Category: Pricing

Unlocking Revenue Potential: Service Provider Strategies for Tools/Accelerator Monetization | Blog

IT service providers are increasingly exploring monetizing their proprietary software tools and accelerators as independent products. This strategic decision can create new revenue streams and differentiate providers. While these accelerators offer numerous benefits, they face challenges in gaining client acceptance. In this blog, we explore the pricing strategies for accelerators and discuss five crucial factors that providers need to consider to maximize the value of their assets. Contact us to explore further.

IT service providers have invested heavily in developing homegrown intellectual properties and proprietary accelerators, tools, and software solutions that have demonstrated impactful results and value creation for clients.

Many providers are now actively pursuing monetizing these assets as standalone offerings. TCS and HCL have created subsidiaries, TCS Digitate and HCLSoftware, respectively, focusing on software and accelerator monetization.

Suppliers have developed software solutions used in different phases of the technology development lifecycle (build, quality assurance, run, modernize, and transition/transformation). Some examples are TCS Ignio and Mastercraft, Infosys LEAP and Nia, Wipro Holmes, and HCL Tech Advantage.

Let’s delve into the opportunities and obstacles service providers face in this pursuit.

Challenges to asset monetization

Despite the money-making potential, success has been limited for various reasons. Some of the primary factors we have observed contributing to this shortcoming include:

  • Internal challenges – Difficulties with legal and procurement process delays in maintaining and executing separate license agreements for these accelerators
  • Post-implementation challenges – Issues related to continued support and maintenance requirements of the accelerators, particularly after the end of services Statement of Work (SoW) term, and the ongoing need for product innovation and marketing investments
  • External challenges – Struggles with low revenue and profitability from product licenses

How accelerators are sold

Let’s take a look at the two ways accelerators are sold:

  • Bundled with services: Service providers frequently include accelerators in their solutions and position them as key differentiators. These accelerators are bundled with services within the provider’s scope and delivered to the customer. This model is preferred when:
    • The accelerator adds value to the existing services offered
    • Customer preferences and market trends show demand for all-inclusive solutions
  • Licensing models: Licensing models can be structured as follows:
    • One-time fee – Service providers propose that customers use the capabilities of their accelerators for a one-time fee
    • Recurring fee/subscription-based – Charging the customers for accelerators through recurring monthly or annual fees is another prominent commercial model

In addition to the one-time/recurring fee, some providers charge for professional services separately. This model is preferred when:

    • The accelerator addresses specific pain points with a standalone solution
    • Customers seek flexibility and independence in using the product

While service providers ultimately aspire to move toward standalone licensing for accelerator monetization, bundling with services is currently the more dominant model. Providers tend to leverage services to grow the reach and mindshare of their accelerators through bundling.

Service providers typically provide the costs of these assets separately in deals where external advisors are involved or where the client’s procurement function is mature. There is a growing emphasis among service providers to focus on asset-led models, with many expecting high asset revenue growth in the coming years.

Research findings

To unlock the value that service providers can realize through their asset and accelerator monetization, we conducted detailed research to understand the key areas that providers must consider.

Here are five key insights from our research:

  1. Positioning: Providers position assets as “investments” in some deals until a predefined threshold is met. This strategy helps to increase the penetration of their specialized accelerators and tools in a client’s ecosystem. The provider then starts charging for these assets when the client has consumed services proportionate to the initial investment
  2. Value proposition: Providers tout numerous benefits for clients using their accelerators, including increased productivity, streamlined costs, reduced rework, automation of routine tasks, instant simulation, end-to-end incident remediation, predictive failure, and proactive decision-making
  3. Fee amortization: The period over which the accelerator fee is charged is determined by its share of the total contract value (TCV). For deals where the share of accelerator fees is minimal, the accelerator fee is charged in the first year. Conversely, the duration is longer when the share of the accelerator’s fee in the overall deal value rises
  4. Return on investment (ROI) articulation: ROI articulation is critical to reinforce the client’s confidence and willingness to invest in accelerators. ROI in the 2.5 to 5 times range has been observed in large deals covering services across the technology development lifecycle
  5. Sales channel: Service providers use different sales channels to increase sales of their assets, including leveraging channel partners, independent software vendors (ISVs), the third-party marketplace, and, in some instances, their subsidiaries

As service providers move towards establishing alternate revenue streams through their accelerators, the observations in this blog will help move them toward devising a robust accelerator monetization strategy.

Everest Group collaborates with leading global and Indian service providers to help identify suitable commercial model(s) and pricing strategies for tools and accelerators. To discuss software solutions and accelerator monetization in more detail, contact Rahul GehaniUdit Maheshwari, and Manan Arora or email us at [email protected].

Broadcom’s Acquisition of VMware: Navigating the Impact on Pricing | Blog

Broadcom’s acquisition of VMware represents a significant shift in virtualization and cloud computing pricing, licensing, and product offerings. Explore the implications of this deal and recommendations for customers and partners to navigate these sweeping changes in this blog. Contact us to discuss.

In a move that has sent ripples through the tech and cloud services industry, Broadcom’s acquisition of VMware marks a pivotal shift in the virtualization and cloud computing landscape. This deal has led to sweeping changes in VMware’s product offerings, licensing models, and, most notably, its pricing structure.

Broadcom’s strategic move from perpetual licenses to subscription-based models and bundled offerings has significant implications for VMware’s existing and prospective customers. Let’s delve into the changes further.

How will the changes impact cost

Since being acquired by Broadcom, VMware has shifted to a more streamlined, subscription-based model as part of a strategy aimed at simplifying offerings and aligning costs with customer usage patterns.

This new strategy will impact user segments in different ways. Here’s a look at the key changes:

  • Consolidation into two primary bundles: VMware has significantly simplified product offerings from nearly 9,000 product SKUs to two main bundles: VMware Cloud Foundation (VCF) and VMware vSphere Foundation (VVF)
  • Transition to subscription-based models: The shift from perpetual licenses to subscription access will allow customers to benefit from recurring payments instead of one-time purchases
  • Impact of core-based licensing: Moving from socket- to core-based licensing could significantly impact costs, especially for organizations with high-performance computing requirements
  • Mandatory core and socket purchase requirements: The new requirement of buying at least 16 cores across a minimum of two sockets (effectively requiring 32 cores as a base) will significantly increase costs for some users
  • Pricing structure adjustments: The new subscription model includes pricing tiers and bundled offerings. Discounts can range from 8% to 35%, depending on the bundle and subscription term. This restructuring might reduce costs for customers deeply integrated into VMware’s ecosystem but dramatically raise expenses for users buying single products

Market and customer reactions to the acquisition of VMware

VMware customers have reacted to these changes with concern, confusion, and frustration. The end of perpetual licenses and the initial uncertainty about continuing the partner program have been particularly contentious.

Educational institutions and small to medium-sized businesses that previously received significant discounts are now grappling with increased support costs and the elimination of traditional discount structures.

The market’s reaction has been further exacerbated by reported delays in licensing renewals and support and OEM portals not operating, disrupting license activation and support services.

Adapting to change

Customers and partners should reassess their VMware strategies in response to these significant changes. We recommend existing customers take the following steps to adapt to the situation:

  1. Explore alternatives: VMware customers should identify alternative vendors to the existing VMware product stack to alleviate cost increases stemming from the new subscription model. Given this transition will require considerable time and effort, customers must consider their long-term virtualization strategy when moving to an alternate product
  1. Renegotiate with VMware: Customers should renegotiate their VMware contracts while exploring options. They should seek clarifications on product bundling and renewal terms and understand the new model’s impact on their VMware product suite and total cost of ownership (TCO). In addition, customers should seek information on Broadcom’s discounts against deal term commitment and leverage this information to strike a deal that gives them maximum cost savings
  1. Understand the market pulse: The unclear changes in the licensing model and pricing of VCF and VVF bundles have created uncertainty. Most customers are struggling to navigate this unprecedented change in their virtualization journey. Customers need to stay agile and informed to form effective virtualization product strategies

The outlook for the industry

Broadcom’s acquisition of VMware represents a significant turning point in the cloud and virtualization industry, with profound implications for pricing, licensing, and product offerings.

As customers and partners navigate this evolving landscape, the need for transparency, flexibility, and strategic planning has never been greater. While challenges lie ahead, opportunities also exist for those prepared to adapt to these changes. The coming months will be telling as the industry adjusts to a new era of cloud computing and virtualization services under Broadcom’s ownership of VMware.

To discuss Broadcom’s acquisition of VMware, contact Ricky Sundrani, Vaibhav Jain, and Udit Maheshwari.

Explore outsourcing pricing trends in our webinar, Delivering Commercial Value in Outsourcing Contracts to APAC Clients in 2024.

Leveraging Contract Benchmarking: Strategies for Negotiating with Veeva Systems | Blog

This blog shares how Everest Group helped a large life sciences company negotiate best-in-class rates for Veeva Vaults and CRM during contract renewal negotiation. Continue reading to discover how contract benchmarking can empower your enterprise to make effective deals, or get in touch.

Veeva Systems, a cloud-based software provider, has established a prominent market position in the global life sciences industry. The business’ market success often leaves customers with limited to no leverage during commercial negotiations, with prohibitively high costs of switching to a different provider and few other viable market alternatives. This leads to difficulty when attempting to negotiate better contract prices with Veeva.

However, by gathering accurate contract benchmarking data for the various Veeva products, procurement teams can negotiate top-tier rates and contract terms.

Let’s explore an example of how Everest Group helped this large US life sciences company identify savings opportunities in their Veeva Vaults and CRM contract renewal negotiation.

The supplier background

Veeva Systems offers several software products to help clients capture clinical trial data, enhance regulatory compliance, control quality, manage adverse events for clinical and post-marketed products, and more.

In addition, the company’s full-fledged CRM suite, Veeva Commercial Cloud, enables sales, medical, and marketing teams to work together more seamlessly. Customers also use Veeva professional services to implement Veeva products, manage programs, configure applications, integrate or migrate data, and garner sampling expertise.

Veeva has created a strong foothold by leveraging its state-of-the-art product suite. Most major pharmaceutical companies use one or more Veeva products. We have observed that Veeva’s wallet share has significantly increased with most customers over the years, due to the widespread adoption and use of their software products.

How we helped the customer 

Like many other existing Veeva customers, our client’s spending with Veeva increased significantly over time. The renewal proposal was nearly 2.5 times their current spend. To help the client get the best rates, we leveraged our internal contract database to identify similar large Veeva deals for the same Vaults, CRM, and professional services.

We followed our standard rigorous normalization approach to identify deals in our contract database that were similar in nature and size to the client’s deal with their software provider. This ensured a like-to-like comparison and offered contextual benchmarks for the client.

In addition to providing the client with the price benchmarks for various Veeva products and services, we also shared some tactics to help them negotiate effectively with Veeva.

Some of the key recommendations were:

  • To seek a ramp-up plan instead of further negotiating peak prices. This provides the customer with the flexibility to pay a fee lower than the peak price for the initial one or two years, allowing them to optimize the total contract value (TCV)
  • To leverage year- and quarter-end sales team targets to get extra discounts. Veeva may agree to higher discounts in contracts signed during the close of their fiscal year or quarters than other times

While each relationship with Veeva is unique, we firmly believe these recommendations and the right contract benchmarking can put any enterprise in a better negotiating position.

To discuss software contract negotiation or for a detailed analysis, contact Rahul Gehani and Udit Maheshwari or [email protected]. Explore Everest Group’s contract benchmarking offerings, or join our LinkedIn Live discussion on delivering commercial value in outsourcing contracts on.

MXDR: A Revolutionary and Comprehensive Solution Transforming Cybersecurity Detection and Response | Blog

Managed Extended Detection and Response (MXDR) has emerged as a game-changer in combating modern cybersecurity threats. Combining managed services with a technology platform, MXDR offers an encompassing, automated, scalable, and cost-effective solution incorporating real-time threat intelligence. Discover how MXDR compares to other cybersecurity offerings, its core components, and pricing models in this blog.

Request a complimentary price check on three cybersecurity roles across three countries.

In the ever-evolving cybersecurity landscape, organizations face the daunting task of safeguarding their digital assets against countless threats. With the increasing sophistication of cyber attacks, traditional security measures often fall short.

To counter this, various threat detection and response offerings have emerged over the years, including Endpoint Detection and Response (EDR), Network Detection and Response (NDR), Managed Detection and Response (MDR), Extended Detection and Response (XDR), and, most recently, Managed Extended Detection and Response or MXDR.

While these offerings are closely related, they differ in the following fundamental ways:

Offering

 

EDR NDR MDR XDR MXDR
Endpoint detection and response Network Detection and Response Managed Detection and Response Extended Detection and Response Managed Extended Detection and Response
Type Technology platform Technology platform Managed service Technology platform Managed service plus technology platform
Definition Protect endpoints and servers from malicious activity through continuous monitoring and behavioral analytics Analyze network traffic to stop network threats through machine learning and behavioral analytics Modern security operations center (SOC) capabilities to rapidly detect, analyze, investigate, and actively respond to threats Provides a holistic view of the threat landscape by analyzing telemetry from multiple sources such as endpoints, network devices, cloud workloads, third-party data, etc. Combines MDR and XDR

Although these cybersecurity solutions are effective, they are limited by being either a managed service or a specifically focused technology platform. This is where MXDR has emerged as a game-changer, offering a unique and holistic cybersecurity approach by integrating technology with managed services. As a result, MXDR currently stands out as the most comprehensive cybersecurity offering available.

Driving factors behind the evolution to MXDR

An MXDR solution always incorporates an XDR platform that integrates with a data lake to gather data from distinct sources. It employs Artificial Intelligence (AI)/Machine Learning (ML) and analytics to correlate the data and generate alerts that threat hunters subsequently investigate.

Given the threat landscape’s constant evolution and the expansion of attack surfaces, the industry is naturally transitioning from MDR to MXDR. Essentially, MXDR provides a “Managed XDR” solution, delivering around-the-clock threat management services.

Primary features that should define any MXDR solution include:

  • A modern, remotely delivered 24/7 SOC with around-the-clock monitoring capability
  • Threat hunting and analysis, which involves searching for undetected intrusions in an organization’s environment
  • Investigation of alerts and incidents generated by the XDR platform using telemetry gathered from various sources like endpoints, cloud workloads, networks, identities, etc.

While service providers or vendors may define their MXDR solutions in distinct ways, these solutions typically encompass the following core services and technological components:

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Some providers offer optional additional services in their MXDR solution, such as vulnerability scanning, onsite incident response and digital forensics, threat detection for OT environments, etc.

The MXDR vendor space is also quite diverse, ranging from global service integrators who partner with technology players to create MXDR offerings to specialized security providers who leverage deep cybersecurity expertise to develop MXDR offerings.

Let’s explore the different MXDR pricing models

While MXDR pricing models are still evolving, the following are the most frequently used:

  • Unit-based tiered pricing – Specialized security providers commonly bill customers according to specific units, such as the number of assets, endpoints, or IT users. Providers often establish distinct pricing tiers with varying unit prices. For example, they may set a per-unit price for environments with 2,000-5,000 assets and a different unit price for those with 10,000-15,000 assets
  • Fixed fee pricing – Global systems integrators (GSIs) typically follow this model that charges the MXDR fee based on the number of endpoints, servers, network devices, data processed, etc.

In a few cases, we also see hybrid pricing, such as per-unit pricing for some MXDR components and fixed fees for other elements.

While traditional detection and response solutions have played a crucial role in the cybersecurity landscape, the emergence of MXDR signifies a paradigm shift towards a more integrated, automated, and adaptive approach. Its holistic nature, automated capabilities, scalability, continuous monitoring, cost-efficiency, and integration of real-time threat intelligence position MXDR as a formidable response to today’s cyber threats.

As organizations strive to fortify their digital defenses and look to select an MXDR vendor, they should consider various factors like current needs, IT landscape, and existing technological investments.

For a more detailed analysis and assistance on MXDR services and pricing, please reach out to [email protected].

Or request a complimentary price check on three cybersecurity roles across three countries of your choice.

Striking the Right Balance: The Dynamics of Cloud Discounts in Enterprise Software Agreements | Blog

To prevent the pitfall of aggressively pursuing discounts on cloud platforms without other considerations, enterprises should implement a holistic procurement and negotiation strategy that takes into account four key factors. In this blog, we share our analysis of a Salesforce contract for a major customer. Continue reading to uncover tactics for negotiating enterprise software agreements.  

The webinar, Adapting to Change: Boost Value in Outsourcing and Software Contracts When Uncertainty Persists, also explores how enterprises can drive more savings from their outsourcing contracts.

In the intricate landscape of negotiating enterprise software agreements, securing the best possible discounts often requires a delicate balancing act. We recently witnessed the interplay of aggressive discounting and product portfolio when helping a multi-billion-dollar brand optimize its contract with Salesforce. The process of obtaining discounts on different Salesforce Cloud platforms (Core Cloud, Marketing Cloud, and Commerce Cloud) proved to be both intriguing and complex. It led us to consider: Does achieving best-in-class discounts on one cloud come at the expense of suboptimal discounts on others?

Assessing the large Salesforce customer’s existing contract with Salesforce presented a fascinating dichotomy. Price benchmarking of their contract for two Salesforce cloud platforms revealed their current prices were very competitive, and the discounts on most of the products were in the highest tier Salesforce offers. It seemed like a sweet victory for the client, securing substantial savings that underscore the power of negotiation and the value Salesforce attributes to retaining a significant customer.

However, as we progressed with our analysis, the third Salesforce cloud platform revealed a huge gap in their existing prices and the prices offered to organizations of a similar size and total spend with Salesforce. Through our rigorous normalization and benchmarking process, we identified a savings potential of up to 35% on their current annual spend on the platform.

Our analysis presented a very interesting and intriguing scenario. The best-in-class discounts Salesforce offered to the client for two cloud platforms indicated that their spend with Salesforce was optimized. But closer inspection indicated they might not be getting the best deal from Salesforce after all.

Is this a tactic used by large SaaS companies to ensure that the overall revenue from an account remains intact? While this is an important question that enterprises must strive to answer, the scenario also prompts a critical reflection on the intricate dance of negotiation within enterprise software agreements. Does the pursuit of extraordinary discounts in one arena inadvertently lead to less favorable terms in others? The answer, it seems, lies in the complex interplay of perceived value, strategic importance, and Salesforce’s bottom line.

Salesforce, like many enterprise software providers, employs a nuanced strategy where discounts are tailored based on the perceived value of each cloud service. In this approach, a particular cloud platform becomes the focal point for driving loyalty and retaining major clients, justifying the high discount percentages. Meanwhile, other cloud platforms, though integral, might be subject to a different calculus.

Adopting a holistic approach

To avoid the pitfalls of a purely discount-centric approach, organizations should adopt a holistic procurement and negotiation strategy that considers the following factors:

  1. Overall spend: Evaluate the total spend across all Salesforce cloud platforms and benchmark it against similar deal sizes to identify areas for potential optimization. A larger deal size might result in better negotiation power for the enterprise customer
  2. Business needs and priorities: Prioritize cloud services and usage patterns that align with the organization’s strategic goals and operational requirements
  3. Negotiation expertise: Leverage benchmarks provided by a specialist firm to elevate negotiation strategy and secure favorable terms across all Salesforce order forms and contracts
  4. Strategic timing: Acknowledge that certain months, especially year- or quarter-end, may present higher chances of securing extra discounts as sales teams aim to meet targets. Additionally, negotiating yearly or upfront payments can potentially result in additional discounts

The above case on enterprise software negotiations often echoes a cautionary sentiment – the importance of a holistic approach. Striking a balance between the immediate gains in one segment and the long-term relationship across the entire suite of services is paramount. It prompts organizations to assess not just the magnitude of discounts but the overall value proposition, ensuring each SaaS cloud or module’s role and strategic importance are properly valued.

Achieving best-in-class discounts in one domain may indeed come with trade-offs in others, emphasizing the need for a comprehensive understanding of the software landscape and strategic collaboration between enterprises and their software providers. The dance of discounts is delicate, requiring astute negotiation skills and a keen awareness of the broader software ecosystem.

To discuss software contract negotiation and for a detailed analysis of your software contracts, please reach out to [email protected]. Explore more about Everest Group’s contract benchmarking offerings.

How to Navigate the Huge Price Uplift of Microsoft 365 Copilot: Software Contract Negotiation Tips for Enterprises | Blog

Microsoft’s recent rollout of its Artificial Intelligence (AI)-enabled productivity tool Microsoft 365 Copilot for enterprise customers has generated a lot of buzz. Its steep US$30 monthly charge per user has ignited debate about how its cost will impact IT spend, the Return on Investment (ROI), and the expected benefits for employees. Continue reading for recommendations on successful software contract negotiation for Microsoft 365 Copilot. The webinar, Adapting to Change: Boost Value in Outsourcing and Software Contracts When Uncertainty Persists, also explores how enterprises can drive more savings from their outsourcing contracts.

Microsoft 365 Copilot is a productivity enhancement tool backed by generative AI and integrates with the Office 365 Suite (Word, PowerPoint, Excel, Outlook, Teams, etc.). It aims to transform employees’ daily tasks by unlocking creativity, boosting productivity, and enhancing skills.

By leveraging Large Language Models (LLMs) content in Microsoft Graph (emails, chats, attachments, documents, etc.) to generate contextualized human-like responses, and touted by Microsoft as the “most powerful productivity tool on the planet,” the tool boasts numerous applications and use cases.

How can enterprises buy Copilot?

Copilot is available for Microsoft 365 E3, E5, Business Standard, and Business Premium customers. It is an add-on license on top of these M365 editions and isn’t available as part of any bundle.

Price Surge for Copilot Adoption

Microsoft 365 Copilot comes with a hefty price tag of US$30 per user per month. The following table summarizes the additional costs that enterprises are looking at when considering buying Microsoft 365 Copilot licenses. (Based on list prices.)

M365 Bundle M365 List price (per user per month) Cost uplift
M365 E3 US$36 83%
M365 E5 US$57 52%
M365 Business Standard US$12.50 240%
M365 Business Premium US$22 136%

This does not paint a very attractive picture for IT and procurement departments as the cost increase can be greater than a company’s current spend on the M365 suite.

Adding to the complexity, Microsoft has yet to reveal how they will apply the contracted volume discount on the Copilot licenses an enterprise purchases.

Software contract negotiation tips

Everest Group helps clients across geographies and industries with software contract negotiation techniques to optimize their software spend. Almost all our enterprise customers have large deals with Microsoft. We help them navigate price increases at contract renewal, negotiate best-in-class discounts, and optimize key contractual terms like price protection clauses, etc.

Below are some measures enterprises can take to mitigate this significant cost increase and assure a robust ROI when adopting Microsoft 365 Copilot in their organizations:

  • Optimize spend for the overall Microsoft portfolio of an enterprise: Microsoft’s move to limit the eligibility to purchase Copilot solely to customers with M365 E3 and E5 subscriptions subtly pushes other enterprise customers to upgrade to these options, thus increasing their spend with Microsoft.

Even for existing M365 E3 customers (many of whom settled for this lower-cost option compared to E5 licenses), the total cost of M365 E3 plus Copilot ($66/user/month) is more than the M365 E5 license ($57/user/month). As a result, justifying investing in this new tool is financially difficult. Enterprises looking to buy Copilot licenses should ask Microsoft to improve their overall cost to make it easier to seek budget approvals and drive Copilot adoption

  • Optimize Copilot licenses: While Copilot benefits look promising, the actual impact is yet to be assessed. Given the different nature of work of employees across an organization, the tool might be more effective for some user groups. Therefore, enterprises should conduct a thorough persona profiling to determine the correct number of users who should be given access to this tool to maximize ROI. This step will help ensure enterprises get the most out of the M365 Copilot licenses required
  • Seek training investment: Given its wide range of applications and methods of use, Copilot will require training and support for employees to uncover the true potential of this tool. Enterprises should ask Microsoft to provide complementary training and workshops to increase M365 Copilot adoption

Microsoft Copilot is undoubtedly a futuristic tool aimed at streamlining daily operations and helping employees focus on tasks that add real value. Nonetheless, understanding its licensing, pricing strategy, and the value it can generate for an enterprise is imperative.

To discuss software contract negotiation and for a detailed analysis of your software contracts, please reach out to [email protected]. Explore more about Everest Group’s contract benchmarking offerings.

To learn current pricing trends and how enterprises can find greater value and lower costs in their outsourcing, cloud, and SaaS contracts in the new year, Adapting to Change: Boost Value in Outsourcing and Software Contracts When Uncertainty Persists.

Choosing the Right ServiceNow Model for your Organization: Comparing Shared and Dedicated Instances | Blog

Deciding between ServiceNow’s dedicated and shared instances can be challenging for organizations. By comparing the options against seven key parameters ranging from organizational size and business process complexity to the cost of ownership and customization options, enterprises can make a well-informed decision. Continue reading to learn more. 

For assistance with benchmarking the ServiceNow implementation and managed services effort and price, contact us at [email protected].

In recent years, ServiceNow has significantly expanded its portfolio to move beyond IT Service Management (ITSM) and IT Operations Management (ITOM) to offer comprehensive enterprise solutions that help clients drive business growth, improve employee efficiency and productivity, increase resilience, and enhance customer experience.

The ServiceNow platform represents a major organizational cost that includes securing the platform license, initial implementation, and maintenance. As cost optimization becomes increasingly important, many enterprises considering ServiceNow adoption grapple with deciding between a dedicated instance model or a shared instance model to save cost.

To make an informed decision, let’s first understand what defines the shared instance and dedicated instance of ServiceNow. By comparing certain key parameters, organizations can choose the most suitable option.

  • Shared instance here refers to the managed services provider’s (MSP’s) domain-separated ServiceNow offering. It is a multi-tenant environment that is shared among multiple customers of SP (Service Provider), with each customer having a separate domain of their own
  • Dedicated instance implies a single-tenant environment used exclusively by one customer. This means that all the infrastructure resources, databases, and application processes are reserved solely for individual customer use

Based on our research and discussions with industry leaders, we recommend enterprises consider the following seven key parameters when evaluating which model to choose in adopting the ServiceNow platform:

Key parameters Shared instance Dedicated instance
Organizational size Better fit for small to mid-size organizations with simple and straightforward requirements Large enterprises with varied requirements, needs, and complex operations benefit more from dedicated instance
Business process complexity More suited for organizations that have simple workflows and are looking to implement basic ITSM processes like incident, problem, and change management More ideal for organizations with complex workflows and ever-changing business processes and integration requirements
Total Cost of Ownership (TCO)

(Inclusive of licensing, implementation, ongoing maintenance, upgrades, etc.)

Low TCO as the cost associated with setting up, maintaining, and managing domain separated instance is spread across multiple customers Large enterprises with dedicated budgets for these initiatives usually prefer this higher TCO option
Customization and flexibility Minimum customization is possible on shared instance   as this is a standard one-size-fits-all offering from the MSP Offers the highest level of flexibility, customization, and personalization tailored to the organization’s needs
Privacy, security, and compliance Due to the shared nature of the instance, data segregation and protection measures need to be very well configured to achieve security and ensure privacy

 

Dedicated instance is solely for one enterprise, and the control elements are assigned to that enterprise alone

From a compliance point of view, enterprises operating in highly regulated industries usually prefer this model

Time to floor This plug-and-play model allows enterprises to quickly onboard Organizations can efficiently transition onto the ServiceNow platform, but making the platform live and operational takes some time
Scalability and future vision Scalability can be limited for any particular enterprise as multiple customers share the same resources It can easily be expanded to accommodate an enterprise’s changing user base, service offerings, and resource requirements

Even though the shared instance model can cost 35-75% less (as shown below) based on our research, price should not be the only consideration when implementing a ServiceNow solution. Enterprises should consider all the parameters discussed and take a holistic view.

Picture1 4

Many enterprises struggle with choosing between the shared or dedicated instance model, as both have their own set of advantages and drawbacks. While each organization has unique requirements, considering the key parameters outlined above will help enterprises select the best setup for their needs and move them in the right direction.

For a more detailed analysis and assistance with benchmarking the ServiceNow implementation and managed services effort and price, please reach out to [email protected].

Also, don’t miss our annual webinar, Key Issues 2024: Creating Accelerated Value in a Dynamic World, to learn the major concerns, expectations, and trends for 2024.

Deciphering Voice Networks – Unravelling an Often Misunderstood Aspect of Enterprise Networking | Blog

Enterprise buyers frequently misunderstand voice network services and incorrectly group disparate services under a single resource unit (RU). Accurately defining and pricing RUs is essential to ensure both the enterprise and service provider benefit. To shed light on this often-cloudy aspect of enterprise networking, read on.

Voice technologies like Private Branch Exchange (PBX) and Voice over Internet Protocol (VoIP) have been integral to enterprise operations for many years now. Network voice managed services can make up a sizable portion of an enterprise’s IT infrastructure outsourcing expenditure – consisting of up to 10% of the overall network managed services spend and as high as 5% of the overall IT infrastructure outsourcing spend.

Historically, outsourcing voice managed services has been trickier than network services. From our observations, enterprise buyers typically are unaware of the depth and nuances involved with voice services. Let’s explore this further in this blog.

While traditional network RUs like switches, routers, etc., are well understood and standardized, blind spots exist across the industry over defining RUs and pricing voice managed services. Enterprises often lack a comprehensive understanding of all the RUs involved in voice managed services and group disparate services under a single resource unit, such as voice endpoints.

This broad classification can create the following two types of challenges:

  1. An enterprise may overpay for services because the intricate details were disregarded.

An internal enterprise telephony service can have a significantly different price point and RU compared to an external-facing contact center. Service providers also have distinct price points for on-premises versus cloud-based versions of the same services.

For instance, prices for an on-premises CUCM-based VOIP system can vary widely from a Cloud Cisco Webex-based system. Similarly, an on-premises contact center will attract a completely different price point than one that is cloud-based.

Elements like voice gateways and session border controllers that require additional management effort and pricing can further amplify the complexity of voice networks. This creates a scenario in which the chances of applying an inappropriate RU rate are very high.

Picture1 3

Fig. 1. Cloud-based instance of the same technology can be priced differently compared to the on-premise instance

  1. Combining different services under one RU can also lead to scope misalignment and ambiguity regarding the responsibilities of the enterprise and service provider

This may cause issues during the actual delivery and lead to unanticipated renegotiation between the parties.

Appropriate RU definition and pricing is important because it ensures mutual value is created between the enterprise and service provider and neither comes away from the engagement feeling shortchanged.

Below are some common RUs and the associated pricing metrics that should be leveraged when outsourcing voice managed services:

Resource Unit

Pricing Metric

PBX System (Legacy) Per device
VOIP (such as CUCM-based systems)      Per endpoint
VOIP – Cloud-based phone systems      Per endpoint
Cloud contact center Per agent
Session Border Controller  Per device
Voice Gateway      Per gateway
Video Conference System  Per device
Video Conference System with Telepresence  Per device

Table 1. Commonly used voice network resource units

Enterprise buyers or service providers of voice managed services who want to better understand the pricing model and price benchmarks across geographies, please email [email protected].

Don’t miss our webinar, Key Issues 2024: Creating Accelerated Value in a Dynamic World, to learn major concerns, expectations, and trends for 2024 and provide recommendations on how to drive accelerated value from global services.

Evolution of Pricing Teams: Pricing Support to Strategic Partners in Winning Deals | Blog

Deal pricing teams have evolved from providing traditional cost-plus functions to becoming strategic commercial and negotiation partners. Modern pricing teams offer market insights, innovative pricing, and contractual models that enhance deal profitability and success. Learn about the changing dynamics of deal teams, their structures across various types of service providers, and other valuable insights from our analysis of pricing support teams in this blog.

Recognizing that pricing is one of the most important aspects of winning any deal, service providers have created the dedicated function of deal pricing teams to help sales, presales, and solution teams build compelling pricing proposals.

Pricing teams play a vital role in securing pivotal business agreements and ensuring deal success by shaping pricing strategies and contracts. These teams empower sales units to effectively respond to proposals and requests for quotes, ensuring they meet client expectations while also supporting the company’s financial goals.

Today’s pricing teams have transformed into strategic partners to the organization that provides market insights, innovative pricing, and contractual constructs. Their involvement throughout the deal cycle ultimately ensures deal profitability and long-term business success. Let’s first explore how their role has taken on increasing importance over time.

How traditional pricing teams functioned

Traditionally, deal pricing teams were comprised of pricing experts with finance and accounting backgrounds who prepared commercial proposals in addition to other tasks like periodic numbers closing, tracking account level parameters, financial reporting, tracking budgets, etc.

In the past, the primary role of pricing support teams has been limited to one or more of the following activities:

  • Estimating resource costs based on products and services estimates prepared by the solutions, sales, and presales teams (known as the “pursuit team”) and calculating margins
  • Reviewing and approving commercials prepared by other teams
  • Safeguarding the organization’s margin and commercial guidelines
  • Advising deal teams on finance-related contract clauses
  • Offering pricing support and negotiating deal contracts at arm’s length

Our analysis of various pricing teams across different service providers over the past decade reveals a noteworthy trend to watch: These teams are becoming increasingly important within their organizations and gaining traction as strategic partners in bringing more business.

A deal lifecycle generally consists of anywhere from seven to ten steps from pursuit preparation to final negotiation and contract signing. Historically, the pricing team had limited influence and would only get involved in the last stages of commercials derivation or approvals, pricing proposal preparation, and client negotiation support.

Typically, they were not involved until the commercials preparation stage, and even then would only base their work on the pursuit team’s inputs and the prior decisions made to win the deal, including aspects like solution strategy, commercial modeling, competitive price points, and client pricing options.

The team would calculate the commercial aspects using Excel or web-based tools configured with resource rate data and other financial guidelines, such as margins, contingencies, and discount percentages.

Pricing would be based on two key parameters – resource effort estimates provided by the pursuit team and the cost rates/salaries embedded into the tool, along with commercial guidelines. Depending on the pricing function maturity, the standardization of these tools could vary significantly among service providers.

Next, let’s look at how their roles have progressed.

The emergence of new-age pricing teams

Leveraging extensive experience in managing deals and accounts over time, the pricing team has started wielding significant influence in mid to large-sized deals. Harnessing their expertise strategically has become a standard practice. However, the impact the deal pricing team has in winning proposals still varies widely based on the maturity of providers across different segments.

Key traits of modern pricing teams

Service providers have been taking steps to empower their pricing teams and transform them into strategic partners. New-age pricing teams in today’s competitive market landscape share the following traits:

  • Early involvement in pursuits: The pricing team makes a significant impact on a deal if they are involved early in a pursuit. They can help identify win themes, make quick go/no-go decisions, decide on favorable pricing strategy, prepare preliminary estimates for the base case, and bring in past deals/account level intelligence during storyboarding
  • Bringing in experience and knowledge: With their experience in handling pricing for multiple deals and contracts and tracking account performance, deal pricing teams bring in a wealth of account-level insights. They work closely with the sales, account teams, and pursuit leaders to generate client-specific insights that can be leveraged to better address client’s requirements
  • Market and competitive intelligence: New-age pricing teams have access to multiple third-party benchmarking vendors, advisors, and other industry experts. Combining knowledge gained from working with various service providers with insights garnered from external sources, pricing teams have built a huge repository of the latest market and competitive pricing/solution data. This information is continuously refreshed on an annual/bi-annual basis. Accessing this intelligence gives them a competitive edge in any pursuit
  • Pricing strategy formulation: Mature pricing teams work closely with the pursuit teams to make early decisions on a deal’s commercial structure to finalize various financial levers, such as volume discounts, margin percentages, alternate commercial models, etc.
  • Proposal writing and review: Typically, pursuit teams own the end-to-end bid response formulation and writing, including the pricing proposal. Modern pricing teams have matured into a partnership role. They now review the overall proposal to ensure the client’s ask is addressed and the key messages highlighting their unique capabilities are comprehensively demonstrated. Pricing teams take charge of leadership review cycles of the pricing proposals and also compare the solution to other deals of similar nature and size drawing on market intelligence from their benchmarking third-party advisors
  • Leading negotiations: Empowered pricing teams today are not just supporting pricing and contract negotiations with clients, they are leading this important stage along with the pursuit teams. In addition to designing fallback options and in-room tactics, pricing leaders are making real-time decisions to win deals by leveraging data-based insights on markets, accounts, and competition
  • Building a deep knowledge base: Organizations have come to recognize that making faster data-based decisions on pricing and solutioning deals can position them well ahead of the competition in any pursuit. Consequently, pricing teams have evolved beyond merely collecting data for deals, which often is underutilized for insights. Instead, they now leverage many data sources for each parameter, enriched with intelligence from diverse origins. This comprehensive dataset is employed in every pursuit to make informed decisions within short timelines
  • Deploying and using advanced tools: These teams leverage advanced tools that offer flexibility and robustness to generate various pricing scenarios with all financial parameters, as well as real-time market intelligence analysis. Possessing this ability is viewed as a characteristic of mature players. The turn-around time from resource estimates to final pricing figures has always been a critical factor in judging any tool’s capabilities. Pricing teams play a key role in developing and deploying new-age integrated tools for specific needs

Emergence of tech tools to aid pricing teams

Pricing tools have come a long way in terms of technology, data, and pricing process maturity. Advanced players today leverage a gamut of connected tools that cover every key aspect of the deal lifecycle, starting from deal qualification to contract signing and then supporting delivery teams after the deal closes.

All parties involved in a pursuit leverage pricing tools at some stage. Tools that seamlessly integrate with critical systems such as Customer Relationship Management (CRM) and knowledge repositories while also harnessing advanced data analytics capabilities have become a prevailing norm within mature pricing organizations.

As Generative Artificial Intelligence (GAI) emerges, the analytical prowess embedded within these tools will push these players significantly ahead of their competitors, making it imperative to establish a solid foundation for these technologies.

Equipped with advanced tools, pricing teams can more accurately anticipate customer needs, enabling them to design pricing strategies precisely and respond to market changes in real time. This degree of agility and customer-centricity will propel organizations far ahead.

The current state of providers in this transformation journey

Let’s take a look at where different types of service providers stand in their pricing team’s transformation journey.

  • Traditional service providers: Most players in this group have dedicated pricing teams that leverage standard deal pricing tools (web- and excel-based) with basic to advanced financial and operational capabilities. These teams generally have well-aligned structures with clearly defined roles and responsibilities. However, they still have room to progress to enhance their ability to influence overall pricing and solution strategy and create a structured knowledge base with sufficient resources to leverage it efficiently 
  • Consulting heritage firms: These players are on the journey to deploy dedicated pricing teams with well-defined structures and roles and responsibilities. They use tools with basic financial capabilities. Pricing teams serve more as advisors to the pursuit teams with low decision-making influence and play a limited role in a deal cycle
  • Niche consulting organizations: This group does not have dedicated pricing functions, and the pursuit team mainly handles deal pricing. They have very low maturity in using data and insights. Overall, the pricing function within niche consulting organizations is lagging by a good distance compared to the other two groups

It is important to note that certain players stand out in their maturity level when compared within the category.

In today’s landscape focused on value realization, organizations must comprehensively analyze all pricing support function aspects on a maturity scale. This is an essential initial step to determine the organization’s current standing and identify ways to stay competitive. Effectively partnering with modern deal teams can improve an organization’s success in winning new business and ultimately succeeding.

For more information about pricing support teams, please contact Achint Arora, Abhishek Biswas, and Amit Dhiman.

Check out the webinar, Current Solution Trends and Their Impact on Outsourcing Deals and Pricing, to learn why is solution sizing important in today’s competitive deal environment.

Negotiating a Successful UKG Workforce Dimensions Contract: Top Five Questions to Ask to Get a Better Deal | Blog

Cloud-based Human Capital Management (HCM) tool, UKG Workforce Dimensions, uses Artificial Intelligence (AI) to offer enhanced workforce management capabilities over the current product version. But understanding the financial terms, pricing structures for various modules, and the benefits can be confusing. Continue reading to equip your organization for successful UKG Workforce Dimensions contract negotiations.

Reach out to Everest Group’s pricing experts for more information.

Enterprises benefit by using different HCM software tools and platforms to manage and optimize various aspects of the employee lifecycle, ranging from recruitment and onboarding to performance management and offboarding. These tools help enterprises transform traditional HR administrative functions into opportunities to increase employee satisfaction, engagement, and productivity.

The cloud-based HCM tool, Workforce Dimensions, developed by Ultimate Kronos Group (UKG), provides advanced capabilities compared to the company’s widely used Workforce Central tool. Some of Workforce Dimensions’ key features and capabilities include time and attendance management, absence management, workforce scheduling, payroll and HR administration, analytics, and reporting.

By leveraging AI, UKG Workforce Dimensions provides more comprehensive analytics, forecasting, scheduling, and reporting. Many existing UKG Central customers have already started migrating to UKG Workforce Dimensions.

However, many enterprises are still trying to understand the financial implications of migrating, the right price for various UKG Workforce Dimensions modules, and the benefits of the new functionalities.

Top questions to ask in negotiations

To get the best possible deal from UKG, enterprises should seek to get answers to the following five important questions:

  • What is the cost increase from UKG Workforce Central to UKG Workforce Dimensions?
  • What other aspects should be negotiated in addition to the per employee per month (PEPM) price of the UKG Dimensions bundle?
  • Does UKG support existing customers in migrating to Workforce Dimensions by investing in implementation or professional services?
  • What is the best time to negotiate with UKG?
  • Are there giveaways or other incentives that enterprises can leverage during negotiations?

In addition to these questions, we recommend enterprises also focus on the following factors:

  • Consider future demand projections – When negotiating with UKG, businesses should take into account their future demand projections. This is because the PEPM price for the UKG Workforce Dimensions bundle decreases as the number of employees increases. By assessing their near-term demand projections, enterprises can identify the optimal volume and negotiate prices accordingly
  • Seek enhanced capabilities in the base bundle – To maximize their investment in UKG, enterprises should not focus on cost alone. Instead, they also should strive to get the most feature-rich base bundle that meets their requirements. Enterprises should push for the inclusion of additional modules, like Data Hub, Analytics, etc., in the base bundle with zero or very minimal increase in the base rate

While each relationship with UKG is unique, we firmly believe these recommendations can put your enterprise in a better negotiating position. To discuss software contract negotiation and for a detailed analysis, please reach out to us at [email protected]. Explore Everest Group’s contract benchmarking offerings to learn more.

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