How to cut software costs in the economic downturn

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2) Consider cutting software maintenance -- carefully

Discontinuing maintenance or support contracts with software vendors is a popular way of saving coin among corporate users. "A lot of enterprises will say, 'You're not giving me anything anyhow, so kiss that revenue goodbye,'" Geisman said. "Customers feel they've been cheated, and in many cases, they have been."

In the case of Microsoft's products, maintenance is "something many customers could dispense with," agreed Paul DeGroot, a licensing analyst at Directions on Microsoft, an independent research and consulting firm in Kirkland, Wash.

But cutting your maintenance contracts could prove costly if you're dealing with vendors that take a hard line in such situations, according to Eliot Colon, president of Miro Consulting Inc., a Fords, N.J.-based firm that focuses on software contracts and licensing strategies for Oracle and Microsoft users.

Colon recounts the case of a US$1 billion-a-year semiconductor maker that dropped support for its Oracle apps two years ago, then found itself needing access to a mission-critical software patch. Despite offering a "six-figure flat fee" for the patch, the company was rebuffed by Oracle, Colon said. He added that after three months of negotiations, the chip maker agreed to pay several million dollars -- the same amount it would have paid if it had kept an active maintenance contract the whole time.

In between the two extremes are vendors that may be willing to strip out elements of their tech support programs you don't use in order to help you save money, Geisman said.

3) Bring hard business data to the negotiating table

Sharing internal financial data may seem like a surefire way to lose the upper hand in vendor negotiations. But some analysts said that when done in good faith, it often is more effective than simply claiming corporate poverty or making empty threats to migrate to other vendors. Good vendors, they noted, will respond to calls for pricing that's more in line with the economic value you get from products.

For instance, if your company pays $100,000 a year for an application that you estimate saves a million dollars annually, Geisman advised that you take the data to the software vendor and tell it that the current cost "is a little too rich for our blood." By doing so, he added, "it becomes a negotiation, rather than you squeezing them."

Colon agreed, citing the experience of a large retailing client. "They told Oracle they were in financial disarray and had a bleak outlook for the next year or two," he said. "Oracle didn't budge at all." But when the retailer went back to Oracle with data showing how low its usage of the vendor's software was apart from the 10-week holiday shopping season, Oracle responded by drawing up a less expensive custom contract, Colon said.

4) Look for other concessions besides price discounts

In lieu of discounts, a popular incentive during the dot-com crash was for vendors to help arrange financing at low interest rates. In a similar vein, Microsoft last month announced a zero-percent financing promotion for new buyers of its Dynamics ERP and CRM applications. But, in general, deals of that sort have either "dried up or the terms aren't going to be all that attractive," Fauscette said.

That's partly because of the tightening of credit markets, according to Colon. "Vendors used to be able to get you approved for several million dollars [of financing] if they just knew your name," he said. "Now banks are asking for audited financials and calling trade references."

So what are some realistic concessions that may be available to IT buyers? One is asking vendors to provide free installation and