OC CIO Roundtable Minutes 3-12-09

Southern California/Orange County CIO Breakfast Round Table
February 12, 2009 meeting

Present: Shannon Muniz, Sean Brown, Andy King, Jeff Reid, Randy Miller, Jennifer Curlee, William Zauner, Jim Sutter, John Pringle, Samir Doshi, Jeff Hecht, Mitch Morris, Dave Phillips

The revised schedule of topics and speakers (through September, 2009) is listed in Attachment A. Check to see if and when you are presenting the introduction.

We welcomed our guest speaker, Shannon Muniz, Artemis Sales/SSD, who traveled from Florida to be with us today, and Samir Doshi, Telecomers.

The minutes of this and prior breakfasts are available online at the Peer Consulting Group’s website, www.peergroup.net, with links to the presentation material, when available.

Topic: Reducing Software Licensing and Contracting Costs

Shannon Muniz, Artemis Sales/SSD, started by identifying the challenges in IT contract negotiations, including not having enough qualified people on staff to handle the load, and dealing with automatic renewal of contracts. Typical software license issues include no enterprise agreements and many duplicate agreements, no volume purchase agreements and the effect of M & A, consolidations and divestitures. In-house procurement staffs can’t keep up. Access to trained negotiators with strong legal backgrounds, who understand licensing issues, and what’s important to vendors, is a big plus. As an example, Shannon went on to describe the approach that her company uses to attack the problem, which includes the following:
- Free consolidation on software inventory and contracts
- Free analysis and creation of a strategic plan
- Renegotiate selected contracts for a % of the cost savings
She distributed a sheet that listed the trigger events, which include new hardware selection, upgrades, expansions, audits, M&A, and expiration of existing terms and renewals. She also described a number of success stories, which resulted in big savings, some in the SC area. She also handed out a letter (attached) they typically send to CIOs who are interested in their approach and services. He charts are at:
http://www.slideshare.net/occio
We asked the members present to identify their biggest problem when dealing with contract and licensing issues.

Andy King, Exemplis Corporation, said that this topic was very timely. Second to people problems, software licensing is one of the biggest problems he has to deal with. He has just cancelled an ERP maintenance contract with Visual. In this declining economy, he is pessimistic, as his company tends not to measure the benefits of the installed base of software, only the costs.

Jeff Reid, ex-Thornton Holdings, said that at Conexant, they had an issue with Oracle. He inherited a contract that he clearly was not going to use and wanted to renegotiate. Oracle sent in a supplier auditor who tried to say that they owed $2M. They ended up having to pay $20,000.

Randy Miller said that since we are in Oracle bashing mode, when he was with Toshiba ABS, they paid maintenance for many modules that they didn’t use. He was impressed with the savings that Shannon quoted – 75% savings is a good deal at any time. By the way, the current Oracle Ts & Cs are on their web site.

Jennifer Curlee, Surefire, has found that negotiating with vendors takes a lot of her time and often involves also negotiating with 3rd party companies. Microsoft Information Worker needs Sharepoint. They are dealing with a Microsoft VAR, which complicated the negotiation. In the end, they had to get Microsoft on the phone as well as the VAR.

William Zauner, JAMS, said that they had the same problems with Microsoft that Surefire has, perhaps because they are both middling sized companies – in the range between $200M - $500M. If you are really small, then it doesn’t matter as much. They do have an advantage because they have in-house counsel, who reviews all contracts.

Jim Sutter, Peer Consulting Group, said that a CIO has enough on his/her plate not to have to get bogged down with contract negotiations. Why the software industry doesn’t have standards in this area is beyond him. At Rockwell, they were blessed with an in-house IT counsel. At the winery, they are on their 3rd counsel in as many years.

John Pringle said that his comments are from the vendor’s perspective, in his case Oracle. Everything is negotiable, especially towards the end of a quarter, or year. The last quarter was the worst in 15 years. The most difficult contracts had to do with hosting, SLAs, and audit which when done seriously, can be a big income opportunity.

Jeff Hecht, Word & Brown, said that they now have an in-house counsel, which took some getting. Now, he doesn’t have to worry about the negotiation. Of course, they wait until quarter/year end before they start to negotiate. They mainly buy tools, not packages as they write most of their own applications.

Mitch Morris, IAPMO, that he didn’t really understand contracts until he started to work with lawyers. It’s an area that gets overlooked because of the complexity. He thinks that a CIO has to step up to the plate because of the money involved with IT contracts, and decisions like buy vs. build, and contract management.

Samir Doshi, Telecomers, said that this is where his company specializes in – telecom contract management. He does for telecom contracts what Shannon does for the rest of IT contracts, and with a similar approach – first a free audit, then an explicit optimization and expense management program. He only gets paid out of the savings realized in the management and administration of the telecom costs. He handed out a 1-page description of the services his company provides.

Sean Brown, RJTCompuquest, added that there seems to him a lot of value to be gained from having an in-house counsel, with a strong legal background and familiarity with IT contracts to be the one doing the negotiation, not just a lawyer who reviews contracts.

A good meeting - thanks to Shannon Muniz for introducing the topic and for leading the discussion on a very timely issue in today’s economy.

See you on April 9, 2009 – 7:00 a.m. in the RJTCompuquest conference room at:
940 South Coast Dr., Suite 260, Costa Mesa, CA 92626.