Pricing Archives - Everest Group

Five Key Steps Buyers Should Take to Optimize Services Contracts | Blog

September 12, 2024

In today’s competitive business landscape, maximizing value in outsourced services is crucial for buyers to achieve savings objectives and maintain a competitive edge.

This blog delves into strategies to ensure cost efficiency and foster high-value vendor partnerships, providing a comprehensive focus on these approaches to vendor engagement, which in return can drive significant outcomes and enhance a firm’s overall performance.

Reach out to us to discuss this topic further with our expert analysts.

Role rationalization and skill-tier categorization: When sourcing teams lack a well-defined rate card structure, they struggle to compare vendor rates effectively, potentially leading to value leakage.

They should maintain a standard catalog of roles with clearly defined experience range and categorize key skills in tiers such as Standard, Premium and Niche skills, in which depend on existing technology landscape.

While comparing multiple vendor rate cards, this grouping will ensure clarity on pricing premiums and transparency in skill categorization. Notably, those who engage in role rationalization process with external benchmarking firms can potentially achieve overall cost savings up to 20-25%.

In one deal scenarios, Vendor A charges $100/hour for .Net developers and $125/hour for full stack developers, with a 25% price premium on premium skills. This leads to overall cost savings for the enterprise buyer. On the other hand, Vendor B charges $110/hour for .Net developers and $120/hour for full stack developers, with only a 9% price premium, but resulting in a higher total cost.

Value leakage audits: Increasingly buyers are engaging third-party benchmark firms to conduct value leakage audits. These audits help determine if vendors are complying with contracts, invoices are billed correctly, service fees are competitive with respect to scope, and service credits are being applied properly by vendors.

Including a price benchmarking clause: Buyers often include a benchmarking clause in their Statements of Work (SoWs) with vendors. This clause specifies the terms and conditions for benchmarking service fees to ensure they remain competitive with market rates. It may be a recurring annual exercise where the enterprise engages an external firm to seek benchmarks during the contract tenure.

Tracking comprehensive metric scorecard: Traditional metrics include Service Level Agreements (SLAs) and Key Performance Indicators (KPIs) related to savings, process improvements, and innovation. However, buyers are now including Experience Level Agreements (XLAs) and Objectives and Key Results (OKRs) in scorecards which offers a more holistic view of vendor performance by focusing on service quality, business alignment, and value realization.

Standardized measurement practices: Alongside implementing scorecards, buyers are establishing robust measurement practices to ensure accurate and fair vendor evaluations. These practices include defining clear data collection methods, implementing customizable metrics, and conducting regular audits. This flexible, iterative approach helps buyers identify value-creation opportunities, address performance gaps, and cultivate high-value vendor partnerships.

If you found this blog interesting, you can now register for our The Evolution Of Next-gen Customer Engagement Platforms | LinkedIn Live – Everest Group (everestgrp.com) event on September 26.

To discuss this topic in more detail or for a detailed analysis, contact us at [email protected], or via Shatakshi Pandey ([email protected]), Geetesh Makkar ([email protected]), Amy Fong ([email protected]) and Prateek Gupta ([email protected])

Meeting the ROI Bar: Client’s Expectations for Generative AI in IT Outsourcing Deals | Blog

August 28, 2024

Generative artificial intelligence (AI) has disrupted the global market since its scaled capabilities were unveiled to the world by OpenAI at the end of 2022.

Today, most enterprises either want to adopt this game-changing technology or are looking to build their own gen AI capabilities, but at what cost? Reach out to us to discuss this topic further with our expert analysts.

Billions of dollars have now been invested into building and leveraging gen AI, with the hope that it will improve business operations with unprecedented productivity improvements.

Similarly, on the information technology (IT) services side, many service providers have begun investing in proprietary gen AI solutions to pass on the associated efficiencies to their clients, all while identifying new use cases during delivery. While the offering of gen AI-driven productivity was considered a differentiator for providers in 2023, this has become a table stake in the past two to three quarters. Despite all of this, a big question remains: “Is the providers’ proposition aligning with client expectations regarding ROI?”

In this blog, we delve deeper into the current expectations in IT outsourcing deals.

Demanding more from gen AI: enterprises raise the bar

With a varying degree of success from the proof of concepts (POCs), enterprises now expect service providers to clearly demonstrate a visible return on investment before approving fresh investments. Enterprises are now expecting clear call outs on both capabilities, as well as true efficiencies from their gen AI solutions.

In this regard, some of the leading providers have started to highlight specific details as a part of their gen AI solution value proposition, such as:

Quantifying productivity: What are the incremental productivity gains over the deal term?
Cost benefits: How would the improvement in productivity translate into noticeable cost benefits? This should take into consideration the reduction in the overall Total Contract Value (TCV) of IT outsourcing deals, both with and without the gen AI proposition
Intangible benefits: How will the gen AI solution lead to an enhanced user experience? For example, highlighting potential reduction in the meantime to resolve (MTTR) or improvement in customer satisfaction (CSAT) scores

Please note that with the advent of new technologies like Agentic AI, the cost implications and the productivity benefits are also expected to increase in the future.

The gen AI return on investment (ROI) dilemma: Is it worth the hype?

Despite the allure of gen AI, executives are under increasing pressure to justify its seemingly hefty price tag. Demanding an ROI of at least 2-2.5x, they’re wary of projects that fizzle out after initial proofs of concept due to the soaring costs and its unclear benefits.

To address these concerns, enterprises are demanding greater transparency and more accountability from providers, scrutinizing costs associated with resources, infrastructure, data, and large language models (LLMs).

There are also concerns around the associated capital expenditure. In response to these demands, providers are strategically positioning gen AI as a long-term value proposition by amortizing the upfront costs over the contract period. In most cases, especially in competitive IT services opportunities, we are also observing a few leading providers proposing gen AI solutions as an investment from their side.

To safeguard the interests of both parties, contracts are now evolving to include detailed discussions on risk, regulatory compliance, commercial impact, and implementation costs. Periodic benchmarking clauses are also being negotiated to ensure ongoing accountability and prevent unforeseen expenses.

Everest Group partners with both enterprises and leading IT service providers on mandates related to pricing strategies, productivity gains, and pricing impact related to gen AI.

If you found this blog interesting, check out our virtual event, Gen AI Unhyped: How It Is Evolving and How to Plan for Success.

To discuss this topic in more detail or for a detailed analysis, contact us at [email protected], or please contact Prateek Gupta and Anubhav Jain.

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

May 8, 2024

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:

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
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
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
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
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 Gehani, Udit Maheshwari, and Manan Arora or email us at [email protected].

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

May 8, 2024

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:

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

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

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

March 5, 2024

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

January 19, 2024

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
Offering	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:

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

December 12, 2023

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:

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
Business needs and priorities: Prioritize cloud services and usage patterns that align with the organization’s strategic goals and operational requirements
Negotiation expertise: Leverage benchmarks provided by a specialist firm to elevate negotiation strategy and secure favorable terms across all Salesforce order forms and contracts
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

December 7, 2023

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 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

November 27, 2023

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.

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

November 17, 2023

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:

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.

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

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.

Don’t miss the premier conference for GBS, sourcing, and tech leaders. Reserve your spot for Everest Group Engage!

Category: Pricing