Analysis: Manage or Be Managed - ' '
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Signing the Dotted Line
Contract management, though, can be much trickier than managing an ongoing relationship. "If you're a small-company CIO and you're sitting across the table with Oracle, they have negotiation expertise that you don't," says Jim Browning, a Gartner analyst. He says that vendors will frequently offer large discounts, up to 80 percent off the license price of a piece of software, if a business buys all the add-ons. Then, two years later, most of the add-ons sit unused while maintenance costs wipe out the upfront savings.
For a CIO at a smaller business, enlisting help in structuring the contract to your advantage is key, preferably from as many sources as possible. Some assistance comes with a price tag, such as hiring a Gartner analyst or an attorney to review contract language. But SCORE, the Service Corps of Retired Executives and an affiliate of the Small Business Administration, has more than 11,000 consultants on tap to offer free advice to small businesses. The Web site, www.score.org, lists counselors by expertise and geography. You can meet with them in person or send them e-mail. And it's all free.
There are also growing numbers of managed-service providers, or outsourcers, who will take over and run entire aspects of a midsize business. Managed providers can do a lot of the dirty work on contracts. And by pooling the needs of many midsize businesses together, managed providers can achieve some leverage with the big technology providers. CenterBeam Inc., a managed-service provider based in San Jose, Calif., represents 15,000 Windows XP licenses. That makes CenterBeam roughly equivalent to a Fortune 100 company as far as Microsoft Corp. is concerned, and gives it real influence with most vendors for pricing and attention.
Despite CenterBeam's size advantages, CTO and Senior Vice President Shahin Pirooz must still work hard to get attention from Microsoft—even though he says that Microsoft is an original CenterBeam investor. For midsize companies looking to go it alone, Pirooz says the biggest challenge in dealing with a large vendor is "staying in touch with the multiple silos in a large organization." Big companies have multiple divisions, with their own revenue goals and styles, and often the divisions aren't well integrated.
At Microsoft, Pirooz has excellent relationships with its support and consulting organizations, but he has to work much harder at being visible to the software division. To enhance that visibility, he religiously attends Microsoft conferences and pinpoints executives he wants to develop relationships with, and makes his top architects do the same. CenterBeam also stays on the radar by developing new twists on Microsoft software, which it then shares with the Redmond behemoth.
Most CIOs at smbs won't develop such close relationships with gigantic vendors such as Microsoft or IBM Corp. But smbs are the fastest-growing market for IT, which means there are options for gaining control of your vendor relationships. The choice is simple: Manage or be managed.
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