tight IT budgets.

More vendors are building hidden price increases into complex new variations to on-site licensing models, as well as to their newer cloud and subscription offerings. "Licensing is getting to be more sophisticated," and the complexity is driving price increases, says Daryl Ulman, chief consulting officer of the Emerset Consulting Group, which offers negotiating services to IT for Microsoft and Oracle licenses.

Rather than having "clear-cut, outright, aggressive price increases," vendors are becoming "more subtle and devious," says Jeff Muscarella, executive vice president of the IT and Telecom Division at sourcing consultancy NPI. They're hiding price hikes within "changes to their licensing programs that are complex and multifaceted."

To get the best price on the software you need, do a better job of understanding exactly what you need now and in the future — and what you could replace with a competitive offering. Such self-knowledge also tells you when it makes sense to buy more or different products or services if that will get you a better deal. The more you learn beforehand about the tweaks in each vendor's approach, the better you'll know when a seemingly good deal might come back to bite you.

How Microsoft, Oracle, and SAP squeeze you
As an example of the kind of price-increase-hiding complexity vendors are using today, Muscarella cites Microsoft's elimination of the Enrollment for Application Platform (EAP) and Enrollment for Core Infrastructure (ECI) licensing programs that had saved customers "a lot of money" on software such as Windows Server, SQL Server, BizTalk, and SharePoint. He estimates the replacement program, Server and Cloud Enrollment (SCE), "means 9 to 12 percent price increases" — but figuring out that hidden price hike required complex analysis and modeling for each customer's environment under both the old and new programs. Ulman says that, rather than impose direct price increases, SCE "requires organizations (to make) a higher up-front commitment" to receive the same discounts as the earlier programs offered.

In another example, he says Microsoft has changed how Microsoft prices the combined Windows Server Standard and Enterprise Editions from the number of physical servers to the number of processors in each server. Because most servers now ship with at least four processors, he says, "you're paying double the amount, or higher" without a formal price hike. (EMC VMware tried a similar tactic in 2012 that Microsoft ironically decried at the time, but customer outcry forced VMware to reverse course.)

 

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