Every company relies heavily on cloud technologies, using a cacophony of SaaS applications and public and private cloud network resources to keep their business up and running. But, when it comes to negotiating the best agreement for critical cloud services, many IT teams gloss over the due diligence process. It’s easy to see why.
When you get down to it, only a handful of hyperscalers dominate the industry, and all are considered large, trusted providers. Likewise, the market for productivity applications like Microsoft 365 and Google Workspace is also dominated by a very short list of heavyweights.
But casual approaches to cloud procurement can cost companies dearly. It pays to do your homework, know the market, and to press providers for the best deal. In negotiating over 400 contracts with the largest providers in the IT industry, Tangoe has learned a few lessons over our +20-year history. Here are our tips.
Define your needs including your current assets and costs, future service requirements, goals, and priorities. Learn more in this negotiation guide.
Some hyperscalers offer cheaper virtual servers, while others have cheaper storage. Consider what’s most important for your business by stack ranking your priorities across: cost, flexible contract terms, scalability to accommodate growth, capacity, tech upgrades, etc, and of course performance and service quality.
Study what each cloud provider offers and get familiar with both their pricing models and available discounts. For example, some IaaS providers charge based on time, so how long you run the instance matters. Others charge based on data quantity. Still others charge based on both of these factors.
Start with clear visibility into how many applications and licenses you have (both sanctioned and unsanctioned), how efficiently each license is being used, and how many have been purchased above and beyond the corporate contract. SaaS management solutions can help you gather intelligence with Shadow IT discovery tools and deep insights into app usage data. Study what each cloud provider offers, understanding if apps are tiered and the different license levels as well as the cost per seat.
Sharpen Your Angle with Market Info:
Gathering market intelligence can make all the difference, arming negotiators with pricing indexes, pricing trends, and discounting models. Before you enter the room, you should know exactly what the going rate is.
Demonstrate a Willingness to Change Providers:
Without the threat of losing business, there is little incentive for providers to lower rates or improve contract terms. Multi-vendor RFPs can help signal a willingness to change and a bidders’ conference can pressure incumbents by revealing the competition.
Hold Out for What You Want:
Don’t be afraid to “stick to your guns” or ask “what would it take…” to achieve the pricing or terms you want, but keep in mind you’ll likely have to give in order to receive. Holding out can also lengthen your timetable. Make sure what you are asking for is worth the delay. Starting early is key.
